Globalization at the time of Covid-19 virus
International Institute for Middle East and Balkan Studies (IFIMES) from Ljubljana, Slovenia, regularly analyses developments in the Middle East and the Balkans. On the occasion of theoutbreak of the pandemic of Coronavirus Covid-19, IFIMES analyzes specific aspects of the pandemics. We bring the most interesting excerpts from a comprehensive analysis titled “Globalization at the time of Covid-19 virus.”
Globalization at the time of Covid-19 virus
In December 2019, a new disease caught the attention of the media and the public around the world. Scientists quickly discovered that the cause of the disease is the Corona virus, which emerged for the first time in the city of Wuhan, China and for which there is currently no appropriate medical response. Since then, simultaneously with the massive media reports on proliferation of the virus to other parts of the world, the public fear has been growing. On 11 February 2020, the virus got its scientific name - Covid-19.
Virus Covid-19 evolved into a major disaster for the world, citizens and global economy all over the world. In the case of China, the delayed announcement of the virus, due to the assurances by Chinese officials that they can restrain proliferation of the virus, has led to an outbreak and proliferation of the virus outside of China, as a result of what the epidemic in China evolved into a global pandemic.
The Chinese government did not respond in a timely fashion. Specifically, all until the outbreak of the contamination in December 2019. The Government ignored calls by numerous doctors from Wuhan regarding the spread of the virus through the city. It was only on 20 January 2020 that the Chinese government admitted- more than a month after the initial spread of virus- the seriousness of the epidemic and declared state of emergency in the country. This delay by the Chinese government reflected on the proliferation of the epidemic around the world and gives reason for questions about the efficiency of the crisis management system in China at the beginning of detection of contamination, as well as transparency, flow of information and responsiveness by the state management in an emergency.
In general, governments were not ready for arrival of Covid-19
Covid-19 has undoubtedly shown that neither the national governments nor international organizations were ready for a direct and efficient response to this lethal global pandemic. With the exception of several countries, such as Singapore, numerous governments were not successful in curbing the proliferation of the virus, whereas Iran and Italy are the most unfortunate examples.
In addition to excessively slow responses to the epidemic by some European countries, such as Italy, the response of international organizations, such as the World Heath Organization (WHO) and other international organizations, as well as the European Union (EU), has also been criticized.
The critics accuse the WHO of hesitating to declare an epidemic and not managing to persuade the Chinese government to be more transparent and cooperative, which would facilitate a comprehensive analysis of the situation in the initial days of the epidemic. There is evidence that China has not been transparent during the critical phase of the outbreak of the epidemic, while at the same time the World Health Organization had decided to acknowledge the efficient and swift response by the official Beijing, which does not actually correspond to the truth.
In addition to the health aspect of the Corona virus, the virus is also a test and a challenge for the global economy and the globalization process. The pandemic entails a threat of an acute global economic crisis, whereas the first true indicator of such a crisis is the accelerated drop in the global prices of oil. Specifically, the price of a barrel of oil has dropped to under 30 dollars per barrel. All global stock exchanges have recorded significant declines.
By the end of February 2020, politicians and investors believed that the Corona virus will have a limited influence on the global economy, and that its negative consequences will be confined mainly to the Chinese economy.
However, with the proliferation of the virus to more than 160 countries around the world and the death of more than 6,000 people, the perspective of the business community and the financial market regarding the virus has begun to change rapidly. Particularly after the World Health Organization had classified the proliferation of the virus as a “serious pandemic”.
It is still unknown what far-reaching and long lasting consequences will the outbreak of pandemic have on the global economy. However, it still significantly complicates the trade relations and the unrestricted flow of goods and services among countries all over the world. These relations were built and developed over decades thanks to the globalization process.
The Middle East, and particularly the gulf countries, which are dependent on the export of oil as more than 90% of their revenues to the budget are dependent on the export of oil, will suffer the biggest damage by this crisis. This crisis is spreading to all countries of the world that are dependent on free trade and particularly the EU countries. The closing of borders is the biggest hit to the globalization. In example, the automobile sector, regardless of the origin of the manufacturer and the brand, manufactures automobiles from parts provided from a number of countries all over the world. Another example is the mobile phone production, whose various components are also manufactured in different parts of the world.
