Although pondering about the possible reasons and long-term consequences of COVID-19 virus may be too hasty, one particularly important topic has already resurfaced in America with potentially solemn ramifications. No longer can this force be ignored for the sake of political or private sector expediency. We’re talking about globalization. The time to revisit globalization is now.
The Failures of Globalization
Globalization has been sold in America’s universities, factory meetings, and political campaigns for decades as a benign force to boost prosperity for everybody. Admittedly, this model seemed to work without creating major imbalances. That is until the Chinese realized the hard way something Western cultures have been saying for a while now: Their poorly manufactured products are unsafe and bat meat is not a nutritious afternoon snack!
We are beginning to see what can happen when the unintended consequences of globalization blow up with serious collateral damages. We are currently living this scenario with the lethal arrival of COVID-19 literally to every corner of the world. Hitherto the rather invisible force of globalization transformed itself into an unrestricted vehicle for global disruptions. These included the Great Recession of 2008, rise of Islamic terrorism (ISIS), and now pandemics. Through each of these, globalization transformed local communities, but also impacted the whole world in very negative ways.
Through unchecked movement of people, capital, (mis)information, and complex supply chains – all fundamental bulwarks of globalization – a virus that could have been contained at its source in Wuhan, China spread across the globe in an unprecedented fashion. As it turns out, open borders for free movement of incompatible ideologies via international institutions (U.N & WHO), unsafe and contaminated products, and people with little commitment or incentives to assimilate into a new society will inevitably cause societal frictions. One could argue the attempts to integrate the above mentioned forces in the name of diversity, or to maximize shareholder value, into one cohesive world view created a logical backlash called President Donald J. Trump.
Economics of Globalization
For decades, the forgotten people in America’s closed Rust Belt factories have pointed out that globalization certainly wreaks economic havoc at home. By moving traditional industries overseas, the results are loss of jobs, healthy lifestyles, and a corrosion of communities. Those raising such alarms were dismissed as “deplorables” by America’s business, media, political, and academic elites. After rolling their eyes at such deplorable humans, they were eager to lecture people about the beauty of “comparative advantage,” “economies of scale,” “division of labor,” and “dynamic supply chain management systems.” All of these are apparently integral parts of the globalized economy.
University students were taught to “Think Global; Act Global” instead of “Think Local, Act Local.” Factory workers were told losing their jobs was a positive phenomenon called “creative destruction,” which would enable these men and women to pursue better careers. Retirees were advised to modify their investment portfolios to reflect the global economy. In reality, doing so exacerbated portfolio complexity, and increased market risk exposure. It subsequently enriched these so-called investment professionals, who in 2008 crashed the economy. Thank God we pay such smart individuals a lot of money to make such smart decisions.
Negatives of Globalization Realized
As a result of Ricardian Theory of Comparative Advantage, complex supply chains also became globally intertwined. China especially transformed itself into de facto factory for the world, with rather serious consequences. Not only did many at home lose their jobs, but Americans also lost interest in the quality and most importantly safety of the products coming from China. Such behavior is of course rational as our consumption decisions are largely driven primarily by cost and availability, as opposed to safety and quality. Sadly, it is COVID-19 that made us realize complex supply chains also carry hazards.
For example, although the bottom lines certainly love globalization, is it worth the risk to import toxic Chinese dog food to undercut domestic suppliers in the name of “competitiveness?” Is it truly good business to depend on China to produce 80% of core components on the generic medicine we use at home? Is it a pleasant customer experience to a “valued customer” having to call a customer support line, where the support agent’s first language is not English? The answer should be obvious to every American business. For some reason, we the customers simply do not understand the forces of globalization that have led to such wonderful scenarios.
Time for a Self-Sufficient America?
Obviously, stopping the forces of globalization is akin to Don Quixote’s fight against the windmills. The time to revisit globalization is now upon us. However, at the end of the day, to Make America Great Again has to start from making great American products at home again. This is not an argument to favor autarky or to abandon the principles of free trade. It is a plea to slow down and examine rationally whether it makes socioeconomic sense to surrender our key industries to the forces of globalization, when our rivals have no interest in doing the same.
In fact, various forms of
nationalism reactionary slogans have already ossified into Western political discourse. Retaliatory “beggar-thy-neighbor” policies, direct trade protectionist measures and immigration controls have entered permanently into campaign toolboxes of both centrist and extreme parties. On a societal level, Guy Haselmann wrote explained in his Zerohedge article how, after the COVID-19 pandemic calms down, a recalibration of consumer and supplier decisions will have to be made. Indeed, rather than seeking better production scales and profit, countries and businesses will desire to prioritize the production of critical and essential goods (mining, pharmaceuticals, telecommunications and energy) over pure cost-efficiencies. In other words, we can expect key industries to move back to US.
Much of that has already happened. The United States of America is one of the few countries which is self-sufficient in production of energy, food, security, and innovation. Therefore, our reliance on other countries is not sine qua non for our survival and resilience. Americans have always been pioneers during tough times and will continue to pave their survival paths alone if needed.
Six Feet of Globalized Toilet Paper?
As consumers we ought to realize the immense power we have in shaping the future direction of globalization. It is time to revisit globalization. We can vote with our wallets and reject made in China products. They will likely be more affordable, but inferior to domestically made products in terms of quality and safety. Indeed, it is precisely through rational consumer choice instead of a coercive government legislation how we will navigate our way out of this chimera. While it is true asking us to act rationally is an argument that should be flushed down the toilet with all the hoarded toilet-paper, we should remind ourselves what President Ronald Reagan said at his 1992 Republican National Convention Address. “While I take inspiration from the past, like most Americans, I live for the future.”
Elites will of course condemn the view that it is time to revisit globalization as reactionary because they have a lot to lose if the status quo is disrupted. Clever and seemingly compassionate corporate PR-stunts and commercials to show appreciation for essential workers making minimum wage is not going appease or silence the forgotten women and men of America. This is because for decades the forces of globalization have reigned without retrospective inspection. If left unexamined, what sort of backlash will America’s forgotten men and women deliver next time at the ballots?
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