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Coronavirus is Proof that Globalisation is Fake | This is Why
In the wake of coronavirus, how has globalisation failed?
The idea of a true globalised world economy is one where all countries’ economies are interdependent. When borders aren’t meant to matter, we are meant to be able to turn to other countries if something happens to our own.
Coronavirus shows us just how globalised we truly are, when borders do suddenly matter, when countries are scrambling for supplies to look after its own citizens. Face masks, medical equipment; they’re all scarce right now, and this has been a stark reminder how we continue to be very much nation-states.
We built our international supply chains by trying our best to cut costs at every link in the chain. Sure, on the face of it, this is seemingly the economically efficient thing to do. However, our systems are now suffering because we were too focused on the superficial numbers. Our nearsightedness has meant our supply lines are not resilient enough, diversified enough or sturdy enough.
Just-in-time production
One example is ‘just-in-time production and distribution’, where firms get their supply just in time to meet demand. The idea of this is that it cuts costs by reducing the need to carry copious amounts of stock. This is a very common method of production with supermarkets. But now, as we scuffle for more toilet roll, hand sanitiser and long-life milk, we wish we had a more robust system, don’t we?
What did we learn from the financial crisis?
What are the similarities between the COVID-19 pandemic and the 2008 financial crisis?
The 2008 financial crisis should have given us this reminder. It’s only been 12 years for goodness sakes! How is the 2008 and the 2020 coronavirus pandemic similar? Well, it all comes down to short-sightedness, once again. The 2008 crisis happened because we were too focused on short-term profits and sweeping our risk under the proverbial rug. Our system, at the time, was capable of dealing with small shocks, but there was also huge systemic risk in the background. Press the right buttons, and the whole thing goes kaput, basically.
Banks did not have enough in reserve to save themselves in such a crisis, because they knew they were too big to fail. Governments ended up bailing them out, which was deemed as the ‘least worst’ scenario; otherwise, the system would have undoubtedly failed, and the situations would have been worse. Read about financial market failure here.
How is the coronavirus situation similar to the financial crisis?
While the coronavirus doesn’t have an awful lot to do with banking, the same principles can be applied to our healthcare system. We have been reminded, time and time again, that a pandemic is likely to happen. In 2015, Bill Gates, founder of Microsoft and the Bill and Melinda Gates Foundation, gave a speech at a Ted Talk in Vancouver, Canada. He fundamentally outlined how our economies and health care systems were not prepared to deal with a pandemic situation. We haven’t been investing enough into research, and we haven’t built enough hospitals and equipment to deal with something like a global pandemic. Instead, we opt for a model that barely floats, because it’s cheaper and it’s not sinking just yet.
What do we do after coronavirus?
What the economy must do after COVID-19
The economic system that follows COVID-19 has to be a lot less myopic. It has to be able to deal with the fact that economic globalisation has outpaced political globalisation. We have to take a step back, otherwise our own greed will imprison us all. Furthermore, we have to accept the fact we need to exercise a degree of independence and discipline. Governments can also work to make it easier for us to make good choices. They can do this by applying some behavioural economics. One such example is bounded rationality, where our choices are restricted a bit more so we can make better, more informed decisions.
We can no longer get away with sweeping important things under the rug. Somehow, some way, the piper has to be paid!
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