They said globalization would reduce poverty and make developing countries prosperous with tremendous movement of commodities, technology, knowledge, information, people, the list goes on. As countries did prosper in the past two decades– there is a huge cost attached to this movement; Coronavirus has shaken the entire world and has definitely secured a phenomenal position not just in medical history but literally everything you could think of. Well, the world has faced myriads of crisis and heals with a better strategy.
The entire trade war between the US and China is proxy for an actual war with enormous damage. Although the fear about the human loss and economic loss spikes at the time of crisis, the fact that we- people, institutions, government, policy makers– adapting to the changes cannot be undermined from being a part and parcel of the process.
Countries closing their borders in order to control the spread, a recession worse than 2008 financial crisis seems like a second speed breaker in the globalization era. The financial crisis indicated a frailty within the realm of markets, but the pandemic is an external threat severely impacting the way things operate. There is a huge snowballing effect that eventually changes the landscape of geopolitics, economy, social relations etc. Many believe fighting against the virus is similar to facing a battle by putting up war against COVID-19. But there is no winning or losing in this war– we just learn to evolve.
A historical case would be The Black Death, originating from Asia in the 1300s, it is estimated to have killed around 200 million people. The malady faced by foreign ships is a traumatic record of pandemic that was later controlled by social isolation. Spanish Flu (H1N1) in 1918, infected around 500 million and killed 50 million worldwide. The shocking past of these pandemic crises strengthened the medical response, immunized humankind, introduced better hygiene and sanitation. Efforts to build a resilient community and minimize the risk of any crisis has always been the sophisticated survival instincts.
Definitely, the world is extremely different compared to the past. The severity of the spread is blamed on the excessive movement. But does this mean we close our borders permanently? Although the COVID-19 episode has placed a stress on globalization, reversing the process would be more costly than conducting it. The world is going to face an inevitable need to replace technology and this change would reorganize the way we think about everything.
A pragmatic shift to a tech-driven policy was not unexpected. It is worth recalling Alvin Toffler- a popular futurist, who believed technology is the foundation to succeed in the fourth wave of industrialisation. Interestingly, his archaic book contains ideas that still remain relevant. Technology and knowledge of technology is the key to consolidate power in the globalized world. Any country with better capital invested in technology would be able to fastrack their economy by quickly adapting to the new normal. The dynamism offered by technological resources is evident even in the case of India.
Majority of service sector employees have shifted to work from home and are able to be productive even without being physically present. Well, this has two important implications — production boundaries have clearly blurred with technology penetration in the economy. Imagine the times when the factors of production were as simple as labour, capital and land. The goods were in factories and were physically measured to obtain a value in the market.
Now think of an online application enabled with AI and data that can be way more effective in offering any service. It is almost impossible to distinguish the production and value without accounting for demand and supply in the market. For instance, in the past people bought manufactured cars which follow the classical production method. Now there is an additional service of Uber app which has diverted most of the consumers in shifting to hire cabs instead of buying. The technology used in the application is not physically produced but created using knowledge. This is the biggest hint of value embedded in skills that would create a ‘knowledge economy’. Secondly, the success of an economy to cope up with a crisis would depend on the digital infrastructure that a country can offer.
However, I also believe it is important to explore the inevitable social and economic consequences with a technology-driven economy. With social distancing and hygiene as a priority, huge investment in technology would be initially invested in replacing labour-intensive industries. This would mean eventually, except premium labour service like a masseuse, hairdresser, bartender,etc., others would be crowded out in the labour market. An important effect would be the spill-over effect on the informal economy. To understand this, let us think of all those software employees working in a first-tier city. An entire chunk of this crowd would take a cab/auto, pick up food from restaurants or food joints, hang out in coffee shops and infinite more things they spend on to keep the urban economy running. Under work from home, moving them back to their hometowns would mean cab driver, restaurant chef and coffee shop owner incur a severe loss.
Hoping the long-term adjustments happen, the good news would be this entire adaptation process might probably just increase business opportunities in the small towns. In a very ideal situation, the urban-rural divide would reduce followed by equitable business development across the country as the real estate prices in metropolitan cities fall. But all these adjustments to a possible welfare society can happen only under an assumption of sophisticated technology being present. Many economists have started talking about Universal Basic Income at the time of crisis.
As much as I think it is the best economic action to immediately provide relief, I also believe capital readjustment in key priority sectors is also important. People adapt to the changes if the policies are sound and strategic – identifying key areas to upgrade the education system to impart technical skills will enable people to manage the change. While there is an unprecedented economic crisis underway, I strongly believe there is a place for expressing optimism.
The mantra has always been learn, unlearn and relearn to survive.