Globalization in a Post-Pandemic World, Parts 1-4

In a post-pandemic world wrought not with questions of success, but questions of survival, we are left at a critical juncture for globalization as a whole. No doubt, globalization has seen its fair share of difficulties over the past decade, heralded by slopelization, financial crisis, populism, and an increase in nationalism and racism. We have to look no further than the trade war between China and the US, beginning as early as 2016 when Trump initiated tariffs on Chinese goods, to see a trend toward decreased globalization.

However, the effect of Covid on globalization is an altogether different story. Not only has it hastened the trend toward anti-globalization, it has plunged globalization into an era of immediate darkness, and one that we will need to make quick and impactful strides toward rolling back, if we are to ever see the level of international flow and global innovation that we saw two years ago.

In our modern history of declining international flows, we have never seen an accelerator of decline as fast, nor as destructive, as the pandemic. In just a few months, lockdowns popped up across the world and government restrictions went into full swing. Travel ground to a halt. The result of this was an instantaneous standstill in the international flow of people. The same thing happened with trading. A once flourishing world trade system booming with the benefits of globalization saw itself cut off at the head by Covid-19.

And yet, beyond all of this, we must remember that none of the effects of Covid were as catastrophic, nor as consequential, as they were to us – the human beings that endured nearly two years of a pandemic that stripped us of the basic human freedoms that we take for granted on a daily basis. No longer could we walk outside of our door, for fear of losing our lives. We could no longer see our friends and family. Many of us lost our jobs to rising unemployment rates. The rate of alcoholism, PTSD, eating disorders, and even divorces, skyrocketed across the globe. And the most heart-wrenching of all; some of us lost our cherished loved ones to the virus. The mental, emotional, and physical toll Covid took on the populace is one that won’t soon be forgotten, and one that will follow us for generations to come. And, as we head into the next leg of our journey, the post-pandemic age, we are faced with a new normal.

The question we must ask ourselves, then, is: what is the new normal for globalization? How deep will the plunge of globalization be? Is it salvageable? How long will it take to have normal international flows again? What will the future international flow patterns look like (if there happen to be any new patterns at all)? And we must also ask ourselves not only to analyze the trend in globalization, but how we can not only survive in the post-pandemic age, but also hasten the revitalization of globalization in the post-pandemic age. How can our leaders handle this never-before-seen scenario? How will they handle it? What should leaders focus on, in a world where we are conflicted with two waves at once: globalization and anti-globalization?

We don’t have answers to these questions. I doubt we’ll have answers to these questions any time soon. What we do have, is a case study of the downward trend of globalization preceding the pandemic, the plunge in globalization during the pandemic, predictions for how globalization will be affected by the post-pandemic age, and most importantly, a platform for instructing business leaders and students alike across the globe, on how to survive a post-pandemic age brimming with the war between globalization and anti-globalization.

The downward trend in globalization was not new, when Covid wrecked the world landscape. We had already run headfirst into the world of slopelization. If Covid headed off the process of killing globalization, globalization had already begun its slow death years before. During the 90’s and after China joined the WTO, we enjoyed a period of hyper-globalization. This was born of the revolutionary CHIMERICA relationship. From 1990 to 2008, World Trade share increased to 39 - 61% of world trade, lifting more that one billion human beings out of poverty.

It didn’t last long.

????????????Cue global financial crises. Opposition to the globalized system. Rampant populism. Increased nationalism. Widespread racism. If we think of globalization as a budding tree with thousands of new branches each year, reaching farther and farther across the global landscape, then we can think of each of those catalysts as a different kind of fungus, each latching onto one of the roots of our globalization tree and causing it to rot away. What we are left with is slopelization: a tree of globalization whose branches are sloping inwards and shrinking, instead of growing.

In 2016, not long after Trump’s inauguration in the United States, we see the beginnings of negative popular sentiment for globalization in the US. The same negative sentiment follows in Brazil, Hungary, and Poland. Nationalism, racism, and populism spread, affected by financial crises, rising unemployment rates, and a marginalized working class. The people begin to lose trust in the central moderate social government. With globalization causing innovative new technologies to shrink the job market in an economy already upheaved by financial crises, we see a pushback against globalization in the form of populism. This manifests itself not only in America, but in Europe, Turkey, Brazil, Israel, and the list goes on.

Trump said it clearly: “The future belongs to patriots, not globalists.”

Free trade went out of fashion. Tariffs and other trade interruptions popped up out of the blue. War broke out; America initiated its infamous trade war with China in 2016. Since then, US tariffs on Chinese goods have increased 6-fold, from 0-2%, to 20-25%, and even more than this on some goods. And what did China do in response? They retaliated, of course, doubling their tariffs on US goods and services. By 2019, the IMF reported that the global GDP had decreased by 4.9-5%, as opposed to previous years. Globalization had taken a nosedive, with slopelization skyrocketing.

Then, Covid hit.

Across the globe, merchandise trade decreased by a staggering 13-32%. Foreign direct investment plunged by 30-40%. The number of international airline passengers took a nosedive by 44-80%. An immediate disruption to the international flow of investment, people, trade, and resources ensued, ushering in a major setback for globalization. However, these statistics do not signal the complete or fundamental collapse of international market integration. No matter how many times Covid’s axe whacked away at the base of globalization’s tree, and no matter the setbacks to globalization we saw even before the pandemic, there remains hope for the reverse of slopelization. This is not the end of globalization’s domination. There is light at the end of the tunnel. But the only way to reach such light is to shift our mindsets, adapt to the post-pandemic world, and analyze globalization. Not three years ago. Not during the pandemic.

