Globalised world: A reality after COVID-19?

Globalised world: A reality after COVID-19?

The COVID-19 crisis is not only challenging our livelihoods, but also our perception about the current economic development model. Many governments have restricted individual freedoms, such as movement of people and some goods by applying travel bans and limiting exports. The current situation is raising many questions about the world we want to live in, once the pandemic and panic have passed.

The world economy is undergoing the most important disruption since the 1929 Great Depression, excluding the effects of World War II. Recent studies have shown Millennials (those born between 1981 and 1996) will be the firsts not to be better off than the previous generation, in the global North.  In addition, a new collapse of the system could mean further sacrifices for the most vulnerable.

Nevertheless, COVID-19 is only the latest chapter of a series of crises – Financial crisis (2008), Climate crisis (2019) – leading to an important question that still remains unanswered: Is our economic model a victim of all these external disruptions or is one of the perpetrators?

The current growth paradigm is fuelled by unsustainable use of natural resources and ecosystem degradation. Research has shown that the destruction of habitats caused by economic activities (e.g. logging, mining, rapid urbanisation) has created the necessary conditions for new viruses/diseases to spread between wildlife and humans. Furthermore, outbreaks of animal-borne diseases (e.g. Ebola, SARS and COVID-19) are on the rise, as 60% of diseases that emerged between 1960 and 2004 came from animals (Jones, 2008). This represents in the current globalised world a chronic threat to global health, security and economies.

COVID-19 has revealed structural fragilities associated with global supply chains and put pressure on critical sectors. Nonetheless, few appear to be ready to renounce to their advantages, as governments seem willing to take action to mitigate globalisation only in strategic and essential sectors (e.g. Healthcare).  On the other hand, European businesses, as risk mitigation strategy might simply diversify their supplier(s) or relocate production to closer economies (e.g. shifting productions from China to East Europe, Turkey), following the example of Germany.

Furthermore, according to mainstream economics, more barriers to international trade are not only a cost to growth (i.e. as only 20% of the economic production is exported), but also to sustainable development. For example, these could  (i) stop the process of wealth redistribution – COVID-19 has already worsening hunger in the developing world if trade routes are not kept open and supply chains alive; (ii)  in a context of global production networks, domestic rules restricting material flows across countries can prevent environmentally friendly goods/services to flow in other markets around the world and renewable energy to expand. This could stop the efforts to expand the circular economy to an international dimension.

However, multiple parties have criticised the assumptions behind mainstream economics and have called for a greater consideration of natural sciences to inform economic and political decisions. While other groups condemn the inequalities of wealth and power distribution, which are reflected in the absence of an inclusive debate of future economic and political agendas.

A lower dependence on the global economy for critical resources and energy could be a solution to improve the resilience of our economies in the eventuality of further shocks. The environment itself could also benefit from shorter and localised supply chains, as very complex, fragmented and global production and distribution systems are more wasteful by nature and have promoted the increase of CO2 emissions associated with transport activities.

A more regional-oriented economy could rely less on fossil fuels, promote delocalised energy production and promote qualitative development over quantitative growth and consumption. Localised supplies, production and consumption activities could incentivise the reuse, the refurbishment and remanufacturing of end of life products, which could help us realise a more circular economy. Most likely, this would entail less growth in some sectors, but support the creation of networks, which could be more resilient to a crisis.

Currently, many are asking themselves: is this the moment to redesign the economy? This crisis could constitute an occasion to design a new economic paradigm to promote a more responsible model of production and consumption.  In order to avoid a collapse and a long period of depression, governments in the Global North will need to take an important role in securing business continuity and jobs.

Therefore, governments can take this opportunity to make structured and well-planned interventions in the market, considering environmental and social requirements. Presently, governments are relying on the expertise of scientific advisers and international scientific bodies (e.g. WHO) to design their responses to the COVID-19 pandemic. This approach could be followed and extended to the post-crisis by not only considering the scientific community, but also through the involvement of citizens (e.g. climate assembly and think-thanks). Such interventions could take form as taxes, subsidies or requirements of rescue and assistance plans to businesses (e.g. written commitments on carbon neutrality by 2030).

