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COVID-19: Possible agent to the end of Economic Globalisation

by Rinku Khumukcham
0 comment 5 minutes read

By Dr Mayengbam Lalit Singh
Dept. of Economics,
Kha Manipur College, Kakching

Adam Smith, Father of Economics, propagated necessarily of specialisation across the nations in the world.  According to him all countries need to specialise in the production of unique goods which results in exchange of wide range of goods among countries.   This concept hatched the concept of economic globalisation and was very popular among the capitalist countries since post Second World War. In this tune many communist as well as socialist countries started globalising their economies during 1970s and 1990s. When special reference is given to China, it started globalising its economy 1978 allowing foreign firms to set production plants in wide ranging manufactured goods. Nowadays China has been main hub for production of cheap manufactured goods which are exported to the whole world. The reasons behind production hub are the cheap labour, factors of production and well protection of foreign firms. This makes China specialising in manufactured goods as mentioned by Adam Smith. The present world is in such a situation where countries across the world entirely depends their existence on manufactured goods. Even the USA which has been economic super power has been reported to depend its pharmaceutical drugs on cheap supply from China.  However, there are pros and cons of economic globalisation which was not mentioned by Adam Smith. He focussed only on benefits of globalisation but never mentioned the ill effects correlated with benefits. The present article focuses mainly on the ill effects of economic globalisation. The foremost ill effect of globalisation is such that countries are abandoning their own productions since their productions are costlier than the production in China. Secondly any economic disease suffered by major economic power is transmitted to the whole world through the medium of bilateral export and import. Recently, one of the Chinese provinces suffered from deadly disease, COVID-19 killing thousands of people and affecting thousands of civilians. Despite the installation of many quarantine medical facilities, transmission of disease is found across the whole provinces with minimal death rate. Here the economic impact of the disease is economic shut down of manufacturing plants in the worst affected province. Here the popular economist, Keynes can be referred to with his remark of human psychology on economic activities. With psychological fear, Chinese authorities shut down many production plants which reduces supply of manufactured goods. Since the shutting production plants, demand for labours and material inputs from across the world have also been closed. Most of the economic problems can be checked as long as it is kept in centrifugal manner which states that problems have to be checked within their own sector i.e. manufacturing problems should be solved within the manufacturing sector itself. However, economic problems tend to be centripetal by nature. With the fall of Chinese manufacturing plants, the problem is transmitted to other sectors such as the primary sector in or outside the country. Mining of minerals inside China fails due to lack of demand from manufacturing plants. In similar fashion, the tertiary sector also collapsed since there has been no supply from the manufacturing sector. There is no transport of manufacturing goods. Moreover, travel, tourism, business summits, shopping, e-business have been shut down. As a multiplier effect, airlines industries collapse with unemployment of its workers. Back to COVID-19, it is transmitted across all the countries by native persons who had visited China (especially students, businessmen, tourists, etc.). Now, there are reports of this disease across all the continents. South Korea, Iran, Italy, U.K., USA, India are the reported countries where maximum surveillance has been taken up. In Italy, the government has denounced not only shutting down of its business activities but also confining citizens into their homes till further improvements. In many countries people have phobia while going to shopping centres, offices and public gathering places. Schools are closed; restaurants are reluctant to open; sports and entertainment activities have been stopped.  Economists have opined that the present economic meltdown in correlation with COVID-19 has been more severe than economic collapse during 1930s and 2008. In a few days ago, OPEC countries decided to cut down their petroleum production and price of crude petroleum has fallen down $30s per barrel which is less than price prevailed during Gulf war in 1990s. This leads to crashing of currencies in stock exchange and discourages investors in many countries. As a chain reaction, it affects production of goods in many manufacturing sectors and hence collapses of economies across all countries. Here, we can think of what kind of initiatives can be taken up in a small state like Manipur. Our state is highly globalised and integrated with the rest of the world since we are highly dependent our consumer goods on imports from other states and countries.  It is high time to stand on our own leg which is possible through innovation of indigenous skills of production. In nutshell, we should try to attain self sufficiency in food grain production; promote indigenous weaving crafts for clothing; and start production of medicines using locally available medicinal plants. Government also should encourage local innovation by channelizing respectable funds and at the same time it should organise craft fairs for many sectors regularly. These policies would help our state in attaining self sufficiency to certain extent in many sectors.

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