Will covid kill globalisation?

Summary

The video discusses the impact of COVID-19 on globalization, highlighting how the pandemic has disrupted global supply chains and accelerated trends toward deglobalization. It explores the economic and social fallout, particularly in industries like clothing, and examines how previous crises, such as the 2008 financial crash, had already begun to slow globalization. The video also delves into rising economic nationalism, technological decoupling between the U.S. and China, and the potential long-term consequences for both developed and developing countries as the world becomes more regionalized and less interconnected.

Takeaways

• 🌍 COVID-19 has disrupted the globalized world, causing significant challenges and exposing vulnerabilities in political and social structures.
• 📉 Even before the pandemic, globalization was in decline, a trend that has accelerated due to recent events.
• 🧵 The clothing industry, worth $2.5 trillion globally and employing 43 million people, has been hit hard by supply chain disruptions.
• 🚢 The pandemic exposed the fragility of long and complex supply chains, particularly in industries like garment manufacturing.
• 🇨🇳 China's dominance in global trade, especially in manufacturing, has made industries highly susceptible to supply chain disruptions.
• 📉 COVID-19 caused a dramatic decline in clothing sales, with a 73.5% drop in the US between March and April, significantly impacting countries like Bangladesh.
• 🔄 The history of globalization began post-WWII, accelerated in the 1990s with China's WTO entry, but faced setbacks like the 2008 financial crisis and recent trade wars.
• 🛑 The rise of populist leaders and protectionist policies in response to the perceived negative effects of globalization has further slowed its progress.
• 🏭 Companies are reconsidering their supply chains, aiming to be less global and more local to mitigate risks and increase resilience.
• 📈 The digital economy, exemplified by companies like Netflix, Google, and Amazon, continues to thrive and expand despite the broader challenges to globalization.

Q & A

How has COVID-19 impacted the globalized trading system?

COVID-19 has disrupted long and complex supply chains, causing significant damage to industries such as clothing, which employs over 43 million people globally. The pandemic led to factory shutdowns, canceled orders, and a sharp decline in consumer demand.

What was the state of globalization before the COVID-19 pandemic?

Before the pandemic, globalization was already in retreat due to the 2008 financial crisis and rising protectionist policies. The pandemic accelerated this trend, further challenging the interconnected global trading system.

How did the 2008 financial crisis affect globalization?

The 2008 financial crisis led to a slowdown in globalization, with cross-border investment, trade, bank loans, and supply chains shrinking. It marked the beginning of a process known as deglobalization.

What is deglobalization, and what factors have contributed to it?

Deglobalization refers to the slowing down or reversal of globalization. Contributing factors include the 2008 financial crisis, rising protectionist policies, trade wars, and the COVID-19 pandemic.

How has the clothing industry been particularly affected by supply chain disruptions during the pandemic?

The clothing industry, which relies heavily on human labor and has complex supply chains, faced severe disruptions. Factory shutdowns in China affected the production of components like buttons and zips, leading to incomplete garments in Bangladesh and canceled cotton orders in India.

What is the significance of shorter supply chains, as demonstrated by Zara?

Shorter supply chains, as used by Zara, allow for faster response to consumer trends and reduced inventory stockpiling. This model has helped Zara weather the pandemic better than other companies with longer, more vulnerable supply chains.

How has the pandemic affected multinational companies' approach to supply chains?

The pandemic has led multinational companies to prioritize supply chain risk management, considering how to be less global and more local to reduce vulnerability to disruptions.

What role has technology played in the evolution of globalization?

Technology has been a driving force in globalization, enabling the movement of companies, products, science, and technology across borders. However, recent trade tensions and policies have led to a 'splinternet' between China and the West.

How might the unpicking of globalization affect developing countries like India?

Developing countries such as India could miss out on economic opportunities if globalization slows down further. The shift to a post-industrial economy might prevent these countries from benefiting from manufacturing-led growth, as China did.

What are some potential outcomes of a more regionalized and localized global economy post-COVID-19?

A more regionalized and localized global economy could lead to greater disruption and fragmentation. While some companies may thrive by adapting to new business models, others may struggle with the shift away from unfettered global trade.

Outlines

00:00

🌍 Disruption of Globalization Due to COVID-19

The COVID-19 pandemic has severely disrupted the globalized and interconnected world, causing significant human suffering and damaging the political and social fabric. Globalization, already in retreat before the pandemic, faces an accelerated decline. The clothing industry, with its long and complex supply chains, is particularly hard hit. The disruption in supply chains has led to significant economic losses and job layoffs, especially in Asia, where many low-cost manufacturing operations are based.