As a starting point, governments can use as a basis the recently promoted European Commission Green Deal and the Democratic Socialists of America proposal Green New deal. However, these agendas still lack a reflection on how much, how irrationally we consume, and whether sustainability is possible in a growth-oriented and globalised system (i.e. ‘rebound effect’), which many consider essential points in the redesign of a new economy paradigm.

Such programmes could have the potential of transforming entire supply chains, advancing the development and commercialisation of sustainable technologies and products, and incentivise circular economy practices.

 

References

[1] Mariana Mazzucato, The Covid-19 crisis is a chance to do capitalism differently, The Guardian (https://www.theguardian.com/commentisfree/2020/mar/18/the-covid-19-crisis-is-a-chance-to-do-capitalism-differently)

[2] Mariana Mazzucato, Virus, economia reale e clima: la triplice crisi del capitalismo

[3] Dean Snyder Matt Guardino, The Green New Deal and a New Politics of Consumption, Jacobin Magazine (https://jacobinmag.com/2020/03/green-new-deal-politics-consumption)

[4] John Pearson, La globalizzazione? È appena iniziata, Sole 24 ore (https://www.ilsole24ore.com/art/la-globalizzazione-e-appena-iniziata-ABFX9qrB)

[5] Riccardo Sorrentino, Perché dopo il virus la globalizzazione non cambierà la sua rotta, Sole 24 ore (https://24plus.ilsole24ore.com/art/perche-il-virus-globalizzazione-non-cambiera-sua-rotta-ADAjr3I)

[6] Paul Mason, Will coronavirus signal the end of capitalism?, Al Jazeera (https://www.aljazeera.com/indepth/opinion/coronavirus-signal-capitalism-200330092216678.html)

[7] Philippe Legrain, The Coronavirus Is Killing Globalization as We Know It, Foreign Policy (https://foreignpolicy.com/2020/03/12/coronavirus-killing-globalization-nationalism-protectionism-trump/)

[8] Grace Blakeley, We were told capitalism had won. But now workers can take back control, The Guardian (https://www.theguardian.com/commentisfree/2019/sep/29/no-alternative-capitalism-workers-take-back-control-class-politics)

[9] Jim Edwards, An economic trend that ensured British prosperity for the last 136 years just went into reverse, Business Insiders (https://www.businessinsider.com/millennials-uk-first-generation-1800s-do-worse-than-parents-resolution-foundation-2017-2?r=US&IR=T)

[10] Annie Lowrey, The Next Recession Will Destroy Millennials, The Atlantic (https://www.theatlantic.com/ideas/archive/2019/08/millennials-are-screwed-recession/596728/)

[11] Huwart, Jean-Yves and Loïc Verdier (2013), “What is the impact of globalisation on the environment?”, in Economic Globalisation: Origins and consequences, OECD Publishing, Paris. https://doi.org/10.1787/9789264111905-8-en

[12] World Economic Forum, How Can Trade Rules Support Environmental Action?, https://www.weforum.org/reports/how-can-trade-rules-support-environmental-action-global-future-council-on-international-trade-and-investment

[13] World Economic Forum, Coronavirus could worsen hunger in the developing world, https://www.weforum.org/agenda/2020/04/coronavirus-worsen-hunger-developing-world/

Authors’ information

Mécia Miguel is an ESR fellow at Tata Steel and a PhD candidate at the University of Sheffield. She holds a Master’s Degree in Environmental Engineering from NOVA University of Lisbon (Portugal). After graduating and before joining the ReTraCE team, Mécia worked as an analyst at the European Central Bank based in Frankfurt. She was mainly involved in assessing the environmental impact of euro banknotes.

Tommaso Calzolari holds an MSc in Engineering and Management from Politecnico di Torino and a MAS in Industrial Engineering and Operations from SUPSI in Lugano. He has worked as a Process Engineer around logistics and supply chain in an industrial plant producing brake pads (ITT Motion Technologies), dealing with lean manufacturing and digitalization programs. His passions for Circular Economy, technological and social innovation brought him to work also for Impact Hub Kuala Lumpur, around fostering entrepreneurship on SDGs, and to collaborate with Associazione Win Win ( Bologna) for Microcredit related projects.

 

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