The first impact of Covid-19 is Globalization as we know it. Globalization as we know it is one big global marketplace with free movement of materials and resources. Considering the news reports the virus was first noticed in Wuhan in China and then it spread in Wuhan post the Chinese new year. A lockdown was imposed to contain the spread, but given globalization and the integral part that China plays in the same, flights from China were not immediately blocked. The rest is well recorded by way of the global spread of the virus or you can say the globalization of the virus.
Come to think of it, Globalization is passe, the new nomenclature is global supply chains. Many other terms have been introduced, become popular and more commonplace compared to BC i.e. Before COVID. For example, lockdown, quarantine, sanitisation, etc. To dwell a bit more on this, there are two major impacts to Globalization as we knew it one based on the spread of the virus and two based on the impact of the spread of the virus globally.
China has built its economy on the basis of a global market place by taking advantage of its available resource pool and regulated internal governance model. This made it possible to be the manufacturing back-office for the world at most competitive rates. This resulted in access to intellectual property, the inflow of investments, a significant jump in local employment, access to global markets on competitive pricing basis. All these led to the growth of Chinese global companies. The primary model I believe based on my reading of the various Chinese globalization stories is that, China provides countries with an offer to build, deliver or support a project that the country needs in return for access to that countries market. This access to the country is then shared with the Chinese companies to exploit by negotiating and setting up business deals. These business deals are delivered using Chinese labour and technology. These initiatives are also supported by China by lending the capital required and offering attractive repayment options to the country.
Given the above model, Chinese companies, businesses and resources were globally, extensively spread by the end of 2019. Several of them had gone back to China for the Chinese new year, they came back to their residence countries post the new year. By the time COVID - 19 was considered a threat, hundreds of people had travelled from China to the rest of the globe. I still recall, the visuals of the Chinese person in Italy with the banner "I am not a virus" and people hugging him to demonstrate solidarity with him. Unfortunately, proximity, physical contact and lack of social distancing is the major basis of the spread of COVID - 19. The global supply chain can be traced based on the spread of the virus. Initial spread from China to Europe and MiddleEast, then spread from Europe to the Americas and Asia and lastly to the African continent.
The speed of spread of the virus can be attributed to the current state of globalization in the form of globalization that exists. The need for global travel, across the table meetings, engaging socially and need for physical interaction to build and grow business relations, plus the global spread of resources, especially Chinese in case of Covid-19.
My personal take is that globalization, as it exists today, is expected to undergo a paradigm shift. This will only improve globalization and not make it localized. Firstly, with the growth of practices like working from home and closely linked video conferencing based interaction which till the pandemic were more of a novelty than practice will become the norm. There was hesitation to adopt these practises before the pandemic for multiple reasons, privacy, business secrecy, tools, investment in infrastructure and social interaction practises. These reasons still exist, but the benefits of adoption have squarely come into focus in the pandemic. For one, the reduction in costs, a key parameter for any business has made physical travel, lodging, boarding and meeting place arrangements significantly more costly than discussing a deal or have a business meeting online. In the case of globalized companies, these costs are a significant part of the benefits package for the resources.
Tools to undertake online communication have grown over the years and predominantly used for personal purposes, these are now being used for business purposes. While the level of security and privacy controls are not what the corporates would like, it is only expected that this open market area would be capitalized on, by enterprising tech entrepreneurs. It is also expected that several new technology tools will emerge to make online communication the preferred mode of interaction for businesses and governments with best in class security and privacy controls.
The other area is the supply chain disruption during the pandemic. While costs and profit margins are the primary focus of businesses to deliver share-holder return, notwithstanding the corporate social responsibility push in recent years, it is but natural for businesses to consider an increased level of localisation post the pandemic. China had emerged as the global supplier of raw materials and finished goods based on a well-calibrated and planned push by the regime in place. With the plan succeeding, scaling up of operations was natural, this made it most attractive as a sourcing destination. The flip-side of this development was the lack of incentive for businesses in other geographies to build capacity and compete with the Chinese model. This is expected to change, as it is expected that businesses will invest in supporting and developing local sources. The benefits of this approach are very clearly visible in the current economic environment where this approach is expected, not only to build local supply chains but also generate local employment. This will also reduce the incidence of brain drain on a global scale.
Future of globalization in view of the above is expected to be much more transparent. The international business deals are expected to increase and time to close deals expected to be significantly reduced given the online communication channels. The need for detailed information on production processes, treatment of resources, impact on the economy will be given significantly more importance compared to profit margins. Discriminatory practices and laws of the land are expected to be negative for countries to participate in the global economic sphere. Consumer activism is only expected to increase by penalising not only the companies engaging in such practices but also products from countries which engage in such activities.
Food security will become key for all countries, this is expected to improve the agriculture technology and practices, improve yield and quality apart from becoming a key contributor to the GDP of each country. In due course, the focus on environment and fair trade practices are expected to lead up to individuals generating their own power and growing a significant part of their food requirements and become more self-reliant.
At least in the short-term, increase in health infrastructure is expected to be noticed. How long this will last only time will tell. Individual hygiene practices, however, is not expected to improve given human nature...
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