The last day when I met with my students, prior to shifting my classes to an online format as a result of COVID-19, I reminded them about our first week’s conversation; that the experiment of globalization of the past thirty plus years had intertwined societies, economies, government and natural environments across the globe, and that their lives would be marked by the global and local dynamics of the current system. Who would have known that a global pandemic would confirm my message to them.
The crisis that we are facing is a testament to this new reality, perhaps it is the ultimate test. The outcome of this global pandemic will dictate whether or not we, as humanity, continue to push forward with globalization or perhaps recoil back to the national borders. Local economies will have to be rebuilt, communities dependent on the small business sector will have to be rescued, consumer demand will have to be artificially sustained for a period of time, and a moratorium on personal debt payments will have to be implemented if want to keep our capitalist machine running.
If local markets are not rescued then global markets will fail to recover, but in the process nationalism and protectionism might, once again, get in the way of globalization. The future of globalization therefore depends on how quickly multinational corporations and governments implement rescue plans for the local economies. Unfortunately, the historic trend has been to rescue those sectors that are “too big to fail” while leaving the fortune of the local markets in the hands of the market.
Governments, their civil society and private sector are now challenged to manage a health and social problem that could decimate their local markets, ultimately leading the global market to a standstill. Countries whose government is able to effectively navigate the economic, social, and political challenges resulting from the pandemic will rebound quickly, and those that do not, will lose leverage and capabilities within the global market system. Those countries whose business sector is able to quickly adapt to the new challenges will leap forward, and those who do not, will see their markets contract. But if civil society does not do its part, then it will impede their government’s ability to navigate the crisis, ultimately making it more difficult for its private sector to recover. More so, if the emphasis of the rescue package is placed on large corporations and not on the local small business sector.
Therefore, the outcome of the crisis could leave us with a new world order, transforming power structures within the international system. China’s and South Korea’s quick recovery could be significant in this restructuring process and so could the European Union’s slow reaction (remember that, as of today, they have a total of more than 62,000 cases). The same could be said about other Western nations whose leadership has only been able to come up with improvised solutions for an irresponsible civil society that has only taken things seriously when it was too late. For example, nobody knows what the outcome of the UK’s initial “Herd Immunity” strategy will be or whether or not the U.S. market-driven strategy will flatten the COVID-19 curve quickly enough to revive the local economy and lift the global market from its historic drop.
Leadership is being tested; politicians that had a comfortable ride under a “bull market” now have to show what they are really made of, and business leaders must now take care of their consumers if they want to have a market on which to catapult themselves back into business. Small, medium, and large businesses in the United States, and across the world, will have to face a steep climb, and only those capable of quickly adapting to the new circumstances will survive.
Although, here at home, our leadership was not honest with the public, about the magnitude of the crisis, the investment sector has sent a clear message to the world that they do not believe the United States is prepared to overcome the situation as quickly as China. There is no confidence in improvisation.
All seems to indicate that large strategic corporations will be protected but the heart of our economy, the small business sector, will once again be unprotected. A large part of the U.S. business sector will have to face the crisis on its own. Companies and businesses of all sizes will be severely impacted; those that quickly adapt to change will survive while those unable to react swiftly will be flushed out of the market.
The devastating outcome signals that, perhaps, the apogee of globalization has been reached, and now we find ourselves in the declining curve. Good when it was profitable for international businesses, when it secured political careers for those that favored globalization, when it provided consumers with cheap products around the world, and when it facilitated opportunities for all stakeholders that capitalized on the deregulations that allowed them to shape the world in which we currently live. Bad for the millions of people that lost their jobs, for those small business sectors that were displaced from the market, for those that were marginalized, those that were victims of deregulation, those that saw their natural environments dismantled and destroyed, and now those millions of stakeholders that will be affected by a global pandemic. Bad for those markets that do not adapt quickly to the changing dynamics of the global market system.
The current crisis is a test for Western societies and markets, an opportunity for the emerging markets of the world, and confirmation of China’s capabilities in this stage of globalization. China could assert its power, if it achieves a quicker economic recovery than its competitors. If that is the case, perhaps, it may begin to carve its own version of the market system, spreading reconstruction aid to the corners of the world, while extending its own networks of interdependence. Or, perhaps, the corporations of the world will begin to reroute their Foreign Direct Investments in China, decreasing their dependency on the Asian giant, and re-investing in their own nation building efforts. Everything hypothetical at this point, since these are “unchartered territories.” One thing is clear, these are going to be challenging times for the local and global business sector.
