Thursday, April 16, 2020

NYT - "The End of the World Economy As We Know It"

According to the Grey Lady, we're in for "a rethink of of how much any country wants to be reliant on any other country."

For years I thought it was obvious that the global economy could not possibly survive climate breakdown. The global chain with its vast supply lines depended on a high degree of stability in its participating nations. Droughts here, famine there, critical water and resource shortages along the chain would leave the nation links exposed to destabilizing forces that, as history shows, lead to chaos or worse.  Now, it seems, a viral pandemic may have accentuated the vulnerabilities of globalism.

The world economy is an infinitely complicated web of interconnections. We each have a series of direct economic relationships we can see: the stores we buy from, the employer that pays our salary, the bank that makes us a home loan. But once you get two or three levels out, it’s really impossible to know with any confidence how those connections work. 
And that, in turn, shows what is unnerving about the economic calamity accompanying the spread of the novel coronavirus.

In the years ahead, we will learn what happens when that web is torn apart, when millions of those links are destroyed all at once. And it opens the possibility of a global economy completely different from the one that has prevailed in recent decades. 
“As much as I hope we are able to get ordinary economic activity back up, that’s just the beginning of our problem,” said Adam Tooze, a historian at Columbia University and author of “Crashed,” a study of the extensive global ripple effects of the 2008 financial crisis. “This is a period of radical uncertainty, an order of magnitude greater than anything we’re used to.”
Crises have a way of bringing to the fore issues that are easy to ignore in good times.
One obvious candidate is globalization, in which companies can move production wherever it’s most efficient, people can hop on a plane and go nearly anywhere, and money can flow to wherever it will be put to its highest use. The idea of a world economy with the United States at its center was already falling apart, between the rise of China and America’s own turn toward nationalism.

There are signs that the Covid-19 crisis is exaggerating, and possibly cementing, those changes. 
“There will be a rethink of how much any country wants to be reliant on any other country,” said Elizabeth Economy, a senior fellow at the Council on Foreign Relations. “I don’t think fundamentally this is the end of globalization. But this does accelerate the type of thinking that has been going on in the Trump administration, that there are critical technologies, critical resources, reserve manufacturing capacity that we want here in the U.S. in case of crisis.”


Lorne said...

Here in Ontario, Mound, even a premier as right-wing as Doug Ford has begun to see the folly of certain aspects of globalism, at least as it pertains to PPEs. He recently said that never again will we be dependent upon other jurisdictions when it comes to such things as masks, respirators, etc.

Will his tune change once this pandemic passes? Who knows, but at least for now, his comments are a good start at reordering trade priorities.

Trailblazer said...

Welcome to the world of known unknowns.
No doubt there will be some bloodletting on the road to the 'new' economy as the old ideas clash with the new.
With influencial special interests at stake what will,say, the heavily subsidised US agriculture industry do?
What about the world money supply which is controlled by US interests?
I can see hard manufacturing returning to the west as that is low hanging fruit for politicians .

The list is endless but I am convinced that climate change will go on the back burner.


The Disaffected Lib said...

Canada needs to have current stockpiles of medical supplies and equipment necessary for national disasters, Lorne. Yesterday a friend challenged the idea, saying why should the federal government carry the cost of stockpiling supplies, some of them perishable, against contingencies. I asked why she imagined we maintained an army, a navy and an air force. Why do we buy and maintain water bombers? We do these things because they're necessary to secure the nation.

This is why I was disappointed to hear Trudeau announce Canada would be establishing its own manufacturing point - in China. If we need supplies such as face masks, they should be produced in Canada, by Canadians.

Northern PoV said...

Perhaps the term just-in-time will become a pejorative while 'redundancy' and 'tolerance' return to the complementaries column.

Meanwhile ...

curiouser & curiouser

The Disaffected Lib said...

Hard to say how this will wind up, Trailblazer. I dread change motivated by fear. There's often a lot given up in exchange for a little.

I dislike neoliberalism for certain reasons. Others reject it for very different reasons. That virtually ensures we won't all be thrilled with whatever comes next.

The Disaffected Lib said...

NPoV - it's important to recall that 'just in time' was all about maximizing profit by paring costs to the bone. It's going to be hard for corporate directors to shake that idea.

Interesting links. I hope they develop into something well before November.

Trailblazer said...

I keep hearing; It will never be the same again, things will change.
As of now, I have yet to hear what changes these people want!!

We live with a generation of young adults that have seldom experienced a job with benefits, particularly pensions and medical.
Their idea a a social safety net is their old room at their parents home with use of their parents credit card.
Such is the life we have made for ourselves!

That said, Greed is good is still the rule of the day, followed by the golden rule!
He who has the gold , rules!


The Disaffected Lib said...

I share your cynicism, TB. If we don't find some means of restoring social cohesion to our people we may succumb to our divisions.