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MIHE Blog News, views and insights from Macmillan International Higher Education

Globalization In The Wake Of The Coronavirus Pandemic

by Janet Morrison 23rd March 2020

Janet Morrison explores the global business environment under the spotlight of the Coronavirus pandemic.

The world woke to the threat of coronavirus in 2020, just as Chinese people were celebrating new year. The initial outbreak occurred in Wuhan in the province of Hubei, and quickly led to drastic measures by authorities to shut down activity and close borders. The epidemic in China caused devastation to families and halted economic activity. But, because of China’s pivotal position as the world’s second-largest economy, the coronavirus crisis has shaken the very foundations of much of the global economy.

China’s dramatic rise as an economic superpower over the last two decades has established it as a crucial player in the world’s global supply chains. Carmaking, smartphones and textiles are among the many product sectors that rely on Chinese inputs to serve global markets. Although not obvious to the shopper, each product will contain components sourced from a variety of co-ordinated suppliers, often continents apart. They range from the humble zip fastener in a garment to the thousands of components in a new car. Following the coronavirus outbreak, it was only a matter of weeks before supply-chain customers, such as carmakers in America and Europe, were running short of vital components from China that could force them to halt production.

Meanwhile, the virus was itself spreading to both sides of the Atlantic, its spread boosted by China’s fast-expanding international air transport links. In Europe, Infections were rising, and car plants were also facing bad news on the economic front. Shortages of components from China, combined with local lockdown measures, could force them to close. Northern Italy was particularly badly affected, its economy suffering a nosedive amidst startling rises in infections. Italy has become one of the world’s most popular holiday destinations. While this is a blessing in terms of the money tourists spend in the country, it is a detriment in terms of the environmental degradation, especially the ecological damage caused by the hundreds of cruise ships that visit Venice each year (in 2019, Venice received 600 cruise ships carrying 30 million passengers). Northern Italy is also dotted with factories linked to manufacturing supply chains in textiles and carmaking. Marelli, one of Europe’s largest makers of advanced electrical components for vehicles, is based in the Milan area, which is at the heart of the epidemic. Although the company was taking precautions to sanitize and keep its operations going, its customers in car plants were having to cease production for lack of components from China. Marelli was thus compelled to halt production temporarily in response, as its customers were not making vehicles and had limited storage capacity in this era of just-in-time supply chains.
Aeroplane on runway

Although carbon emissions from air travel are a cause of climate change, consumers are still reluctant to give up flying voluntarily.

Image by Ken Yam. Available on Unsplash via the Unsplash License
Lockdowns and border closures imposed by the governments in European countries contributed to radical deterioration in economic activity. Consumers confined to their homes were focused mainly on personal health and food supplies. Their thoughts had turned away from shopping for new cars or planning holidays. Airlines, like manufacturers, saw customer demand fall rapidly, and many stopped operations. How long would the crisis last? Not even specialists in infectious diseases could predict with confidence. What was certain was that the longer factories and airplanes were standing idle, the greater the risk of economic calamity for businesses. The fragility of the globalized economy was becoming painfully apparent.

In reality, globalization has been under fire for years for insufficient focus on sustainability. The speed with which the virus has traversed the globe owes much to the airline industry and the ease of crossing borders, for both business travellers and tourists. Although carbon emissions from air travel are a cause of climate change, consumers are still reluctant to give up flying voluntarily. The closure of borders by governments around the world was a huge blow to modern middle-class lifestyles. In truth, there were precedents in Europe and the US, both of which have seen limited border closures in recent years, notably in the case of immigrants and refugees.

China’s air quality, long contaminated by carbon emissions, has seen a dramatic improvement as factories lie still. Looking upwards at a blue sky is perhaps a small consolation for Chinese people, but is a reminder, nonetheless, of the world they have lost. And inhabitants of Venice, a city now devoid of tourists and cruise ships, can look down at the deep blue of the canals, and take some comfort in the restorative powers of the ecological environment. While the future is uncertain, it is becoming clear that the pandemic has been a wake-up call. Globalization’s achievements have richly benefited businesses financially. They will now have opportunities to rebuild, and it should be on a more sustainable footing.

Featured Image credit: Photo by Alinenok. Avaliable on Unsplash via the Unsplash License