05:01

🛠 Decline of Manufacturing and Rise of Populism

The 2008 financial crisis and the resulting slowdown in globalization left many feeling poorer, leading to growing opposition to the system. This sentiment fueled the rise of populist leaders in western democracies, who advocated for protectionist policies and attacked the existing global economy. Trade interventions like tariffs and subsidies increased, further harming world trade. The US-China trade war exemplifies this trend, with significant tariffs imposed by both countries, disrupting global trade relationships.

10:04

📱 Tech Decoupling and Regionalization Post-COVID

The pandemic has intensified the decoupling between China and the West, particularly in technology. The 'splinternet' is deepening, with bans on apps like TikTok and measures against Huawei. This decoupling extends to hardware, potentially leading to two separate technological spheres dominated by China and the US. This fragmentation of the global tech landscape may stifle innovation. Developing countries like India might miss the benefits of globalization, while developed countries face challenges in reviving domestic manufacturing without bringing back jobs due to automation.

Keywords

💡Globalization

Globalization refers to the process by which businesses, technologies, or philosophies spread throughout the world, creating a more interconnected and interdependent global economy. The video discusses how globalization has shaped the world's economy and how the COVID-19 pandemic has disrupted global supply chains, impacting industries like clothing manufacturing.

💡Supply Chains

Supply chains are the networks between a company and its suppliers to produce and distribute a specific product to the final buyer. The video illustrates how the pandemic has wreaked havoc on supply chains, particularly in the garment industry, where disruptions in one part of the chain (like button production in China) can halt the entire manufacturing process.

💡COVID-19 Pandemic

The COVID-19 pandemic is an ongoing global health crisis caused by the coronavirus SARS-CoV-2. The video describes how the pandemic has not only caused human suffering but also significant economic disruptions, accelerating the retreat of globalization and highlighting vulnerabilities in global supply chains.

💡De-globalization

De-globalization refers to the process of diminishing interdependence and integration between certain units around the world, typically nation-states. The video discusses how the trend of de-globalization, which started after the 2008 financial crisis, has been further accelerated by the COVID-19 pandemic, leading to more regionalized and localized economic activities.

💡Financial Crisis of 2008

The Financial Crisis of 2008 was a global banking crisis that resulted in the collapse of major financial institutions and significant economic downturns worldwide. The video mentions this crisis as a precursor to de-globalization, marking the beginning of a slowdown in cross-border investments and trade.

💡Populism

Populism is a political approach that strives to appeal to ordinary people who feel that their concerns are disregarded by established elite groups. The video notes the rise of populist leaders advocating for nationalist policies and economic protectionism, which has contributed to the retreat of globalization.

💡Protectionism

Protectionism refers to economic policies that restrict imports to protect domestic industries from foreign competition. The video highlights how protectionist measures, such as tariffs and subsidies, have increased, leading to more harmful interventions in global trade and contributing to de-globalization.

💡Trade War

A trade war is a situation where countries impose tariffs or other trade barriers on each other in response to trade disputes. The video discusses the trade war between the United States and China, where both countries significantly increased tariffs on each other's goods, further challenging globalization.

💡Multinational Companies

Multinational companies are corporations that operate in multiple countries. The video explores how these companies thrived during the era of hyper-globalization by expanding globally but are now rethinking their strategies to become less global and more local due to the vulnerabilities exposed by the pandemic.

💡Regionalization

Regionalization refers to the process of dividing an area into smaller segments called regions. The video predicts a shift towards regionalization, where economic activities become more focused within specific regions rather than globally, as companies and countries seek to reduce the risks associated with long global supply chains.

Highlights

COVID-19 has disrupted the globalized world, causing human suffering and damaging political and social structures.

Globalization was already in retreat before the pandemic, and this trend is likely to accelerate.

The global trading system relies on complex supply chains, which the pandemic has severely disrupted.

The clothing industry, worth $2.5 trillion globally, has been hit hard by supply chain disruptions.

Factory shutdowns in China and canceled orders in Bangladesh and India exemplify the vulnerability of global supply chains.

Bangladesh lost an estimated $3.2 billion from canceled exports in six months, and millions of low-income workers across Asia were laid off.

The roots of today's globalized world were established post-World War II to promote economic peace and cooperation.

The 1990s marked an era of hyper-globalization, with China becoming a major player in global trade.

The 2008 financial crisis was an early sign of deglobalization, slowing down global trade and investment.

Populist leaders across the West have championed nationalist policies and protectionism, further challenging globalization.

Trade wars, particularly between the US and China, have added to the challenges facing globalization.

The pandemic has highlighted the vulnerability of global supply chains, leading companies to consider more local and regional supply chains.

Zara's shorter supply chains have helped it weather the COVID-19 storm, showcasing the benefits of a more localized approach.

