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The disruption of supply chains coupled with an unprecedented economic disaster in waiting for the world due to the pandemic, the pertinent question is- has the time come for the world to have a rethink for globalization?
Global economy in a tailspin
Ever since the COVID-19 outbreak evoked an unprecedented lockdown in the epicenter of the outbreak- Wuhan, the bustling industrial hub of central China with a population of over 11 million forcing the Chinese government to take such drastic action, such a kneejerk yet necessary action has been replicated by many countries to contain the virus. But the actions have thrown the global economy into a tailspin with supply chains ending up being disrupted, billions of people being forced into confinement and governments across the planet scrambling for desperate action, the virus has put at peril the nascent recovery of the global economy in the aftermath of the 2008 financial crisis.
Before the pandemic broke out, the IMF predicted that the world economy would grow at 2.1%, however, the pandemic has forced a drastic rethink on such an analysis, economists, world leaders seemed upbeat about the prospects of development in the aftermath of the 2008 financial crisis but the situation suggests otherwise. Although the outbreak appears to have slowed in China, COVID-19 and its impacts have gone global. Infections are heavily mounting in Europe, South Korea, Iran, the United States, and elsewhere, with authorities implementing increasingly restrictive measures to contain the virus. Europe and Japan are likely already in recession territory given their weak fourth-quarter performance and high reliance on trade. Estimates of the global impact vary: early last week, the Organization for Economic Co-operation and Development (OECD) predicted that COVID-19 will lower global GDP growth by one-half a percentage point for 2020 (from 2.9 to 2.4 percent); Bloomberg Economics warns that full-year GDP growth could fall to zero in a worst-case pandemic scenario. In India, the price of paracetamol, which is the most commonly used analgesic, has surged 40 percent, while the cost of azithromycin, an antibiotic used for treating a variety of bacterial infections, saw a spike of 70 percent, according to a Bloomberg report.
The sectors which have been the hardest are the real estate, tourism, airlines, hospitality and other sectors. According to the Center for Asia-Pacific Aviation (CAPA), a leading aviation consultancy firm, global airlines are set to go bankrupt by May of this year if the restrictions and expeditious steps to contain the COVID-19 outbreak are not achieved. Therefore it is looking very clear if the virus is not contained in the near future, not only it would throw away millions of people from their jobs but would lead to chaos vis-à-vis the global economy, further what is necessary to ensure that the supply chain of essential goods is not disrupted in this moment of uncertainly.
Globalization: does it require a rethink?
The buzzword of the 21st century is globalization, integration of supply chains, economies, increasing interdependence of nation-states for their inclusive and holistic development is what drove the countries after the cold war to adopt the nuances of Washington consensus and tread the path of liberalization of their economy, India followed suit in July 1991, since then many hiccups came but the world grew by leaps and bounds to promote the flow of a globalized economy, however the COVID-19 pandemic has sparked a rethink of globalization, the fact that China is the focal point of many industries and an important supplier of raw materials of a large number of industries such as electronics, automobiles, pharmaceuticals has accelerated the disruption of supply chains globally, in this context it is necessary to introspect whether too much globalization is necessary for the global order.
In the coming years, the coronavirus outbreak may be remembered as a milestone moment on the road toward the end of the first phase of globalization. Over the past few decades, markets have opened, supply chains have gone global, middle classes have emerged, and new connections have been made. More recently, a severe backlash against the increasingly free flow of information, ideas, money, jobs and people has created extraordinary political pressures. Tightened immigration rules, new hurdles for trade and investment, a deliberate curtailing of supply chains, a technological decoupling and a new emphasis on rightwing nationalistic politics have become the order of the day.
The pandemic has also unleashed the wrath of the extreme right-wing nationalistic leaders across the globe to hold globalization responsible for the ills of their respective countries, Jair Bolsonaro of Brazil, Viktor Orban of Hungary are some of the heads of state which have lambasted globalization for the respective economic woes in their countries.
The world is at crossroads, while the effect of the Wuhan virus will recede in the near future(likely) as the leading researchers are desperately trying to find a vaccine for the deadly virus, it will have a profound impact on the course of the global economy, at a time when protectionism was on the rise manifesting itself in the form of the US-China trade war, US withdrawal from the Trans-Pacific Partnership (TPP) in 2017 and India’s withdrawal from the Regional Comprehensive Economic Partnership (RCEP) to protect domestic industries and jobs has demonstrated that multilateralism has taken a backseat. The need for the hour has saved globalization because as the proverb goes “Man by nature is a social being”. The steps that need to be taken by nations can be-making the flow of ideas, jobs, working of institutions more transparent, holistic and more transparent. Promoting greater cooperation and goodwill by promoting the spirit of brotherhood is the need of the hour.