COVID-19: Is this the end of globalization?

AuthorShahar Hameiri
Publication Date01 March 2021
DOI10.1177/0020702020985325
Date01 March 2021
SubjectScholarly Essay
untitled
Scholarly Essay
International Journal
COVID-19: Is this the end
2021, Vol. 76(1) 30–41
! The Author(s) 2021
of globalization?
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DOI: 10.1177/0020702020985325
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Shahar Hameiri
School of Political Science and International Studies,
University of Queensland, Brisbane, Australia
Abstract
Lockdowns and border closures to manage the ongoing COVID-19 pandemic have
caused the greatest global economic shock since the Great Depression. Does this
also signal the end of economic globalization, the most significant trend of the past
forty years? And if so, what kind of global political economy is emerging from the
wreckage? In this article, I argue that COVID-19 is mainly intensifying pre-existing
trends, set in motion by the global financial crisis of 2008 and the People’s Republic
of China (PRC)’s economic rise. The disruptions to global supply chains wrought by
COVID-19 have combined with rising United States–PRC rivalry, growing disaffection
with the distributional impacts of global value chains, and automation to catalyze the
turn away from globalized production. Meanwhile, amid the economic doom and
gloom, financial markets are booming, high on the central banks’ liquidity injections
to which they have been addicted since the 2008 crisis. As in the decade since the 2008
crisis, booming markets will likely deepen inequality and resentment, fuelling economic
nationalism and eroding support for globalization even more. The governments of
relatively small and open economies, such as Australia and Canada, will need to
guide their economies more purposefully or find themselves at the mercy of the
increasingly confrontational, yet domestically fragile, United States and the PRC.
Keywords
COVID-19 pandemic, globalization, global political economy, trade, global finance
Corresponding author:
Shahar Hameiri, University of Queensland, Saint Lucia Campus, Saint Lucia, Queensland, 4072, Australia.
Email: s.hameiri@uq.edu.au

Hameiri
31
The lockdowns and border closures that many governments have imposed to
manage the ongoing COVID-19 pandemic have caused the greatest economic
shock since the Great Depression. The scale and pace of the collapse in supply
and demand throughout the global economy in the first half of 2020 is truly
startling. At the time of this writing, in November 2020, the precise extent of the
economic carnage remains unclear, but all the signs are ominous. Though
doomsday predictions from earlier in the year have not been met, world mer-
chandise trade is still expected to fall by nearly 10 percent in 2020.1 Some
services sectors, such as aviation, tourism, and international education have
been almost entirely wiped out, though online services have seen expanded
usage. Globally, foreign direct investment plunged by 49 percent in the first
half of 2020, compared to 2019, much worse than the trough reached during
the global financial crisis of 2008. The outlook for the full year remains dismal,
at 30–40 percent below the previous year’s level.2 To shore up collapsing econ-
omies, governments have rolled out huge rescue packages, which in late April
2020 were already estimated to total US$6.3tn for the Group of Twenty (G20)
countries alone, or 9.3 percent of their 2019 gross domestic product.3 Despite
these extraordinary efforts, however, the World Bank predicts that the global
economy will still shrink by over 5 percent in 2020. The share of countries
entering recessions in 2020 will be higher than at any point since the Great
Depression, while per capita income will decline in more countries than at any
point since 1870.4 Even the People’s Republic of China (PRC) and India, the
main engines of global economic growth in the past few decades, have experi-
enced their first episodes of negative growth since the 1970s.5 The International
Labour Organization estimates that COVID-19 has caused employment to
decline by 320 million full-time jobs in the G20 countries, amounting to nearly
15 percent of all paid working hours. This is, on average, six times worse than
the impact of the 2008 crisis over a similar time frame.6
1.
“Trade COVID-19 shows signs of rebound from COVID-19, recovery still uncertain,” World Trade
Organization,
6
October
2020,
https://www.wto.org/english/news_e/pres20_e/pr862_e.htm
(accessed 12 November 2020).
2.
“Global foreign direct investment falls 49 percent in first half of 2020,” United Nations Conference
on Trade and Development, 27 October 2020, https://unctad.org/news/global-foreign-direct-invest
ment-falls-49-first-half-2020
(accessed 12 November 2020).
3.
Stephanie Segal and Dylan Gerstel, “Breaking down the G20 COVID-19 fiscal response,” Center
for Strategic and International Studies, 30 April 2020, https://www.csis.org/analysis/breaking-
down-g20-COVID-19-fiscal-response
(accessed 24 June 2020).
4.
“The global economic outlook during the COVID-19 pandemic: A changed world,” The World
Bank Group, 8 June 2020, https://www.worldbank.org/en/news/feature/2020/06/08/the-global-eco
nomic-outlook-during-the-COVID-19-pandemic-a-changed-world
(accessed 24 June 2020).
5.
Rishabh Madhavendra Pratap and Michelle Toh, “India’s economy will shrink this year for the first
time since 1979,” CNN, 22 May 2020, https://edition.cnn.com/2020/05/22/economy/india-gdp-rbi-
coronavirus/index.html
(accessed 24 June 2020); and Michael Smith, “China’s economy shrinks for
the first time since 1976,” Australian Financial Review, 17 April 2020, https://www.afr.com/world/
asia/china-s-economy-falls-record-6-8pc-in-first-quarter-20200417-p54krx
(accessed 24 June 2020).
6.
“The impact of the COVID-19 pandemic on jobs and incomes in G20 economies,” 3rd Meeting of
the G20 Employment Working Group, 19 August 2020, International Labour Organization,

