With globalization it defines the phenomenon that, in the last two decades, has led to the intensification of international trade and investment on a global scale, making national economies more and more interdependent, also thanks to the digital revolution that made economic relations, especially financial ones, particularly fast.
The diffusion of information technologies has favored the processes of relocation of companies and the development of production and exchange networks increasingly conditioned by geographical distances, fueling the growth of multinational groups and concentration phenomena on a global scale.
The positive aspects of globalization include the exponential growth of the volume of information available, the economic development of marginal nations, the reduction of costs for the final consumer thanks to the increase in competition on a planetary scale. But, alongside these positive aspects, phenomena already present in the past such as the intensification of the exploitation labor, environmental degradation, the increase in social disparities.
The term globalization describes the interconnection of national economic systems through global value chains, or Global Value Chains (Gvc), where the production of goods and services worldwide is segmented in different phases, located in different areas, often very distant from each other. The most relevant aspect is the impact that the new Gvc production models have on economic inequality in terms of geographical distribution of production activities.
Research and development, design and marketing, the prerogative of rich countries, take possession of the predominant part of the added value, while production is increasingly delocalised in the southern hemisphere where wage levels are very low. Among the countries most affected by COVID-19 there are most economies, China in the lead, which play an extremely important role along the global value chains.
In other words, the interconnection of the production structures of the different countries at the international level means that these chains represent the privileged channels along which the recession all over the world. But the economic crisis, in addition to production, will also have negative effects on demand.
The measures taken by most countries to contain the virus, from the drastic reduction of the mobility of people to the closure of shops, theaters, libraries and museums, have led to a consumption reduction by families. The services sector, from transport, to tourism and catering, was particularly affected.
The closure of many production and commercial activities has resulted in an increase in the rate unemployment and, therefore, in a reduction in the disposable income of many men and women workers especially in the informal sector of the economy. Finally, an increase in propensity to is expected saving by families for precautionary purposes, which will reduce consumption until the fear of contagion has finally disappeared.
Globalization will survive the coronavirus, or will the process stop and economic nationalism, some examples of which have been seen in the early days of the pandemic, will resume and take hold again? Although the globalization process has lost speed in recent years, mainly thanks to the sovranismi growing in many countries, it is difficult to imagine a return to the past, even if the president Trump, in a recent interview with Fox Business, said that this pandemic shows that the era of globalization is over.
But for U.S. agriculture the Chinese market is vital, developing countries are increasingly dependent on the export of intermediate goods and other mass production, but above all the freedom of movement of capital is not affected in the least by restraint of the contagion. Globalization will be under threat only when strong limitation measures are introduced to the international capital movement.
After all, the alternative to globalization is the return to a economic nationalism invoked by the sovereigns of many countries which, if implemented, would result in the collapse of the world economy and the further increase in international tensions.
In the future more uncertain than ever, the only novelty that emerged with the recession is the strengthening of the role of the state economy. The huge support interventions, both on the demand and on the supply side, in all the main countries of the world are the first eloquent testimony. The public hand, which until yesterday appeared more and more marginal in an economy guided by free market laws, it regains one with the economic crisis centrality that seemed gone forever.
* Scientific manager of the Unimed Study Center, former Professor of Economic Policy at the Sapienza University of Rome