The flow of data across borders is also facing challenges, with increasing decoupling between China and the West.

Deglobalization could negatively impact developing countries like India, which have benefited from the globalization boom.

Economic nationalism may not bring back jobs as factories would be more automated, even if relocated back to the West.

Big digital companies like Netflix, Google, and Amazon are likely to continue thriving despite deglobalization trends.

The world is unlikely to see a full unwinding of globalization, but the pandemic will deepen existing cracks.

Leaders need to make interdependence work with resilience to avoid simplistic solutions that have failed in the past.

Transcripts

covert 19 has brought disruption to the

globalized and interconnected world

the challenges of kovid have led to a

dark period

both in terms of human suffering but

also the damage done to of political and

social fabric

but before the pandemic globalization

was already in retreat

now that trend looks set to accelerate

this is a diminished world in many ways

that we're looking at

it's a world of globalization

[Music]

from smartphones to toys today's

globalized trading system has grown to

rely on long and complex supply chains

but the pandemic has played havoc with

them

clothing is one industry that has been

hit hard

worth 2.5 trillion dollars globally it

employs over 43 million people

in asia alone one of the most footloose

industries when it comes to supply chain

has always been the garment industry

that's because it has a high level of

human involvement

and so the labor cost of a product is

much higher than you might find in an

automobile for example

for that reason we've always seen

companies chase the lowest cost

[Music]

that means manufacturing mostly happens

in asia

and the global nature of the industry

makes it especially vulnerable to

disruptions

take a typical pair of trousers sold on

a high street in western europe

the label says made in bangladesh but

many of the parts come from other

countries

chinese factories making buttons and

zips shut during the pandemic

meaning the items didn't reach their

next port

factories in bangladesh couldn't finish

the trousers

and canceled orders to cotton suppliers

in india

and lockdown hit demand in the west as

customers weren't shopping on high

streets

in america clothing sales fell by 73.5

percent

between march and april this year

bangladesh lost out on an estimated 3.2

billion dollars from cancelled exports

in just six months

and across asia millions of low-income

workers were laid off

goods taking long journeys from factory

to the high street have become one of

the signatures of globalization

[Music]

the roots of today's heavily globalized

world were put down at the end of the

second world war

the allied nations created a rules-based

system for international commerce and

finance

designed to establish the economic

foundations of peace

on the bedrock of genuine international

cooperation

this allowed companies products science

and technology

to move across borders

then in the 1990s the world entered an

era of hyper globalization

becoming more interconnected than ever

before

a dream of money money

in this era the big new player on the

scene was china

which joined the world trade

organization

it grew to dominate global trade

alongside the united states

multinational companies thrived

expanding into china

and all over the globe

from 1990 to 2008 the total trade in

goods and services increased

from 39 to 61 of world gdp

this great globalization boom enabled a

billion people in developing countries

to lift themselves out of poverty

and in the west consumers enjoyed

cheaper and more accessible travel and

goods

[Music]

covert 19 struck a major blow to

unfettered globalization

but before the pandemic arrived

globalization had already taken two

other big hits the american financial

system

is rocked to its foundation japanese

stocks down nine percent the hong kong

market's down

everywhere you look the color is red and

no one it seems

can stop the bleeding the first was the

2008 financial crisis

when cross-border investment trade bank

loans and supply chains

shrank globalization started to slow

down

a process known as globalization

the global financial crisis decade ago

was perhaps an

early sign of the beginnings of

globalization

it wasn't recognized as such at the time

because it seemed to be a banking crisis

the global economy suffered

[Music]

and those who had already lost out

during the heyday of globalization

felt even poorer opposition to the

system grew

and we see this kind of sentiment across

western democracies

to bring the jobs back that were stolen

when the factories moved particularly to

china

those who were left behind very cruelly

by the policies and people that

supported globalization

that is the blue-collar workers for

example in factories

in northern england or in the midwest of

america the trump voters

this desire to revive manufacturing and

bring back dignity to workers spread

across the western world

a wave of populist leaders were elected

across the globe

championing nationalist policies

attacking immigration

and the existing global economy

[Music]

