Covid & Lasting Changes: Slowbalisation - The world shifts from global to local
Experts say that there were three significant periods that globalization is in retreat, a phenomenon known as slowbalisation. The term was first used in 2015 by a Dutch trend-watcher and grew in popularity in recent years. The once heavily interdependent, and rapidly globalizing world began to see international trade and investment shrinking and the complex supply chains started becoming shorter and shorter.
The 2008 financial crisis was the first trigger of slowbalisation. It is noted that at the time, it was seen as a banking crisis, but since then, nationalist and populist patterns became more prominent. In the west, negative sentiment towards immigration grew and the people demanded that jobs be taken back from foreigners and factories in China. Free trade is one of the largest components in how the MEDCs became developed. Following the World Wars, hyper-globalization brought more people to middle-class status than the world has ever seen.
Still, wealth and social class disparities continued to be high in the US and parts of Europe. Lower-income citizens grew critical of all the foreign aid their countries are giving out, the jobs they are sending to Asia while communities of caucasian Americans remain unemployed. Even grants and scholarships are mainly for those from different ethnicities, and races. Despite the development and wealth in their country, they felt left behind, and this furthered xenophobia even more. When Donald Trump was running for president, most did not believe his candidacy, and no one thought he would win with his populist agenda and risky comments. It was almost as if America forgot about the Red States.
However, this is not the only cause of slowbalisation. It is the sentiment that charged populism is not America alone, but the West as a whole.
A resurgence of populist leaders across the world got elected and attacked the global economy and immigrants.
The second major trigger is the trade war. For the past decade, the world was very much a rising China, and the West was critical of China abusing its role in global trade. When Donald Trump was voted into office, he took a more assertive stance towards China, and tariffs on Chinese products increased sixfold according to the Peterson Institute for International Economics. In response, China doubled its tariffs on US goods. The trade war between the two global powers is the eruption of a longstanding tension. Now, Biden and G7’s B3W Initiative is most likely to further challenge China, and further the drift between the two if countries have to choose sides.
“The future does not belong to globalists, the future belongs to patriots,” said Donald Trump at a rally. Ultimately, it is globalization that laid the foundation for the modern world we live in.
The backstory of globalization
Scholars agree that the genesis of globalization began with Columbus’ voyage to North America in the late 15th century, at the Age of Discovery. Even before this, the roots of globalization sprouted through the Ancient Silk Road, its birthplace. Another important leap on the path to the current global world was the Spice Routes beginning the 7th century where Islam spread to the four corners of the globe through merchants. The trademark of the Muslim merchants was their spices and was dominating their respective regions.
The first wave of globalization kicked off with the abolishment of the British Empire, and the beginning of the First Industrial Revolution. This is when global trade truly occurred with technological advancements from Great Britain such as steam engines, trains, and boats delivering their manufactured products. Global demand for British goods was high, boosting the nation’s economy greatly and raw materials were being pumped out of the colonies. Still, South American countries were developing their domestic production and began entering global trade.
Historically, it shows that whenever a large international crisis accedes, globalization recedes. During the world wars, the resources that went into trade were being funneled into weaponry and the military. The global GDP fell significantly, and the trade and economic branches of the world were being snapped off. Ultimately, international trade came back stronger after the end of WWII through the creations of intergovernmental organizations that systemized free trade such as the European Union, and the World Trade Organization.
Following the World Wars, the US established itself as the global hegemony and export made up 14 percent of global trade. Research and development across the globe boomed and the intricate supply chains amongst countries developed. This was aided by the internet and by the 2000s, the trade made up a quarter of the world’s GDP.
Now, we are in the period of history past the second and third waves, known as Globalization 4.0.
Global trade is dominated by China and the US. The new platform of commerce in cyberspace. Through the coronavirus pandemic, e-commerce across the world grew exponentially, reforming global trade as a whole. The speedup of movements and exchanges that is globalization was accelerated further through activities of the digital economy despite the trade war up until the pandemic.
The last straw of slowbalisation
Before the pandemic, world trade made up 58.24 percent of global GDP in 2019. This was still a decrease from 2018, which was at 59.49 percent according to Macro Trends. Covid is seen as the third interference to globalization in the last 12 years. The Congressional Research Service states that the pandemic affected global economic growth in 2020 “beyond anything experienced in nearly a century”. It is estimated that global trade fell by 5.3 percent last year, but is projected to increase by 8 percent this year.
Financial markets are looking for a V-shaped recession and the world is expected to make up for lost time at a fast rate.
Nonetheless, the global supply chains after the pandemic will not look the same as they did. As explained in Covid & Lasting Changes Part 4: Business and Innovation of The Boston Post, the pandemic showed businesses how little they knew about their supply chain. One of the most notable changes to come in the post-pandemic world is that companies will pull their factories out of China as it is becoming more expensive to manufacture there. Additionally as reported on Covid & Lasting Changes Part 1: Remote Employment and Automation “If factories are brought back to employ the developed world, there would be far more automation now than there was a decade ago, and more automation than Chinese factories.”
“Ultimately, this means that manufacturers and businesses will need to have end-to-end insight into their production to avoid future obstacles. One of the ways this is being done is that companies are localizing their supply chain rather than shipping it out halfway across the world. When it is local, they have better control over their production and it is more sustainable.” - Covid & Lasting Changes Part 4: Business and Innovation of The Boston Post.
The post-covid world is speculated to be more regionalized for the following reasons. Through populist regimes, extreme nationalism and localization are already being furthered by the pandemic’s isolation. Asian manufacturing has given significant boosts to Southeast Asia and China in the past, but the world is headed towards a post-industrial economy and the pandemic has furthered the usage of AI technology and automation.
On a national scale, sometimes recessions are seen as a good thing.
Through it, the country can reallocate resources from failing businesses to flourishing ones. Similarly, perhaps automation, failing businesses, and unemployment across the globe can mean human capital, and resource allocation into the growing fields. With global supply chains minimizing, factory workers in developing countries will need through much necessary retraining.