How Covid Spread Fear of Globalization and Threatens a New World Order | Mondial economy


When Xi Jinping promised influential people around the world in January 2017 that China would champion globalization, it looked like Beijing was smoothly taking over global economic leadership as Donald Trump prepared to usher in an era of American isolationism.

Almost five years later, a new world order has emerged, but it is not the one that the Chinese president and others in Davos seemed to have in mind that day.

Instead of a continuation of the post-Cold War era of growth backed by free trade, the world faces a fractured economic system where the post-pandemic supply shock and mistrust engendered by the virus is pushing the country towards an autarcist impulse for self-sufficiency.

Autarchy is a Greek word meaning ‘autonomy’ and was popularized as a shorthand for economic nationalism in the 19th century. It gained some credibility as an economic model when the fledgling Soviet Union actually closed itself off from world trade and the nationalist drive towards self-sufficiency won over Hitler. It also flourished in the post-war world, particularly in Africa, although the credo of globalization left few examples outside of North Korea.

There were already signs of nationalist questioning of the current system, exemplified by Brexit, the rise of Trump and a growing suspicion that China was not prepared to abide by the rules set by the United States and its proxies. .

The arrival of the coronavirus pandemic has accelerated these trends, experts say.

Maintenance of a high voltage converter station in Xuancheng. Photograph: AFP / Getty Images

Evgeny Postnikov, a senior lecturer in international relations at the University of Melbourne, says pressures from the pandemic have made it possible to understand how countries depend on imports and products entangled in the global supply chain.

From the initial scramble to protect face mask production in France to the careful control of vaccine technology, the pandemic has provided countless examples of how quickly the existing world order began to crumble under the influence. domino of nationalist impulses.

“Governments cannot rely on strategic competitors to provide essential goods and services,” says Postnikov. “Trade and security used to be seen differently, but they are now both treated as high politics. This is why the autarcist push is not going to go away. If anything, it will get stronger, and that’s quite worrying. “

Power cuts in northern China in recent weeks have prompted Beijing to step up efforts to become more self-sufficient. After encouraging signs that China is weaning itself off fossil fuels by shutting down hundreds of coal-fired power plants, Beijing’s hint this week of an overhaul of emission reductions is a blow to global cooperation on the climate crisis .

As part of the “Made in China” policy launched in 2018, China is already trying to develop more capacity in semiconductors, the cornerstone of consumer goods ranging from Tesla to toasters and PlayStation to printers, as well as other strategic products. The country’s Belt and Road Initiative links dozens of countries in Asia, Africa and Europe in Beijing’s economic orbit.

India, which was slow to abandon its corporate economic model in favor of a more global model, also gave a name to its backlash plan: Atmanirbhar Bharat. This translates to “self-sufficient India” and is designed, in the words of Foreign Minister Subrahmanyam Jaishankar, to free the country from “global commitments which are not to our advantage”.

Hence India’s withdrawal last year from the Pan-Asian pact for comprehensive regional economic cooperation (Rcep) for fear that its huge agricultural sector will be sacrificed on the altar of free trade.

In Britain, the sudden loss of cheap migrant labor means employers are re-examining their business models. Britain’s ‘Chicken King’, the chef of the country’s largest poultry producer, on Wednesday called for a total rethink of the way food is produced. “Three months ago, I said the government needed to help solve the workforce issues,” said Ranjit Singh Boparan, owner of 2 Sisters Food Group, which processes 10 million chickens. per week. “I have now come to the conclusion that in reality this cannot solve all problems. “

He says he no longer believes the solution is more visas for foreign workers: instead, the price of food will have to rise according to the cost of its production.

“We need to work with our supply chains and our customers to resolve these issues. But it will come at a cost. I have to invest, increase automation and make our factories more welcoming to new recruits, ”he said.

The supply shock has “thrown sand into the wheels of the global economy,” according to George Magnus, an independent economist and associate at the China Center at the University of Oxford. “It is difficult to disentangle the structural issues around the supply chain with the process of globalization. Everything is more complicated and more expensive. It sounds like a symptom of a decaying global economy.

Agriculture near a power station in Hubei
Agriculture near a power station in Hubei. Photograph: Getty Images

He says the global economy is expected to start realigning by next year, but the current crisis could have a “medium-term corrosive impact” as companies seek to diversify from a single supply and secure strategically important products such as semiconductors, batteries and energy. .

More than 80% of industries have experienced supply chain disruptions due to the pandemic, according to a report by consulting firm Deloitte, and around 75% of companies have presented plans to repatriate manufacturing from overseas by building smart factories closer to home.

A study by the Reshoring Initiative in the United States predicts that the country will create 224,213 overseas jobs in 2021, a 38% increase from 2020. Investments in strategic products such as semiconductors , electric vehicle batteries and pharmaceuticals are driving the changes. , says the report.

There are similar moves in the UK, where a report predicts factories could manufacture nearly £ 5bn more in 2021 as the pandemic and Brexit prompt companies to bring production home.

Rising labor costs in countries like China have increased pressure on companies to rethink the way their products are made. For example, labor costs are now cheaper in Mexico than in China and bypass the latter’s economic model as the workshop of the world while strongly encouraging American producers to settle more. near their place.

Another problem undermining the global system is that controversy over the origins of the coronavirus has plagued relationships already grappling with battles over tariffs, Hong Kong, and alleged Chinese infiltration of foreign communications networks through the champion. State Huawei.

“The virus has engendered mistrust,” says Magnus, “and the division sown by it has come as a shock to China. This will not be easy to fix as Western public opinion now shows a high level of antagonism towards China. I don’t know what it would take to get back from it.

Britain’s withdrawal from the EU came as a shock to the world trading system, and when Trump took power days after Xi’s speech in Davos, one of his first acts was to step down of the Trans-Pacific Partnership trade agreement. This could be a sign of things to come as countries “decouple” from the globalized system.

“We’re not going to end up with a lot of North Koreas – the quintessential autarkist state,” Postnikov says. “But what we’ll see, I think, is a world of smaller regional blocs where supply chains are shorter. The TPP, the Rcep, Brexit, everything is unilateral, whereas before these problems were seen from a multilateral angle.

Source link

Leave A Reply

Your email address will not be published.