EPC | 17 Feb 2021
The COVID-19 pandemic has exposed several faults in the global economic system. Experts expect that the deep impact of the pandemic will raise the possibility of a reconsideration of globalization and the global trade system. This in turn will enhance Trends of domestic manufacturing and adjustment of supply chains. These trends, however, will take some time. The crisis has also shown that countries cannot face global crises alone and might seek regional integration at the minimum.
The 7th Abu Dhabi Strategic Debate (ADSD) was held between 9-11 November 2020 with the participation of a number of distinguished experts and researchers at the global level and tried to shed light on key emerging economic trends in post-pandemic world. The following are key conclusions provided by participating experts on this issue.
The global economy was hit by higher uncertainty as global production has dropped by 4.5%, global labor income is estimated to have declined by 11% and direct foreign investments have fell by 15% at least in the first half of 2020. Although China is taking a V-shaped economic recovery, there is an increase in digital services inequality; 60% of world population do not have easy access to the internet. There is also a health divide because some countries lack a health system that protects their citizens.
China’s quick recovery reflects a shift in the balance of power within the global economic system. Over the past 50 years, the US and Europe have led growth in the global economy. Now, China and other Asian nations have joined this growth. In fact, this shift is beneficial to the stability of the global economy.
One of the lessons learnt during the pandemic is that diversifying the economy requires investments in renewable energy and green technology and a gradual retreat from pumping billions of Dollars into national electrical grids. This is important for emerging nations in Asia and elsewhere. It is important to shift from a consumption-driven growth to an investment-driven one. This proves the importance of shifting towards renewable energy, pumping more cash into digital investments, and realizing the risks of the carbon footprint as a result of fossil fuel. To this end, subsidies on fossil fuel should stop.
We should be careful, however, of those who control on-line networks and the digital world because this would mean more authoritarianism by some governments and regimes; thus, more control over people and a decline of freedoms. It is also important to realize that world top technology companies like Amazon, Apple, and Microsoft have developed into major powers. The power and money they have are stunning. This brings to mind the idea of “Big Brother” either through an authoritarian tendency or by controlling population through digital technology led by big global firms.
In light of the ongoing change in the global trade system and the growing trend towards domestic manufacturing, it is important that GCC countries realize their position in the emerging international supply chains. Or is it more feasible for these countries and their long-term interests to follow a multi-lateral methodology? Such methodology would play a role in dealing with climate change and digital investment which is capable of containing the current digital divide.
Nasser Saidi is the President of Nasser Saidi & Associates.
Despite burdens of the COVID-19 pandemic on the global economic system and heavy pressure on the structures of national economies all over the world, the world and national economies might improve by next summer in light of manufacturing and distributing vaccines. This, however, does not eliminate the continuation of the state of inequality in income and opportunities. Anyway, things will not fully go back to pre-Corona state for the following reasons:
1. The psychological and economic impact of the pandemic on people; households and consumers have become more concerned about the future and do not want a quick return to the strong and secure consumption pattern;
2. The discovery of new ways such as online working and shopping and distant learning; we will not completely go back to pre-Corona situation;
3. Reconsideration of globalization itself, international trade and challenges of supply chains. On the other hand, there will be a sharp decline in dependence on tourism as a source of growth in the foreseeable future at least. Traveling is not the same anymore. There should be a reconsideration of such policies by adopting more economic diversification. In addition, more attention is needed once more on the importance of regional integration, collective cooperation and less dependence on international trade.
Growth over the past half-century was led by growing consumption and households were encouraged to consume more. As a result, there was a huge global growth led by the US and Europe. This model has started to recede because the world has realized the importance of reducing pollution and stopping harm to nature and the environment. The world has started to realize the importance of reducing the carbon footprint in all our activities.
Giacomo Luciani is Adjunct Professor in Interdisciplinary Programs at the Graduate Institute of International and Development Studies in Geneva.