COVID-19 exposes terrible dangers of globalization

COVID-19 exposes terrible dangers of globalization


The coronavirus lays bare the terrible dangers of globalization on steroids but will hardly summon its demise. The benefits from international exchange of goods, capital, technology and people are too compelling, and the real challenges are to manage those more effectively and forging tougher domestic measures to cope with pandemics.

After World War II, freer commerce among Western democracies and supporting institutions ushered a golden age of capitalism — mutually re-enforcing peace and prosperity among historical adversaries and opportunities for developing nations to transform their economies and raise millions from poverty.

The coronavirus reveals a global supply chain drawn too taut by just-in-time inventory practices and lowest price sourcing. Apple can’t make nearly enough iPhones if China shuts down, automakers in Germany must idle workers if components’ factories in northern Italy close and we are perilously dependent on China for many active ingredients to make many drugs.

The threats posed by coronavirus are hardly something new — influenza pandemics swept the United States in 1957, 1968 and 2009.

In 1957, the United States did not practice much social distancing, most schools remained open and little was done to limit workplace interactions. The virus killed 100,000 Americans out of a population of 177 million but had a very small impact on the economy.

The example of St. Louis, which responded to the 1918 Spanish Flu more quickly and suffered fewer casualties than Philadelphia, was either not yet well enough documented by historians or federal health authorities placed too much trust in only partially effective vaccines.

China, after initially denying the coronavirus, took stronger measures than Italy, Washington State and New York and other states. And U.S. citizens have been slow to respond to voluntary measures — despite their clear potential benefits.

Consequently, our national experience will be more like Italy than China, and 240,000 deaths out of a population of 331 million could result.

Still the porous business closures, work-at-home and social distancing we have implemented easily could push unemployment to 20 percent and reduce GDP by as much as $5 trillion.  

America has both suffered the loss of life of a significant unbridled pandemic and taken an economic hit that rivals China — where loss of life will be less.

It’s folly to believe that the U.S. economy will bounce back quickly or be the same as before — wars and crises enable new technologies and business practices and permanently alter consumer behavior.

Americans are mastering strategies that better permit virtual workplaces and fewer business trips and accelerate the shift to online commerce. Some industries will come back smaller — airlines and hotels — and many restaurants and retailers will close permanently.

Unemployment will not quickly fall again to 3.5 percent, and general economic activity, corporate profits and stock prices will not quickly recover to the levels just prior to the pandemic.

In addition to retooling displaced workers, businesses will harden supply chains — diversify international sources for components. Western governments will seek greater national self-sufficiency in critical health care products. All that will come at some cost in lost efficiency and growth.

Those adjustments are more compelling, because China’s newly urbanized populations continue cultural practices such as live wild animal markets that can be expected to generate more transnational pathogens. And Western commercial and scientific relationships cannot be adequately terminated without large economic dislocations voters would be unwilling to accept.

Chinese authorities moved aggressively in Wuhan and surrounding communities to keep individuals in their homes by dispatching armies of low-level enforcers and using mobile phone data to rundown those who slipped lockdowns. Even suspected cases and many healthy individuals with close contact to confirmed cases were sent to special quarantine facilities. And Beijing has essentially closed the country to foreign visitors.

The idea that President Trump would quarantine the New York metro area was greeted with strong protests from state officials. Now we face months of the virus spreading out and running its arch in virtually every corner of the country.

Before we are done, China may well be able to boast to the world its authoritarian government accomplished both fewer lost lives and less economic losses than the United States, Italy and several other European nations.

China moved the curve — lessened the tradeoff between public health and sustaining prosperity. Now, America must respond by building stronger pandemic containment mechanisms — albeit those that are publicly accountable and not subject to abuse — or our democracy will simply not measure up to the challenges of globalization.

• Peter Morici is an economist and business professor at the of Maryland, and a national columnist. 

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