After the collapse of the USSR and the creation of the WTO, economic globalization was considered the most effective economic system for increasing GNP, supposedly the basic indicator of a state’s productive power. Taking up Montesquieu’s thesis of peaceful “sweet commerce”, the system of economic interdependence appeared to be a powerful factor of international peace and economic growth. These caricatured analyses of the business world and the rise of democratic values were quickly contradicted at the beginning of the 21st century by international terrorism, the balance of power between states, the existence of the sanctions of economic warfare, the rise of social inequality and the contestation of autocracies in the face of the US’ international order.
In 2014, the war in Crimea, officially triggered by Ukraine’s desire to join NATO and a strategy of reconquering the territories of the former USSR already engaged in Georgia by Moscow, highlighted the fragility of the peaceful hypothesis of the market economy. As early as 2018, Donald Trump had warned Europe about the risks of its energy dependence on an imperialist Russia.
The Covid-19 pandemic has given a death blow to the system of unbridled globalization. Based on profit, economic actors set up and develop their activities according to this dominant criterion. However, corporate profit and financial speculation have time horizons that do not fit well with the long-term constraints of a nation’s global security.
International competition leads States to reduce taxes to the detriment of public spending necessary for the proper functioning of the community, infrastructures, national hospital and education systems and all permanent long-term security systems. Under these conditions, it is to be hoped that the international production chain is sufficiently solid to be able to fight against the rarities inherent in the random appearance of a socio-political crisis or pandemics.
When the population of a country is confined for public health reasons, the production of its firms is directly affected by the decline. A new scarcity sets in, notably in energy products, intermediate consumption or technological production (microprocessors in particular), which calls into question the security of supply even for essential food and pharmaceutical products. All countries are then affected when there are no other supply alternatives at the same price, and in this case, the food and health security of citizens is no longer ensured by the public authorities.
For public health, medicines and vaccines are highly sought after by governments, but due to the weakness of the links in the value chain, these health products are becoming increasingly scarce and are subject to fierce competition between states. These choices will create tensions between nations. China and even Russia have had the intelligence to make their vaccines or medicines, which are ultimately not very effective, available to developing countries, thus increasing the popularity of autocracies against democracies deemed selfish. The old imperialist and colonialist memories are coming back to the surface in the current era. Popular discontent leads governments to redirect it, in a warlike posture, to neighboring or developed countries. In democratic countries, many safety nets exist to allow the country to go to war. This is much less true for autocratic countries.
At the beginning of 2022, the pandemic has created an economic and public health crisis that has weakened all states, except the energy producing and exporting countries. The geo-economic situation offers a judicious window of opportunity for a “special operation”, taking into account the lack of political courage of the Kiev government in the annexation of Crimea, the nuclear arms threats against a denuclearized Ukraine and the weakness of NATO, which Macron considered in 2021 to be “brain dead”, the lack of solidarity between the States of the European Union, partly on the fight against the pandemic effects.
Moreover, there was a special international situation with the Brexit crisis, the French presidential elections, the new German government, and the seemingly more moderate policies of Joe Biden’s. Vladimir Putin thought that the time was right to act on his expansionist plans. However, the Kremlin’s “special operation” has not been sufficiently effective in the short term, it has left the necessary time for Western countries to renew with mutual solidarity.
With the pandemic and the difficulties for each country to engage in strategies of mutual solidarity, globalization is now suffering an undeniable setback.
The WTO has not been able to intervene to restore free trade in crisis, at a time when the US is engaging in a Keynesian-mercantilist policy known as the “Inflation Reduction Act”. Companies that are not based in the US will not be able to claim public funding for research and development, and purchases in the field of microprocessors in particular; an action that consists of protecting American industry to the detriment of any foreign competition. As retaliation, Brussels has planned to conclude a “Buy European Act” allowing subsidies, the supply of local products, and additional financial aid to European companies in sectors deemed fundamental to tomorrow’s economic development.
The Covid-19 pandemic has clearly highlighted the dangers of an economic globalization which also has little respect for environmental standards and global warming.
The opinions expressed throughout this article are the opinions of the individual author and do not necessarily reflect the opinions of Vision of Humanity or the Institute for Economics & Peace.
Further Reading:
References
Fontanel, J. (2023), The Covid-19 and the war in Ukraine, International Conference Disaster Management: Global Pandemic and Its Impact, Binghamton University 26 January, New York, hal-03963350.
Fontanel, J., Corvaisier-Drouart, B. (2023) The pandemic reveals the violence of economic globalization, Globalization and Covid-19, Emerald Publishing, 31.
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