Global dependency on China and defeat of European solidarity
Prior to the early nineties of the twentieth century and the fall of the Berlin Wall, epidemics such as the Coronavirus one could have been more easily curbed in the area of economy and globalization. At the time the industries of European countries were more or less dependent on the production chains within the respective countries. Liberalization of trade and the emergence of China as the main country in the area of cheap labor and production instigated the big industrial companies to rely on China for manufacture of majority of production elements and necessary spare parts. As a result, major dependence on Chinese economy was created. That is how now the Chinese economy amounts to 17% of the global gross domestic product, and the scope of commercial exchange with China amounts to 35% of the overall international trade, whereas 80% of the global pharmaceutical industry depends on China and its production.
The open door policy, as a globalization product, has been stopped. Air, marine and passenger traffic is almost completely suspended. Cargo traffic has been impeded due to the closing of borders and efforts on protection from proliferation of epidemics. As a result, the scope of commercial exchange has declined, which causes shortage of goods and services and leads to increase of prices. If the epidemic continues to proliferate at this pace, possible consequences could include major austerity measures by the population, serious political instability and a new economic crisis.
The pandemic has shown that “global village” is no longer a matter of metaphor used for easier and swift communication. In this century, the world has become a large network of interactive units, that is companies and states. These units are legally independent of each other, but are connected at the economic level, which implies cooperation and communication with other units.
Maybe it is only natural that national governments give advantage to their respective citizens in such exceptional situations, but it is not normal to see how some European Union countries had turned their backs on each other, by closing their borders and suspending almost all mutual interactions in the context of provision of assistance to affected member countries. China sent its medical experts and materials to Italy and Spain to assist these two countries, which have been most affected by the Covid-19 virus. European solidarity has failed on this test.
Due to the increasing protectionism and populism, the epidemic will probably inflict the largest damage to globalization trends in the world. The world is losing the capability to respond to global economic, social, environmental and medical challenges. For quite some time already four freedoms that are the pillars of the EU have been endangered. Specifically, free flow of people, goods, services and capital. The EU had already failed the test of the migrant crisis and the closing of the borders of national states.
The pandemic caused by the Covid-19 virus will make corporations and industries review their supply chains and calculate the risk factor, as well as product costs for basic components and materials. The Tsunami crisis, which hit Japan in late 2004, and the subsequent crises with the leaking of radioactive material in reactors in Fukushima at the north of Japan in 2011, forced some American and European companies to reconsider their chains of supply of electronic chips and software processors, majority of which were manufactured in the Fukushima region and in the vicinity of the areas affected by radiation. Many of these companies moved some of their factories to Taiwan.
Time will show whether the Covid-19 virus will have an effect on the world similar to the one of the attacks from 9 September 2001 and the subsequent US military interventions in Afghanistan and Iraq, which changed the international relations that had existed until then. Under the fear of terrorism, thorough security checks and screenings were introduced for the first time at airports and border crossings all over the world. The virus will affect relations among people and peoples, that is nations, and open our eyes with respect to our weaknesses and vulnerabilities related to epidemics and natural disasters. It will trigger a dialogue in the world between those who call for international cooperation and those who promote isolation and protectionism.
Vučić said a big truth about EU
EU was recently faced with major crisis, including the financial/debt crisis and the migrant/refugee crisis. However, EU members pursued national rather than EU logic and the EU adopted decisions that were neither the most convincing nor the best possible. Although five years have already passed since the outbreak of the migrant/refugee crisis, no reform of the asylum/migration system has been adopted at the EU level.
The crisis caused with the outbreak of the new Covid-19 virus exposed once again the weaknesses of the European Union and its institutions. While expectations from the EU were high, each EU member state implemented its policy, as healthcare is still a competence at the national level. The emergence of the Covid-19 virus puts in the focus the relationship between people and nature, which had been rather neglected so far, and the pandemic has shown that this relation must not be neglected or ignored.