32
International Journal 76(1)
While the economic devastation is clear enough, less obvious are its implications
for the global political economy, and specifically globalization—the main econom-
ic trend of the past forty years. Is the COVID-19 crisis going to end globalization?
And if so, what sort of economic order will emerge in its place?
It would be foolish to attempt to predict the future in the middle of an unpre-
dictable pandemic. For example, the pace at which economic activity recovers, and
hence the extent of the global economy’s transformation, would partly depend on
whether and when effective treatments or vaccines are found and delivered widely.
What is clear enough, though, is that the COVID-19 pandemic, rather than a
turning point, is acting as a catalyst for pre-existing trends in the global political
economy, pulling in a direction opposite to the “hyperglobalization” of recent
decades. To examine how COVID-19 interacts with key dynamics in the global
political economy, I focus specifically on production, which under globalization
was linked closely with international trade and foreign direct investment patterns,
and on global finance.
As I will show, the disruptions to global supply chains wrought by COVID-19
have combined with rising United States–PRC rivalry, growing disaffection with
the distributional impacts of global value chains (GVCs), and rising automation,
to foster efforts to shift away from globalized production. However, given the
extent to which production, trade, investment, and taxation have arranged
around GVCs over the past few decades, full reversal is unlikely. More likely is
an increasing fusing of multinational corporations’ efforts to maximize profits with
a variety of national security and geo-economic agendas. Meanwhile, amid the
COVID-19 economic doom and gloom, financial markets have been booming for
most of 2020, high on central banks’ injections of liquidity to which they have been
addicted since the 2008 crisis. Policy-makers are in a trap, since turning off the tap
would collapse global financial markets, potentially leading to catastrophic eco-
nomic outcomes. As in the decade since the 2008 crisis, however, booming markets
will likely deepen inequality and resentment, fuelling economic nationalism and
eroding support for globalization even more.
I begin by examining trends in production, then in finance. I conclude by briefly
considering what these dynamics mean for Canada and Australia, both relatively
small and open economies. Their governments will need to relearn how to direct
their economies more purposefully or find themselves in a fragile position in the
emerging, post-COVID global political economy.
COVID-19 and global production
The reorganization of trade and production around border-spanning GVCs, dom-
inated by large multinational corporations, has arguably been the most distinctive
feature of economic globalization in...

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