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.