Will covid kill globalisation?
Summary
TLDRThe 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
- π COVID-19 has disrupted the globalized world, causing significant challenges and exposing vulnerabilities in political and social structures.
- π Even before the pandemic, globalization was in decline, a trend that has accelerated due to recent events.
- 𧡠The clothing industry, worth $2.5 trillion globally and employing 43 million people, has been hit hard by supply chain disruptions.
- π’ The pandemic exposed the fragility of long and complex supply chains, particularly in industries like garment manufacturing.
- π¨π³ China's dominance in global trade, especially in manufacturing, has made industries highly susceptible to supply chain disruptions.
- π 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.
- π 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.
- π The rise of populist leaders and protectionist policies in response to the perceived negative effects of globalization has further slowed its progress.
- π Companies are reconsidering their supply chains, aiming to be less global and more local to mitigate risks and increase resilience.
- π 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
π 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.
π 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.
π± 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.
Mindmap
Keywords
π‘Globalization
π‘Supply Chains
π‘COVID-19 Pandemic
π‘De-globalization
π‘Financial Crisis of 2008
π‘Populism
π‘Protectionism
π‘Trade War
π‘Multinational Companies
π‘Regionalization
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
if you'd like to find out more about the
topic of the pandemic and the global
economy
click on the link opposite thank you for
watching
and don't forget to subscribe
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