Coronavirus Consequence: Will Globalization Survive?
Will the process of globalization and world integration survive as a consequence of Coronavirus pandemic?
Coronavirus is affecting not only our health, finances, relationships buteven how we think. It is also forcing governments to rethink their strategies. Countries are beginning to reduce their dependence on supply chains out of China. Will this result in countries reverting to local manufacturing or finding alternate supply sources?
Even before Coronavirus happened most countries around the globe elected right wing nationalist leaders who take great pride in putting their nations interests first. It started with Trumps America first policy. He has got America into trade war with China and negated most international treaties.
Other nationalist leaders followed the example set by Trump. These include Putin, President Xi of China, prime minister Modi of India, PM Benjamin Netanyahu to name just a few. Brexit followed as a result of nationalistic fervor in United Kingdom.
Nationalist forces are driven by people who have been left behind financially as a result of globalization, technology driven changes and a rising sentiment against immigrants who they perceive as taking their jobs as a result of globalization.
Globalization that had brought great prosperity to the world in in last five decades was under great strain when coronavirus happened.
Now the big question is: Will globalization survive as a consequence of coronavirus? Most countries are shut down and looking inward. The response so far has been nationalistic with politicians and nations blaming one another. There are hundreds of conspiracy theories floating around resulting in hate spread that is dividing the world.
Let us examine this very important issue in detail.
Major Reason Behind the Spread of Coronavirus so Quickly Around the Globe
One might be curious to understand why and how the virus was able to spread so fast in this millennial era. The major reason why the virus spread so quickly is “Air travel”. Most countries imported the virus that could have easily been contained locally in Wuhan. The question is as to why governments did not stop air flights and allow the virus to spread?
The global air travel industry is worth around 800 billion USD! With thousands of flights taking off, and reaching destinations on a daily basis – the capacity of air travel has grown by 30% in the past two years. Even with COVID-19 declared as a pandemic by the WHO and most countries having raised travel advisories, air travel continued virtually without check so as not to have adverse impact on airline finances.
Secondly, most nations take great pride in rescuing their citizens caught in natural calamity disaster areas, war zones and places of political unrest. These evacuations are praised in news media and are a matter of great national pride. To save lives of fellow countrymen is indeed a noble purpose in most cases. However, is this response correct when it comes to pandemics. This resulted in import of a highly contagious disease much to the detriment of other citizens.
Thirdly, misguided national pride kept China from informing rest of the world about the contagious and dangerous nature of coronavirus. This resulted in spread of the virus that has now caused a major health and financial crisis.
Reasons Behind Slow Global Response
A disease that could have easily been contained in Wuhan; China has turned into a global crisis with the world economy virtually shut down resulting in loss of millions of job and livelihood around the globe.
According to surveys, “Trade” was one of the major reasons behind delay in imposing travel bans. The supply chains in an inter connected world would have been disrupted. China has turned into a manufacturing hub for various brands and supply of important components even for local manufacturing. No one was willing to disrupt these supply chains even when the pandemic happened in China in order not to impact their economies.
Will there be Change in Supply Chains post Coronavirus?
Most countries will definitely review their over dependence on supply chains from China. There will be a definite shift towards local manufacturing and nations will look for alternate sources of cheap manufacture and supply.
Finding alternate supply sources will not be as simple as it looks. It will be a very complex process and cannot be done overnight. Process will be expensive and slow especially at a time when the economies will be struggling to get back on their feet.
The After Effects of Coronavirus
Coronavirus has resulted in countries shutting their borders for health reasons and even after health issues related to virus recede there is going to be suspicion amongst travelers, It will take time and effort to resume movement of people and trade.
Many writers and thinkers believe that the process of globalization has reversed irrevocably due to the nationalistic fervor, blame game by political leadership to pass responsibility for their confused and delayed response and nations looking inwards to become more self-reliant.
Some of the arguments are valid but let us put them in perspective.
Globalization is not only about manufacturing but also about exchange of ideas, movement of people, issues affecting whole of planet like health and environment, world trade etc.
Supply chains world over will change not so because of coronavirus but because of advances in technology. Artificial intelligence and robots will replace cheap labor so there will be no need to go to third world countries in search of cheap labor either for manufacturing or services. The shift was visible even before Corvid 19 took hold of our lives.
It will however be very difficult to stop movement of people and trade. Advanced countries have shrinking and aging populations. There will be continued requirement of importing people from poorer countries to run basic services like electricity, water, health services, public transport so that advanced nations can sustain. Rich people do not want to do certain jobs that only poor can do.
To run high-tech companies, you need well qualified people. India and China are power houses when it comes to churning out engineers and doctors. The advanced countries will need them and welcome their entry.
Greying nations will also need younger people sustain the ever growing pension and health care bills by paying taxes.
