- Mohamed El-Erian foresees an era of deglobalization with less dynamic productivity and higher industrial concentration.
- China's change to the recycling industry is a good example of how deglobalization wreak havoc on an industry.
Politicians and leaders in the West have been speaking of consequences for China for the coronavirus pandemic, but mostly have been focused on how to make their own economies more resilient as the lockdowns exposed serious vulnerabilities in supply chains, specifically for those that create medical equipment.
Nobel laureate Joseph Stiglitz said policymakers should view the move toward deglobalization as one that is focused on resiliency for the supply chain, not job protection. Mohamed El-Erian foresees less globalization with less dynamic productivity and higher industrial concentration. He thinks countries should work together and abide by the "rules of globalization."
The global economy faced a microcosm of deglobalization a few years ago when China implemented the Blue Sky policy. China prohibited recycling facilities from purchasing international bales of scrap materials with certain levels of contamination that were difficult for international partners to achieve.
What ensued has been a struggle for the industry as shipments of recyclable goods have been turned away from Chinese ports, sent to other Asian ports, or sent back to their ports of origin. This lack of globalized recycling has created some innovation in the U.S. by increasing domestic processing of recycling goods but the recycling industry in general has yet to recover to full capacity.
As politicians point to the coronavirus with the need to close ports, the same fate could be foretold for many other industries.
Nobel laureate Esther Duflo is hopeful that the virus could be a bright spot for emerging economies to be able to compete with China, much like other countries in Southeast Asia were able to process some of the recycling turned away by China.
Economists Jim O'Neill and Jeffery Sachs do not see the coronavirus as a meaningful end to globalization. O'Neill does not expect companies to stop selling to Chinese consumers, offering the example that Apple is unlikely to stop selling iPhones in China. Sachs thinks a more remote workforce could help bring the brightest minds to more jobs, increasing the globalized nature of work.
Paul Krugman notes that our shipping container economy is not an inherent transmitter for the pathogen for Covid-19, so it's unlikely to change. What may be impacted, he warned, is the interpersonal connection associated with manufacturing goods across country lines. Watch the video to find out how economists predict the coronavirus will impact globalization.