The current reality is an eye opening moment for transnational corporations and the global market system; a time to reevaluate their China-dependent investment, production, and supply chain strategies. Perhaps, it is finally clear, that putting all your eggs in the China basket is no longer good for business. This goes to all sectors of the production and service industries, from Tesla and Apple, all the way to face masks, and the local lobster industry here in Maine. If this is the case, then it would be the end of China’s assertion in the world. At the end, China has lost the trust of the international community.
The current realities represent an opportunity for global citizens to reflect on what the future will look like if nations and economic blocs do not implement local regulatory norms to protect the social, economic, and environmental wellbeing of their local communities and markets. An opportunity for the global consumer to reevaluate whether it is worth paying a bit more for goods and services, as long as they contribute to the sustainability of local economies. It is a time to question whether or not it is sustainable to live in a world “Made in China.”
COVID-19 has also provided nationalists, protectionists, and isolationists with a rich ground on which to develop and advance their agenda, setting the foundations to challenge this era of globalization. All the more, now that local governments, businesses, and citizens will have to reconstruct their economies from the bottom up. Rebuilding everything from the small business sector to the large corporations will inevitably be a local effort.
In the case of the United States, the reconstruction process might even involve Andrew Yang’s idea of a $1,000 per month handout. Social welfare policies may potentially be strengthened and a moratorium on personal debt payments implemented, knowing well that our economy is currently heavily dependent on consumer spending. The majority of citizens do not know that the U.S. economy was transformed and redesigned to not depend on a trade surplus, but on consumer consumption. Incrementally, since the 1980s, this has been the case. Today, seventy percent of the Gross Domestic Product (GDP) depends on personal consumption. If we do not consume we are in trouble; therefore, as our economy shuts down due to COVID-19, our policy makers will have to take drastic measures in order to incentivize consumption.
How will that happen? It is difficult to say, but it will require the reinvention of the free market and a revival of the local economies. New businesses will flourish, old models, such as big box retail, will vanish, and others will become leaner and more efficient. Universities, for example, will look very different after this social experiment, not to mention our own social behaviors. Perhaps, this could result in the revival of rural economies; rural life will become more valuable than urban life, who would have known.
But it all comes down to China, how will international business, governments, and consumers react to the fact that all this devastation began in China. Will the world trust the obscure and secretive decision making style of the Communist Party? Will multinational companies continue to believe that China is their best production, distribution, and supply chain strategy? Will global consumers trust China’s rising leadership as well as their Belt and Road Initiative? Will western economies take an introspective look and return home in order to help rebuild their national economies from the bottom up?
At this point there are more questions than answers. We live in uncertain times. Will the United States come together, leaving behind the internal political war, and perhaps push forward with a united reconstruction plan? Will we leave behind out individualism and begin to rebuild our local communities after the pandemic crisis is over? Will we be able to find cohesion as a society, or is it too late? This is the test that we are facing as the COVID-19 cases escalate.
It is clear that we will be hurt socially and economically. This new social experiment will have a tremendous impact in our local, state, regional, and national politics, changing priorities, discourses, and agendas. It is a test for our society; it is in our hands to pull ourselves out of this crisis, in the absence of strong leadership. The solution is in our neighborhoods and our broader communities, and not in the hands of state and federal leadership whose vision is very distant from the realities on the ground. Rescuing airlines, banks, and investment companies will not bring the economy back to life; the only solution is to keep the local economies alive.
Our country was prepared for terrorist attacks and military scenarios, thus the robust national security budget. More recently we were preparing for an invasion of illegal immigrants, thus our constructions of a wall in our southern border. We were preparing ourselves for cyber wars, but forgot about the welfare and health of our society. The facts on the ground show that without a healthy society there is no healthy economy.
A country whose economic stability depends on consumer consumption cannot be, in the future, as unprepared as in this case. All the countries will fill the economic pinch of COVID-19, but we will feel it the most, because we are the most dependent on consumption. We are very vulnerable, we stop consuming and our economy plummets. Next time around, because there will be a next one, unless we go back to nationalism and tight borders, we will need to make sure that society, communities, and the small business sector have a safety net on which to fall back. Next time our federal and state governments cannot improvise, because as we will see in this case, improvisation will have had a large social, economic, and political costs.
There are positive outcomes out of all of this. We will become more united as families and communities, we will be more resilient as a society, and we will rebuild our local, state, and national economies. Who would have known, at least for some time, our natural environment will be cleaner, particularly our air, but at a heavy social and economic cost. We are definitely in a new social experiment. One that will challenge our current life styles, our priorities, our relationship with our material world, our new role as citizens and not as consumers, and our vision of the world.
 “Share of Gross Domestic Product: Personal Consumption Expenditures,” Economic Research: Federal Reserve Bank of St. Louis, January 30, 2020, accessed March 17, 2020. https://fred.stlouisfed.org/series/DPCERE1Q156NBEA