Now.

We discuss five of the most critical factors in globalization’s decline (and its uncertain future): global growth patterns, supply chain policies, super power friction and fragility, technical innovation, and public opinion.

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1.?????Global Growth Patterns

International flows tend to swing dramatically due to macroeconomic events. In times of prosperity and growth, international flows grow faster than GDP’s. The paper business, for instance, grew at a rate 3-4% faster than the GDP. This, of course, is a pattern specific to industries; despite the trend holding true across the board, the rates vary based on industry and business.

The converse is also true: in times of economic downturn or decline, international flows shrink much faster than GDP’s. With supply chains cut off, companies can no longer provide goods and services at the same rate, causing the immediate deterioration of exports and imports as well as other international flows. In 2020, due in totality to the pandemic, the volume of global exports fell to a staggeringly low level – a level last seen in the early 2000’s. What does this mean, in plain terms?

We went back 20 years. (Footnote here?)

I’ve seen it in my own commodities trading, with exports like paper and pulp. Our exports plunged to the same level as in 2001 and 2002, a whole 20 years in the past! No industry, nor any business, has been immune to the global pattern of decline in international trade, caused by the pandemic.

This is not to say that Covid has initiated the “end of globalization” … not by any stretch! According to the DHL’s Global Connectedness Index, the reopening of the world has ushered in a new dawn – The Post-Pandemic Age. And the birth of this age, along with the reinstitution of global connectivity, is making significant strides in globalization’s recovery from the pandemic. In the future, if we are to hasten this recovery, as business leaders we must carefully follow the trend of economic data and translate this data to micro-actions in our firms which promote growth, and the type of innovation necessary to skyrocket growth in a Covid-dominated, and now post-Covid era.

An awe-inspiring example of this innovation is Unilever, whose 317 new actions implemented during the pandemic completely shifted production to more PPE and other health care-related products, ultimately donating 100 million euro’s worth of health care products to communities ravaged by the pandemic. During a period in which the majority of global businesses were experiencing confounding plummets in sales, Unilever actually grew by 1.9%. Unilever is an amazing case study in the innovation and resilience necessary to combat declines in international flow, bounce back from the detriments of the pandemic, and actually capitalize off of the pandemic and post-pandemic ages to drive growth.

2.?????Supply Chain Policies

Supply chain policies have also been influenced by the pandemic, and are currently being influenced by post-pandemic recovery. Even in the years leading up to the pandemic of 2020, supply chains were challenged by tariffs. Then, to no one’s surprise, Covid turned supply chain challenges into supply chain catastrophes. 94% of Fortune 1,000 companies encountered supply chain disruptions. In response, business leaders turned to localization and short distance trade to offset long distance supply chain cut-offs.

My own company, PDI Group, did that clearly. Europe, the most connected continent in the world, did the same. In 2019, the global value of the clothing industry reaching $2.5 trillion, with 43 million people working in the industry, in Asia alone. Along came Covid. Supply chains ground to a halt. US clothing sales in April of 2020 fell by a striking 73.5%. Bangladesh, a leading nation in the clothing industry, lost $3.2 billion, between January and June of 2020 alone. Faced with staggering losses, businesses across the globe were forced to turn inwards and localize their supply chains. This, as you can guess, was yet another nail in the short-term coffin for globalization.

3.?????Super Power Friction and Fragility

We need look no further than superpowers such as the US and China, to notice the blatantly different ways nations went about dealing with Covid in terms of government regulations, restrictions, and lockdowns – and how each of these unique systems resulted in a wildly different degree of success.

We must ask ourselves … how was China able to ultimately control the outbreak and return to semi-normal life, while Europe continued to struggle, month after month after month? In the 1800’s, Shakespeare’s famous qualm was “To be or not to be?” That was the question. In the pandemic age, look no further than Europe to find the most pressing question had suddenly become, “To wear a mask or not to wear a mask?” That was the new – relentlessly, heatedly, and needlessly – debated question.

To be frankly honest with you, I’m not sure if free democracy in times of crisis is useful, or detrimental. I believe a crisis like this is not just a crisis, but a war.

We are at war.

And we cannot allow our brave soldiers to stand around the trenches, asking themselves whether or not they should attack. It has been made clear by the success of China (and the failures of Europe and America) that centralized leadership in a time of crisis such as this, is vital. A powerful and decisive form of leadership must take the reigns and lead its folks, lest we have red tape bog down every initiative we propose.

Not only China was a case study in the benefits of decisive, proactive leadership. The United States, too, under President Biden’s leadership, made incredible strides. Not only did he implement a federal mask mandate, he also shifted vaccine policies and rollouts onto the right track, and was instrumental in the virtually negligible Covid rates in the United States, as opposed to the raging rates during President Trump’s term.

Again and again, we see that quick, hands-on leadership is the most effective in times of crisis, while the sloth-like pace of free democracy lags behind. We must be proactive. We must trust centralized leadership. And we must relinquish some degree of representative liberty in the short-term, if we want to survive.?

Stay tuned for part 5 of this multi-part weekly series! Next week, we discuss the fourth and fifth factors in globalization's decline. I'll see you back here on Monday!