Human rights awareness, political rights, environmental and global health issues have taken center stage in human consciousness and simply cannot be wished away. These issues will continue uniting the world.
We could have fought the coronavirus pandemic much better if there was a global response rather than a jingoistic nationalistic one. Disease could have been easily isolated in Wuhan, China if there was global confidence and dialogue.
Rich countries need global markets to sell their products.Developingnations is where majority of the young population reside. The demand for products will only happen if there is purchasing power in these countries. Rich countries simply cannot live and thrive in isolation. They will need to support the economies and growth world over through enlightened policies. In other words, strengthening forces of globalization.
Nothing in the world can reverse exchange of ideas due to internet connectivity or flow of capital to any place in the world where profits are to be made.
Doomsayers can keep predicting the worst but the process of globalization is irreversible. There can be Trumps or minor road blocks but the march of the world civilization will continue towards globalization.
The only solution for the people who feel threatened by globalization is to go back to the drawing board, learn new skills and re-invent themselves to face the challenges in this fast changing technologically driven world presents.
Countries and people who fail to adapt to the new reality will become an extinct species like the dinosaurs.
A lot of people are curious to know if the volatility caused to the country’s economy will have an impact on real estate. Some claim that there is no direct bond between the stock market and the real estate. But, is this true? The overall health of real estate depends on the economy of a country. It depends on the place, and the kind of wealth it holds.
When stock markets and other forms of investments become volatile due to times like COVID-19, people have the tendency of moving their finances bonds. They believe that bonds can be related to financial security and stability. As a result, the demand for treasury bonds starts to increase. Meanwhile, the yield of these bonds will not change drastically. Instead, people will be tempted to buy treasury bonds at a higher price, and eventually yield at lower rates. (technically the yield decreases because the interest paid is reduced). This is one of the main reasons why the overall mortgage rate goes down. Mortgage rates have dropped by 3.7 percent due to the pandemic.
As we pen down this post, more than 90% states have mandated the shutdown of businesses, apart from the basics and restaurants. Even restaurants are only aiding with take away and home delivery orders. Everything else has come to a halt. Whether it is Disney world, or your favorite ski resorts or your much loved bowling alleys – everything is closed. Above all, the scope of travel into and around the country are blocked. Of course, these announcements are temporary. But, they tend to have an impact on the decisions we make.
Hospitality based real estate will be influenced greatly. Most hotels and restaurants will be affected. In fact, it would take months for these businesses to recover. Any business that is in its planned construction stage will be on hold for an unseen period of time.
We may be able to resolve health issues relatively fast in this pandemic but coronavirus financial impact will take several years to settle down. Indeed, this has turned into a situation that no one could ever imagine off. With industries around the world taking a hit, corona has had its impact on the share market too.
A lot of people believe that risk assessment needs to be done on the sunnier days. Well, this is not how it works. On your best days, you will not be able to gauge your actual risk tolerance level. It is during bear markets; an investors haughtiness gets revealed. Untold and unexpected details about your risk appetite will surface. Now would be the best time to analyze your risk tolerance abilities. And, the results can be very interesting:
Do you have the habit of checking your stock portfolio on a daily basis? If yes, you need to stop right away. Seeing your stock move downwards will force you to re-think about your investment. This may result in unwise investment bets. The coronavirus financial impact doesn’t give you a reason to judge your investment. At least for the next few months, you need to stop checking your portfolio.
With the pandemic, we are certainly facing a coronavirus crash in all our markets. In the next 12 to 18 months, the world is likely to see a recession. Recently, a survey was conducted to understand how prepared people are for another recession. And, the study revealed that two in every three are not really prepared. A major reason why people need to be prepared is because the economy has been extremely strong in the past few years. Luckily, there are few steps that can increase your chances of surviving the forthcoming recession.
During tough days like a coronavirus crash, the need for networking increases by leaps and bounds. According to industry leaders, you must network to avoid the catastrophic impact of recession in your life. Irrespective of the fact that new jobs are often bagged through known contacts, 50 percent of the current population has networks that are weak and unusable.
Have you being dreaming of a new car? Will the economic recession caused by corona, you should consider leveraging the benefits of equity. When you stick to equity, you will have the benefit of eliminating a cheaper mortgage. Conversely, you can consider investing the funds elsewhere. The current interest rate on loans in some countries are as high as 6 percent. This clearly means you don’t need to have a hefty cap rate to boost your existing portfolio. Of course, you need to look for the right property. Work on the numbers, but don’t force a property to fit within your requirements.
Now, you might be curious to know what is the bond between divorces and recession. Well, economic recession can bring trouble into marriages, even those that look like they are planned in heaven. When the economy starts to go down, the rate of divorces will increase. Forced lockdown can get couples to get onto each other’s nerves,
