The COVID-19 pandemic has led to much reflection on the state of globalization, its disadvantages in a time of worldwide disruption and the supposed advantages of retreating into the national sphere. In this sense, as in many others, the current crisis has accelerated pre-existing trends. The world trade quota – one of the main indicators of globalization – has been falling since 2012, and anti-globalist political movements have been gaining popularity for some time.
These movements have good reasons to distrust globalization, and even more so. The scarcity of vital materials – from face masks to yeast – has highlighted the poor resilience of the global supply chains that produce so much of what we use due to their over-concentration in a few countries and the lack of vital supplies. In addition, globalization has produced many losers in individual countries, especially in industrialized countries.
This phenomenon was particularly pronounced in the United States, where the median income of the poorest 50% actually fell between 1980 and 2010. Moving production is certainly not the only reason (the impact of automation on inequality is often overlooked), but it’s a major one.
But we must resist the temptation to change globalized production as a whole. Adam Smith’s axioms on specialization and David Ricardo’s axioms of comparative advantage are as true today as they were 200 years ago. Overall, globalization has clearly shown itself to be beneficial in lifting billions of people out of poverty, so our focus should be on reforming it rather than destroying it.
First of all, organizations to promote regional economic integration must strengthen the development of regional value chains for strategically important goods – not just electronic chips, but also basic needs such as food. In order to avoid future bottlenecks in essential goods, companies have to switch from just-in-time production to a “just-in-case” model that puts security of supply over optimal cost efficiency. This does not necessarily lead to self-sufficiency, but requires more diversified global distribution networks.
Likewise, we must continue to fight the enormous inequalities that have developed within countries. National and local governments need to put in place adequate safeguards to protect workers’ fundamental rights and offer them prospects for a decent future. These measures include minimum income schemes (which many countries have already put in place), investment in education in the economic sectors of the future, and public employment programs related to the impending green transition.
Politicians also urgently need to address weaknesses in the world trading system. The upcoming election of a new World Trade Organization director general will be crucial. Whoever is chosen will have the difficult task of revitalizing an organization that has been weighed down by the failure of the Doha Round, the current power of Member States to declare themselves developed or developing countries without any objective criteria, and the crippling of its Appellate Body . This body is the cornerstone of the WTO’s dispute settlement system; without it, the risk of trade wars increases dramatically.
When one speaks of globalization today, one essentially means the growth of international trade and the free movement of financial capital. But as the economist Dani Rodrik has pointed out, there is no reason to limit globalization to these processes. In particular, we need to look deeper into the common management of so-called global public goods so that they can become one of the most important vectors of international cooperation.
Serious and overarching threats such as COVID-19 and climate change can only be effectively countered on a global level. Unilateral action by economic actors and national governments will not be enough: the sum of such initiatives can never replace effective multilateralism.
To prevent pandemics and other major public health risks, the World Health Organization needs to be strengthened both politically and economically. The irresponsible decision of US President Donald Trump to withdraw the US from WHO is obviously a step in the opposite direction and can only be understood as short-sighted campaigning.
Policy-makers urgently need to consider sensible reforms of WHO, such as strengthening the organization’s funding by increasing the compulsory contributions of member states. As things stand, the WHO’s largest single donor in 2020-21 will not be a state, but the Bill & Melinda Gates Foundation, a philanthropic donor. This unacceptable situation needs to change, and WHO should also have sufficient staff and capacity to review Member States and impose binding sanctions to ensure that science takes precedence over national interests.
As for the environment, we need to recognize that combating climate change is the fight of the century. We need to encourage public-private partnerships to support the transition to sustainable production models, knowing that building a green economy can be profitable now, and beneficial for future generations too. The current context offers us the opportunity to anchor green conditionality in all instruments for economic recovery – as the historic economic fund that the heads of state and government of the European Union has just presented shows. Finally, cities and other actors should play a more prominent role in the public debate on this issue. An inspiring example of this is the C40 initiative, which unites 96 large cities in the fight against climate change.
Investing in an economic recovery that ignores the need for decarbonization is counterproductive. Attempting to monopolize the supply of future COVID-19 vaccines by preventing their fair distribution cannot end the health and economic threat posed by the pandemic. And choosing protectionism and national austerity would mean applying yesterday’s formulas to today’s problems.
Globalization has created legitimate frustrations and concerns that cannot be alleviated simply by remembering the tremendous benefits it has brought. But instead of trying to push back globalization, we will be better served if we try prudently to build a better globalization.