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Reinvent globalization with a human face

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Reinvent globalization with a human face

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From Rajesh Mehta and Uddeshya Goel,

As Muhammad Yunus said: “Globalization must not turn into financial imperialism: the strongest rule of capitalism must give way to a rule that ensures a place and participation for the poor”.

From the 1st century BC The Silk Road was the first international trade route in the world, connecting Europeans and Chinese and providing the first indications of globalization. When the Silk Road finally closed, the fall of the empires had everything to do with it. It showed a pattern we’ve seen throughout history: trade routes thrive when nations protect them, they fall when they don’t.

For a long time in modern history, globalization was accelerated by the beneficial changes in interstate relations with the fall of the Berlin Wall in 1989 and the US-Soviet armistice at the end of the Cold War in 1991. The economic expansion that followed was a broad period worldwide economic prosperity. World exports rose from 8.5% in 1970 to 16.2% of world GDP in 2001. In fact, European GDP tripled between the end of the war and 2000. America used its post-war base to become a global superpower, and China, established as the world’s manufacturing center after liberalization in 1979.

Over the years, globalization has resulted in duty free trading, spurred innovation, international travel with or without visas, seamless channeling of capital flows, cross-border pipelines and energy networks, real-time global communication and the rise of human rights and equality forums. Globalization acted as an insurance for world peace, with multiple stakeholders maintaining a Nash equilibrium in an improved democratic world.

Recently, globalization has reached a plateau due to several economic resistance events. The 2007-08 subprime mortgage crisis in the United States and its spillover into the euro zone exacerbated national sentiment in Europe, which was previously a prime example of international integration. The assumption that the rise of China would bring similar development opportunities for others proved unfounded. It became increasingly clear to the heads of state and government that not all countries, societies and people benefited equally from globalization and that the income gap widened many times over. This gave rise to economic nationalist impulses as varied as the USA (“America First”), India (“Make in India”) and Great Britain (“Brexit”).

However, the ongoing Covid-19 pandemic has been the largest peacetime globalization disruption in the history of the modern world and a threat to international well-being. While globalization has integrated the world well, it has increased the vulnerability of nations by making them too dependent on the global supply chain. Optimal just-in-time delivery has turned into late deliveries, with even developed countries struggling to meet their citizens’ basic needs for vital medical equipment to withstand COVID-19. The recent chaos on the Suez Canal confirms the over-reliance on wedged supply chains.

The pandemic gave national governments the pretext to withdraw from multilateralism and free trade, which put them in an interesting position with voters who are now calling for the renationalization of production, especially for essential goods. As a result, decisions about removing barriers to international travel are being scrutinized and information that may become increasingly plentiful is being more jealously guarded.

Although voters are theoretically against free trade, they support it with their wallets when shopping. In India, for example, cheap smartphones from China have driven the digitization of the country with a market share of 45%.

The crisis and the subsequent short-term government and corporate responses are causing the largest and fastest declines in international flows in recent history. Whatever the world has been doing in the past few decades can turn into a fiasco and we could be back in first place.

Foreign direct investment in emerging economies, the new bridges, roads, factories and ports that offer developing countries an opportunity for prosperity is expected to decline by around 20% to levels not seen since 2006. Foreign direct investment as a percentage of GDP is expected to decline by 30-40%, the lowest level since the early 1990s. Up to 100 million people around the world are on the verge of falling into extreme poverty, the first increase since the financial crises in Asia and Latin America in the 1990s and the largest increase since the World Bank began tracking that number in 1990. While poor migrants find themselves unemployed or returning home, the World Bank expects remittances to low- and middle-income countries to decline by nearly 20 percent this year, the largest decline on record.

The collapse in travel not only endangers airlines and the hospitality industry, but also threatens conservation efforts in places such as Namibia, where tourist dollars have allowed a poor country to maintain vast nature reserves.

This is the darkest hour for all of humanity that has shaken the richest of countries. Although Covid was a systemic global event, there is no global collaboration and no central authority for advice. Instead, a heavy guilt game is involved.

It is the need of the hour where global leaders band together for a cohesive future and undo the damage. This also makes sense for global climate initiatives and global vaccination efforts in order to counter rising temperatures and future pandemics. Joe Biden, the much perceived human face of global social behavior, has already taken the first steps in the global vaccine patent waiver, and now it’s the turn of the rest of the world to abandon buddy capitalism.

Let us believe again in the idea of ​​Vasudhaiv Kutumbkam, who explains: “This is mine, this is his, says the small-minded man who believes that the whole world is one family.”

(The authors – Rajesh Mehta is a senior advisor and columnist working on market entry, innovation, and public policy, and Uddeshya Goel is a financial researcher with particular interests in international business and capital markets. Views expressed are personal and do not reflect official positions against. or guideline of the Financial Express Online.)

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