EU leaders, particularly the President of the European Council Charles Michel (MR/ALDE), President of the European Parliament David-Maria Sassoli (PD/S&D) and President of the European Commission Ursula von der Leyen (CDU-CSU/EPP) have displayed an absence of any leadership in a key period for the EU, which is faced with the invisible adversary of Corona virus Covid-19. In the most difficult period that the EU has faced, the current Chair of the EU Council and Prime Minister of the Republic of Croatia Andrej Plenković (HDZ/EPP) also had to deal with intraparty elections within his own HDZ (Croatian Democratic Union) party, while hundreds of EU citizens, particularly in Italy, were dying from the consequences of the Covid-19 virus.This is an illustration of the spirit and relations in the EU and its leadership.
Although EU leaders often parrot the mantra that solidarity is one of the foundations of the European Union, the newly emerged crisis caused by the Covid-19 virus has shown that European solidarity is absent and defeated. In fact, the selfishness of some countries has even become more prominent during the crisis. This is best illustrated on the example of Italy, when after the outbreak of the Covid-19 virus Germany and France introduced measures restricting export of protective equipment to Italy. Crisis management mechanisms of the EU, which poorly function in practice, had failed and the internal market has been impaired.
This vacuum, that is this absence of response by the EU, was filled by China, which even before other EU members responded had offered assistance to Italy and Spain. China also offered assistance to West Balkan countries, primarily Serbia. With such moves China demonstrated its “soft power”, and simultaneously defeated EU in its own yard.
Analysts believe that Serbian President Aleksandar Vučić (SNS) has said a big truth about the European Union when he stated “there is no large international or European solidarity” and called it “a fairy tale on paper”. He also identified China as the “only one that can assist Serbia” as well as a state from whichone can expect the most at a moment of crisis.
Analysts also believe that EU leaders could have acted more swiftly and decisively to mitigate the negative consequences of the Covid-19 crisis and activate the European crisis management mechanism (ESM), which was created at the time of the Euro crisis. However, the official Berlin still opposes such a measure. The key role of the European policy should be solidarity-based curbing of a spiral of negative trends or a crisis, as well as reducing uncertainties. However, just the opposite is happening.
The statements by the Serbian President Aleksandar Vučić caught the attention of the international public. Vučić, is one of the leaders from West Balkan countries who do not cultivate a vassal relation towards the EU. Numerous media around the world published his statements related to European solidarity and assistance in a crisis. The emergence of Covid-19 has revealed once again the shortcomings of crisis management in the EU and its institutions that are particularly experienced by the West Balkan countries, which the EU frequently and unjustifiably criticizes for turning more towards Russia, China and Turkey, while the EU itself mainly develops a “stepmotherly” relation towards West Balkan countries.
Political blindness of the EU
The existing crisis has shown that the European and specific state members were more consumed with how to complicate the negotiation process for thecountries that are candidates for membership in the EU and/or how to procrastinate the process or even not allow opening of negotiations for membership in the EU,which was not a smart move. In fact, it was a reflection of political blindness of the EU. Some two months ago that was one of the main topics in the EU. The persistent insisting of the French President Emmanuel Macron (La République En Marche!/ALDE)on the blockage of opening of accession talks for North Macedonia and Albania was in the focus of attention, whereas now nobody talks about it anymore. As a result, another year has been lost before North Macedonia and Albania can begin the talks on membership in the EU, and in the meantime China is strengthening its influence - not just in the Balkans but in the European Union as well.
According to analysts, the existing crisis that is caused by the emergence of the Covid-19 virus is a new test for the EU and its leadership, who had not found visionary solutions even for the previous crisis, and the existing crisis is global and requires appropriate answers by EU member countries to the question of the role of the European Union and its repositioning in the global framework.