[Music]

the future does not belong to globalists

the future belongs to patriots

[Music]

free trade went out of fashion and

protectionism was all the rage

the number of trade interventions such

as tariffs and subsidies

introduced by countries has been

increasing year on year

and while some have brought

liberalization most have been harmful to

world trade

in this climate globalization suffered a

second assault

[Music]

we can't continue to allow china

to rape our country and that's what

they're doing

a trade war blew up between the world's

two largest economies

for years the west had accused china of

flouting wto rules

saying its trading practices were unfair

to western companies

but president trump turned rhetoric into

policy

since the start of his presidency

tariffs on chinese exports to the u.s

have increased

six-fold china hit back more than

doubling its tariffs on u.s goods

the advent of the pandemic this year was

the third big disruption to

globalization

within the last 12 years globalization

has sped up

[Music]

this year the imf forecasts that global

gdp could fall by 4.9 percent

that is 50 times more than in 2009

the post-covert world is likely to be a

more fractious and regionalized one

what we saw for 20-30 years with

unfettered global trade with unfettered

global travel

with sourcing from china serving the

world i think we'll never go back to

that

what we're likely to see is a messier

world and future

one with elements of globalization

continuing

but many other counter trends that lead

to either regionalization

nationalization localization some form

of

de-globalization and so we're going to a

spiky world

we're going to see much more disruption

[Music]

multinationals try to navigate the

challenges of the pandemic

the talk in the boardroom is

increasingly about how to be less global

and more local they have seen

how vulnerable their supply chains are

to unanticipated disruption of a natural

kind

for the first time at the level of the

ceo and the board

companies are discussing supply chain

risk and what to do about it and how to

ensure against it

now they're seeing this as something

vital to the business

some companies are ahead of the game the

spanish clothing retailer zara

is one of the most successful in the

clothing industry

and its shorter supply chains have

helped the company

weather the coveted storm while most

western high street fashion brands have

offshored manufacturing to asia

where labour is cheaper distance equals

time

so retailers have to bulk order six

months in advance

and in that time a lot can go out of

fashion

zara keeps its manufacturing base closer

to home for its higher fashion lines

meaning you can take a design to the

high street in a matter of weeks

that way it doesn't stockpile inventory

and can respond quickly to consumer

trends

that model is coming to not just to

fashion but industry after industry is

going to move in that direction

in part because the on-demand economy is

allowing

us to express our tastes through social

commerce

we've seen a revolution that's driven

both by fear of disruption on one hand

but also by the opportunities created by

the internet economy

the pandemic has disrupted the movement

of goods people and capital around the

globe

but even without covert 19 another

pillar of globalization would be facing

challenges

the flow of data across borders

the great firewall of china has kept out

the likes of google and facebook for

years

[Music]

and president trump's recent attacks on

tiktok and wechat

are deepening this splinter net between

china and the west

we're looking at tick tock we may be

manning

and it's not just software we confronted

untrustworthy chinese technology and

telecom providers

we convinced many countries many

countries

and i did this myself for the most part

not to use huawei

the decoupling of chinese and american

tech also extends to hardware

i think this is likely to lead to two

worlds a china-dominated world

and an america-dominated world on

technology and software

and ultimately we will have less

innovation

the unpicking of globalization may

accelerate on a number of fronts

irrespective of when covert 19 is

brought under control

and this could be bad news for

developing countries such as india

[Music]

the globalization boom allowed countries

in southeast asia to rise to

middle-income status

but the likes of india may miss out on

this

there is a concern that we may see a

leap frogging in countries that are

emerging

the way that china had a chance to put

its massive population to work in

factories

there is a worry that for developing

countries that are just emerging at that

stage that the world may move to a

post-industrial economy

and leave them behind this is a genuine

concern

and they are not the only people who

stand to lose out from deglobalization

in rich countries like the us and

britain those most in favor of reigning

in globalization could suffer the most

we're going to london to stop the brexit

betrayal good morning

economic nationalism will not prove to

be a silver bullet

it's very likely that uh policies of

de-globalization or economic nationalism

that try to bring the factories back

will discover that you can bring the

factories back

but you can't bring the jobs back that's

because when the factories

are brought back almost always they will

be more highly automated

than they were in china but even as the

world becomes more de-globalized

some of the biggest winners from

globalization will endure

big digital companies like netflix

google and facebook

will keep getting bigger with the

pandemic accelerating the trend towards

shopping online

companies following the amazon model of

fast direct delivery

will also do well the top 10 percent

even in the worst sectors worst meeting

hardest hit sectors

could well emerge with a winning

business model i think in every crisis

you find some companies that fall behind

and those that are fundamentally able to

re-jig their business models

and innovate are the ones that thrive

in the post-covered world some aspects

of globalization affected by the

pandemic

may shift back such as freedom to travel

the world has grown too integrated for a

full unwinding of globalization

covert will not kill it off it will

deepen the cracks

however this may not be all bad news

i'm hopeful that we'll learn the right

lessons that we need to make our

societies more resilient

so that we don't resort to very simple

solutions that don't work

like shut down the supply chain build a

wall

keep the immigrants out we've tried

those things before

i think the broader solution is to make

interdependence

work with resilience that's the

challenge that

global leaders face today

[Music]

i'm vijay vadis warren u.s business

editor of the economist

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