Globalisation which denotes free flow of goods, services and capital in its simplest form, has come under strain. However, this has been the lifeline for world economy since the 1990s when many countries embraced it for economic advantages. Despite facilitating expansion of global trade and bringing prosperity and reducing poverty, critics have argued that globalisation has simultaneously fueled economic inequality. They have logic because the issue of rising inequity has been raised every now and then by economists to whom globalisation’s dividends are not fairly distributed in the societies including the developed economies. Very few affluent families have benefited more from globalisation at the cost of hundreds of millions of poor, whose quality of life has not improved much. The coronavirus pandemic has severely tested the limits of globalisation A large number of countries last year faced acute shortage of not only medical supplies but also other essential goods including toilet paper, as global health crisis caught the world by surprise. People panicked and started unnecessarily hoarding household goods when they feared that the pandemic would bring the manufacturing to a grinding halt.
Worst fear Although the worst fears of people around the world which was influenced by lockdowns of cities considered to be manufacturing hubs did not materialise, thanks to swift response of the governments to suppress the spread of virus, the short-term shortages in supplies brought sharp economic downturns. People were shocked to see the medical professionals struggling for masks, let alone Personal Protective Equipment (PPE). More shockingly, global supply chain, a dominating feature of present-day globalisation, was disrupted causing ripples in global economy. When countries were overwhelmed with exponentially rising cases of virus infections and deaths in March 2020, there was a replay of ‘beggar thy policy’ of the Great Depression era. Neighbours closed their borders in the European Union and refused to share the medical equipment embracing nationalistic approach. In fighting against COVID-19 through vaccinations, countries have demonstrated “My Country First Approach”, which has led to the hoarding of vaccines by some while many needy countries are desperate to receive their paid orders of vaccines for months. The prospects of possible disruption in global supply chain have emboldened their worries and prompted them to be more selfish. The initial economic collapse and political uncertainty that accompanied the COVID-19 pandemic will likely fuel many illiberal trends in the global economy. In the midst of global economic contraction, economic trade and investment have slowed and national borders are increasingly important. The World Trade Organisation (WTO) noted a strong rebound in the fourth quarter of 2020 but warns of this recovery is unlikely to be sustained in the first half of 2021. International trade has squeezed and is down by as much as 68 per cent. Amid such pandemic-triggered economic gloom, the grounding of Ever Given, a huge ship carrying 20,000 containers in Suez Canal, though it has moved now after week-long efforts of international salvage teams, could not have come at a worse time. That giant ship weighing 2, 22000 pounds was sailing from Asia to Europe bound for Rotterdam port of Netherlands got stuck in the middle of the Suez Canal where the width of the waterway was narrow. The traffic to and from the canal was jammed involving hundreds of vessels. Its blockage has sent reverberations to the world economy. The disruptions in global supply chain due to this incident in sea route, through which 10 per cent of world trade takes place, will continue to impact the global economy for a long time. The delays in delivering the materials and commodities carried by the ship has disrupted factories around the world due to just-in-time manufacturing, that has become the hallmark of today’s globalisation. This methodology of production has sharply reduced the costs and helped the consumers to reap benefits. But these benefits are not without risks. This has been evidently exposed by the Suez Canal maritime traffic jam caused by the Ever Given’s beaching last week. The exact losses incurred in global trade because of traffic jams in Suez Canal are not known as yet. The analysts have predicted that the delay will have cost around $10 billion every day. Some experts have warned that short-term shareholder interest have eclipsed prudent management in prompting companies to skimp on stockpiling goods. The corporate executives of automotive companies have received bonanza from just-in-manufacturing and they believe that money saved by not filling warehouses with unneeded auto parts is at least in part can be given to shareholders in the form of dividends. Rather than waste money stockpiling extra goods in warehouses, companies can depend on the magic of the internet and global shipping industry to summon what they need. This is an example of just-in-time production.
Perils of reliance Against such backdrop the shutdown of a vital waterway and its impact on trade underscore the perils of the world’s reliance on global supply chains. This is why China has embraced dual circulation economic model to prevent it from danger from overreliance of goods consumed outside the country. It plans to reduce its reliance on external demand in favour of increased self-reliance. China’s policy of import substitution and introduction of supply-chain safeguards is influenced by national security concerns as well as the harsh reality of globalisation. Globalisation has benefited the global trade, no doubt but it has limitations. We should not forget that overdoing good thing can bring danger as illustrated by Suez Canal traffic obstruction. “As we become more interdependent, we are even more subject to the fragilities that arise,” said Professor Ian Goldin from Oxford University.