Analysts believe that in the West Balkans leaders of the EU and some EU member countries should distance themselves from leaders on the West Balkans who are a symbol of crime and corruption, i.e. the Montenegrin President Milo Đukanović (DPS), whose regime has been in power for 31 years already, Albanian Prime Minister Edi Rama (PS), Kosovo President Hashim Thaçi (PDK) and others, as otherwise it will be believed that they too are a part of the international politico-criminal octopus to which the listed politicians belong. Certain leaders from the previous convocation of the European Commission, as well as some senior European officials and officials of member countries, were corrupted by specific West Balkan leaders. That is why nobody should be surprised by the outcome of a poll conducted in the West Balkans, which indicates a drop in the trust in EU and NATO institutions, because it is a result of the perception of the public in the West Balkan region that specific EU and NATO officials are a part of the criminal-corruptive network of Balkan leaders.
Threat to existence of globalization
The crisis caused by the proliferation of the Covid-19 virus is a threat to existence of globalization process and opens what can be described as the end of one phase of the globalization process.
This crisis is more severe than the crisis and the consequences of the SARS, bird flu, Ebola, cholera, malaria and other virus-borne diseases, or epidemics witnessed over the past decades. Its consequences can be more complex and detrimental for the global economy than the ones from the financial crisis that hit the world in 2008, because this epidemic has already shown that natural disasters recognize no borders.The world is faced with a challenge and temptation to which it is difficult to respond with the required speed,particularly for the countries with poor infrastructure and those that do not have medical supplies and do not have instruments for prevention and control of the diseases. Loss of thousands of lives and economic damages sustained so far are assessed to five trillion dollars.
Analysts believe that facing this pandemic crisis can be an opportunity to prove sincerity and success of international community.It is necessary to provide required resources, global openness and arduous work far away from ideologies and red lines in international relations. Without polarization and senseless divisions to those on the right and those on the left side of the spectrum, the East and the West, as it is the only way to mitigate and reduce the damages of this disease and save lives, as well as to face the health-related and economic consequences.
The emergence of Covid-19 can give an additional contribution to development of system of measuring of globalization, that is development of new globalization indexes. A combination of qualitative analysis and quantitative measuring can be an appropriate model, which will respond to the challenges of measuring of an occurrence that continuously evolves and appears in new forms. There is no ideal model, because any model is subject to changes and upgrading. This is also demonstrated by the emergence of Covid-19 and its influence on globalization trends and structure of the globalization index.
Short-term effects of Covid-19 pandemic
Analysts warn that the pandemic caused by the Covid-19 virus will have numerous consequences for the mankind:
- The feeling of collective endangerment and threat has united the world and gives hope that only through joint efforts it is possible toovercome this crisis. There are no winners and defeated in this case. There are no small and big states.
- The level of the global debt-to-GDP ratio will increase; just like in 2008 when there was a decrease of interest rates, as well as equity investments and recovery of the financial sector after the mortgage crisis. Since 2008, the global debt has increased from 180 to 253 trillion dollars, which is equivalent to 322% of global economy, as shown in the date of the Institute of International Finance (IIF).
- Major investments in the digital world, and development of the work process and promotion of distance learning will become a part of the strategy of crisis management and work in the periods of crisis, as well as in normal circumstances, in order to increase work effectiveness and rationalization. The virtual work will be an integral part of life and society in general.
- Revisions of the traffic and travel systems. Just as the terrorist attacks from September 2001 had changed the security systems at the airports and resulted in morerigorous visa regimes, the proliferation of the virus will increase the controls at airports and borders, because in addition to the security aspect they will include also the health condition of passengers, with respect to epidemiological and infection aspects.
- The medical and pharmaceutical industry will experience changes and will be more flexible in its strict regulations (conservative approach) related to registration and use of new medicines, which can result in faster generation and development of new medicines and medicaments. We are witnesses of the enormous efforts invested by scientists and the competitive spirit of pharmaceutical giants in the US, China, India, Germany and Israel to come up with products for stopping and treating Covid 19 and other similar viruses in the future.
Ljubljana/Rome, 23 March 2020