A China Cosco Shipping container ship passes the Golden Gate Bridge in San Francisco. China owns 7 … [+]
ASSOCIATED PRESS
When it comes to who to blame for the pandemic, most fingers point at China. But as China heals and all of Europe and the U.S. get knocked out, more and more people are blaming globalization — a decades old system that, by and large, created the China behemoth and made most of the advanced economies dependent on her for everything from pharmacological inputs to surgical masks. Who knew?
“At the micro level, the consequences of this pandemic are huge,” says Kevin Warsh, a visiting fellow at the Hoover Institution at Stanford University and a former Federal Reserve official during the heyday of the Great Financial Crisis of 2008-09. “On the macro level, many of the trends, such as the fights between the U.S. and China, are not going away. The virus will accelerate those tensions. Deglobalization has further accelerated.”
One day, the killer SARS coronavirus would have passed. It may stick around forever like other viruses, but its pandemic status would have abated.
It’s not going to happen next month because new states here at home and other countries like Brazil are just getting started. But when it does end, many businesses, politicians and media influencers will be rethinking globalization as it pertains to China.
Davos Man will need a rebranding.
Back in 2004, political scientist and author Samuel Huntington coined the phrase “Davos Man” to refer to the jet setting “gold-collar class” that attended the World Economic Forum each year in the Swiss Alps.
Davos Man, and now Davos Woman, are emblematic of the politically connected business and investor elite that make the world go round. They advocate for free trade, free flow of capital, and open markets.
Masks off: President Xi Jinping visits the Xixi National Wetland Park in Hangzhou on March 31, 2020. … [+]
Xinhua News Agency/Getty Images
They all jumped the shark in January 2017 when they put out the red carpet for Chinese leader Xi Jinping in what was an obvious knee-jerk reaction to new American president Donald “Tariff Man” Trump.
For some reason, Davos Man thought that Xi, leader of the largest closed economy on Planet Earth, and who holds the opposite political view of nearly every Westerner and Latin American attending the Forum, was somehow deserving of the title of new leader of the free trade world.
(Ridiculous.)
Since Trump’s election, he has wanted U.S. companies to make themselves less reliant on the Made in China supply chain. That supply may not come back to the U.S., but it is going to Mexico, to Bangladesh, to Vietnam.
In that respect, globalization is alive and well. But it is coming closer to home and it is definitely leaving China; not in droves, but not in a tip-toe either.
When asked how the U.S. will deal with the China question post-coronavirus, Trump said he would deal with that when the time comes.
Republicans like Florida Senator Marco Rubio and Arkansas Senator Tom Cotton have had it with China.
Democrats like Chuck Schumer have as well.
And while Nancy Pelosi may think wandering around a crowded China Town in San Francisco during peak coronavirus in China is a good idea to stick it to Trump for banning travel, Pelosi has been a harsh critic of the U.S. China trade relationship for a good 20 years.
President Donald Trump wasn’t happy with China in 2017. He’s less happy now. The pandemic that … [+]
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The coronavirus pandemic will not usher in an entirely new global order, of course. The “gold-collar worker”, their court jesters, and those who serve them professionally in some middle class professions, will still be global jet setters dependent on global business trends.
But it will change things in important ways, says Joan Hoey, Europe regional director at The Economist Intelligence Unit (EIU) in London.
One, it will bring to the surface developments that had previously gone largely unnoticed, such as the way in which China has already established spheres of influence in parts of the world that receive little attention.
Two, it will accelerate existing geopolitical trends, in particular the shift in the economic balance of power from West to East, though this is mostly thanks to the Europeans who seem to have very little fight in them.
“It is not a certainty that China will emerge as the clear winner from this,” Hoey says. “The U.S. is not going to cede ground that easily.”
The third factor is Europe. Deglobalization makes the EU a bit wobbly.
“I think this is something that is going to unravel over a period of months, maybe years,” says Laurence Boone, chief economist for the Organization of Economic Development and Cooperation. “If we do a good job, you’ll see more solidarity in Europe,” she hopes.
But if not, the concept of nation states wins over the borderless one-worlder view, at least with the voting public.
An ambulance crew of the Berlin fire department wheel out an elderly man whom they said was showing … [+]
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The failure to mobilize a pan-European response to the pandemic and the tendency of member states to look after their own citizens has dealt a blow to the EU for now, says Hoey.
Member states did not act in concert when the crisis erupted in Italy. Italy closed borders. Germany said it didn’t need to. Boy were they wrong. Now Germany has more cases of the coronavirus than China.
France was second to close its borders after Italy. But U.K. kept things open and British Airways flights were going in and out of New York until Trump restricted them. Then all the major Western powers went on lockdown.
Coming after the financial crisis of 2008-09, the migrant crisis that began with the image of a drowned boy on a Turkish beach in the summer of 2015, and later Brexit, the coronavirus crisis will further damage the EU as the one last bastion of kumbaya globalization.
“Anti-EU sentiment will definitely increase,” Hoey predicts as a consequence of the pandemic.
Within the existing globalization model, the question of dependence on supply chains from China for both European and U.S. companies need to be examined. Of the world’s 10 largest ports, seven of them are in China. It was built to be the world’s manufacturer. It was not built to be the world’s importer. China wants to make stuff. It has 1.3 billion people to feed and house.
As European countries like Spain and Portugal realize their dependence on the service economy hurt them in a lockdown, they too, like China, might want to make important things like medical equipment and — why not — rubber gloves.
China is trying hard to repair the reputational damage caused by yet another SARS epidemic emanating from its neck of the woods. The first version came out in 2002-03.
At the moment, it looks like their relations with the U.S. and western Europe are frayed.
The post-coronavirus world will reveal the demarcated Chinese spheres of influence in parts of Africa, eastern Europe, Latin America and Southeast Asia, making them more dependent on China as the advanced economies — the creators of the globalization model — opt out.
New York City on quarantine. The pandemic will forever change business, whether it is supply chain … [+]
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“The U.S. is incredibly dependent on China,” says Luca Paolini, chief strategist with Pictet Asset Manager in the U.K. “This pandemic will move forward the the trend of deglobalization which was already in place.”
Everything depends on how long the pandemic lasts.
If it is over by the early summer, we may all breathe a sigh of relief and let bygones be bygones. China is forgiven. The status quo returns to December 2019. The trade war returns to the fore, only if Trump is re-elected. (A Biden victory is a Double Plus China Win!)
If it lasts longer than expected in the U.S. and Europe, while China seems to be getting back on its feet, it only increases the animosities.
“Advanced economies will become more localized,” says Paolini. “The supply chain will become more fragmented. You’ll see a decline in fixed investment globally as you’re seeing now in the middle of the pandemic, especially in smaller emerging markets,” he concludes, with a warning: “For them, deglobalization and disinvestment could be especially devastating.”