While the world might recover
from the Wuhan, China-based 2020 novel coronavirus, it is likely that the virus
will leave the world governance system in a different state. Globalization as
we knew it is over and a new world order will emerge, with dramatic
consequences to our field.
Globalization involves the movement of people, information, money and products, and increases in the mobility of these factors of production have allowed for international business (IB) to prosper. The post-WWII world order was held as international institutions, built largely with the US leadership, provided a regulatory framework for trade (e.g., WTO and UNCTAD), finance (e.g., IMF) and development (e.g., World Bank). The 21st century has also witnessed the rise of China as a world power and reformer of existing institutions (e.g., UN, WHO and WTO) and a creator of new global institutions (e.g., Belt and Road Initiative). The 21st century has also witnessed the rise of China as a world power and reformer of existing institutions (UN, WHO and WTO) and a creator of new global institutions (e.g., Belt and Road Initiative).
As an orchestrator of global resources,
the multinational enterprises have responded to economic incentives by
outsourcing production to low-cost countries (such as China), selling to
high-income consumers (such as the ones in the EU) and channelling profits to
low-tax territories (such as the British Virgin Islands). Shareholders became
richer, but blue-collar workers in footloose industries bore some of the
burdens as much of the manufacturing base moved to China.
A conflict began to emerge
between Wall Street and Main Street leading to the likes of Occupy Wall Street
movement of 2011. Some democratic countries have responded to the new
challenges with populist governments, such as Boris Johnson of the UK, Donald
Trump of the USA, Narendra Modi of India, Jair Bolsanaro of Brazil and Benjamin
Netanyahu of Israel. These leaders oppose globalist approaches, that
disadvantages them, and favour nationalist policies that benefit their
constituencies. In the USA, both Bernie Sanders (populist left) and Donald
Trump (populist right) agree, at least in principle, on issues related to
protectionism and trade. Populist democratic governments around the world (on
the left and on the right) are becoming more popular among mainstream voters.
International institutions are
challenged by legitimacy and the trust in them is eroding. One such key
institution is the WHO. The Trump administration has threatened to defund WHO
and promised to launch an investigation into their recommendations. Aid to
Italy and Spain was shown to come from Russia and China and less from
neighbouring countries, as countries in the Schengen agreement have closed
borders. Mateo Salvini of Italy has lashed out at the EU for their lack of help
with COVID-19 and warned that the future of the EU is at stake.
In the EU, statistics of COVID-19
are shown at the national level and not at the EU level as national governments
attempt to battle the virus. EU solidarity will come under strain even further
as Hungary’s and Polish governments defy some of its rules, and when costs of
COVID-19 will need to be divided among its nations.
The Westphalian
system of the nation-state showed its primacy in the face of global adversity.
In the post-COVID-19 world, forces and voices supporting nationalism and
protectionism will rise, and those of unrestrained globalization will drown.
As for people, the longer the
restrictions on the movement of people persist, the bigger the impact it will
have on persistent behaviours, both at the personal and at the firm levels.
Even after some regions or countries will be open for business (internally),
restriction on international movement will persist.
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