We are planning for a Special Issue of this journal on the impact and implications of the covid-19 crisis – for which papers are still welcome – but it is already clear that one aspect of the global economy that might be impacted in a way that may not be quickly reversed is that of cross national supply chains, and what are often referred to as ‘global value chains’. Analysing these global value chains long before the covid-19 crisis, the article in this issue by Zuohong Pan on ‘Employment impacts of the US global value chain participation’ may serve as a benchmark study of the impact these had, pre-covid-19, on employment in the US, which might thereby suggest what the impact would be of any changes in these global supply chains, caused by the impact of covid-19, both in the short term, and in the case of global value chains perhaps in the longer term too.
Thus, based on data from the World Input-Output Database for 1995–2011 across all 35 industries in the US and their value-added trade with 40 other economies, Pan finds that global value chain activities had significant positive impacts on overall US employment. Hence, if the economic impact of the global covid-19 crisis were to include a disruption to and continued diminution of these global value chains, this study might suggest that the reported gains would be lost, and employment in the US would be hit.
Similarly, if the covid-19 crisis were to lead to some sort of reversal of the previous type of economic globalisation, and if this included a reduction in the levels of foreign direct investment (FDI), then any impact that FDI tends to have might be expected to be likewise reversed or lost, in proportion to how great such an effect might prove. Thus, Evangelina Dardati and Meryem Saygili ask ‘Foreign production and the environment: does the type of FDI matter?’. Their answer is that general FDI tends to be more environmentally damaging than that focused specifically on export industries. It is likely that any ‘deglobalisation’ effect would impact more on FDI that was focused specifically on export industries than other FDI, so the resulting balance of FDI would be more environmentally damaging than that which pertains today, which must be a worry, as concern for the covid-19 crisis segues into the climate crisis.
A third example of where the previous effects of economic globalisation may be reversed to some extent if the reaction to the global covid-19 crisis were to lead to some reversal of that previous economic globalisation – whether in the sense of the degree of globalisation, or a change in its nature – relates to the linkages between international economic liberalisation, in the sense of promoting trade through reducing tariffs, and the consequent effects on poverty and child labour. This is analysed by Jabbar Ul-Haq, Sana Khanum and Ahmed Raza Cheema in ‘The impact of trade liberalization on child labor in Pakistan’, and they do indeed find some previous positive benefits, which might therefore be at risk of being lost through any post covid-19 shifts in the degree of economic globalisation.
On the other hand, while the above articles point to previous positive developments or factors that might be reversed as part of any post-covid-19 reversal of economic globalisation, Ricardo Barradas in ‘Does the financial system support economic growth in times of financialisation? Evidence for Portugal’ finds that the Portuguese financial system experienced a strong wave of privatisation, liberalisation and deregulation since the adhesion of Portugal to the European Economic Community in 1986, which has not favoured a sustained path of strong economic growth since then. In this case, a reversal of the degree of economic globalisation might bring benefits to countries such as Portugal that had their potential for domestic economic development stifled or curtailed by that economic globalisation.
Of course, none of these effects operative automatically – they are the result of various actions by governments, companies and others, and of decisions taken by politicians, managers and others. Thus, if one of the reactions to and consequences of the global covid-19 crisis were a change in either the degree or the nature of economic globalisation, the outcomes of that would depend on what other policy measures were pursued. It is not inevitable that – for example – the remaining FDI would on average be more environmentally destructive than is the case today: that would depend on what other actions were taken. But these studies at least point to various outcomes to which attention should be paid if the degree or nature of economic globalisation were to shift, both to guard against there being any damaging unintended consequences, and also more positively, to ensure that potential benefits do actually get realised in any new settlement.
On the global stage and in individual countries, we need to make sure that following the global covid-19 crisis, we do ‘build back better’, and ensure that both global and national economic and social arrangements are better placed to be resilient in the face of such crises. We also need economies and societies to adjust and develop to become better aligned with the sort of society necessary to meet the challenges of the climate crisis – that is, to be able to deliver a good quality of life without putting unsustainable pressure on the planet and its climate.