COVID-19 and the need for domestic industries

The COVID-19 crisis is a worldwide shock for our societies, for sanitary concerns of course but also for our economies, social interactions, cultural lives, and daily routine in general. Even though the peak of the pandemic has already been reached in many countries, the virus is still circulating out there in a very deadly way and mankind will have to learn how to live with, amid the fear of a possible second wave of the epidemic. Hopefully, a few months by now, a vaccine will be available and will put an end to the catastrophe; but even if that happens, and it is very hypothetical, the consequences provoked by the coronavirus will still be felt for many years. The predicted economic crisis quickly started to take shape:  stock markets are unstable, the unemployment rate is at its highest, and many of the people belonging to the  underprivileged social classes, who lack an Internet connection and are not able to respect the lockdown regulations because of their life conditions, suffer greatly from the economic burden imposed on their shoulders while the better-off spread messages about the importance of staying home from their luxurious penthouses, explaining that “we are now all equal” when the pandemic highlights inequalities.  But the epidemic also represents an opportunity to learn; because during the past few months, the limits of globalization were thrown to the face of the world, and cracks appeared in the perfect world of the liberal universe of wild and anarchical global competition. In light of the recent developments, we can now understand how fragile our system is and start to rethink globalization. One of the most important issues for the Western nations is the need to recreate again powerful domestic industries, at least in vital sectors; an idea that has been disregarded by the proponents of a global market

To fully grasp the situation, it is important to define first the term  “globalization”; a concept widely used during debates and discussion but that few understand. Pr Manfred Steger, professor at the University of Hawaii and one of the most influential scholars in global studies, defines it as the following:

“Globalisation refers to a multi-dimensional set of social processes that create, multiply, stretch and intensify worldwide social interdependencies and exchanges while at the same time fostering in people a growing awareness of deepening connections between the local and the distant.”

Steger, M. (2003), Globalization: A Very Short Introduction (Oxford: Oxford University Press).

In simple words, we can consider economic globalization as a form of economic integration on a global scale with one huge unregulated market, international free competition, low tariffs, and barriers and the cancellation of any economic borders when it comes to the production and circulation of goods and services. Since the end of the Second World war, many steps have been taken by Western leaders to make such a world possible (for example the creation of institutions like the GATT, the World Bank, or the International Monetary Fund). Those strategies were highly successful back then with a period of providential economic growth and prosperity for the Western world. Later on, neo-liberal policies pushed by Ronald  Reagan and Margaret Thatcher brought globalization even further by undermining the last existing barriers and regulations on trade. At the end of the century, the fall of the Soviet Union and the communist block altogether combined with the liberalization of China’s economy made people believe that a global liberalized economy was the only way. Some scholars such as Francis Fukuyama even called it “the end of history” as this ideal was the end-goal for mankind.

Nevertheless, Globalization only partially succeeded as a project. Indeed, on economic terms, it came very close to the creation of a single and unregulated market (except when we talk about the movement of labor) but it failed to unite the world politically. The task was almost impossible as nation-states, willing to give up on macro-economic independence, would never accept to abandon their prime role on the diplomatic stage, only to be replaced by Multi-National Corporations. International institutions are all based on intergovernmental structures where national political interests prevail: the United Nations General Assembly and its non-binding resolutions somewhat appear like an empty shell, the World Trade Organization only deals with economic issues while International courts rely on the goodwill of their member-states to respect international law.

Even the Security Council, who holds a real decision-making power, is driven by a handful of countries with nuclear capabilities. During the era of globalization, no attempt to implement a level of international political rules to control trade has been taken with the notable exception of the European Union. The issue is that without such institutions, the economic market is skewed and now resembles a jungle. “Homo homini lupus”, “Man is a wolf to man” is the leading “virtue” of international trade. If every country plays the game by its own rules, then control becomes impossible.  The perspective of cheaper labor and higher productivity gave an incentive for firms to relocate in poorer countries without any kind of social protection for workers; and as a consequence underaged children work in disastrous conditions for too many hours a day to produce a smartphone while the lower classes from the West suffer from great unemployment.  Social justice and the welfare state have been sacrificed on the altar of the sacrosanct economic growth. Moreover, the environment has been the first to greatly suffer from the transportation of goods without any possibility to internationally regulate pollution.

“Homo homini lupus”, “Man is a wolf to man” is the leading “virtue” of international trade. If every country plays the game by its own rules, then control becomes impossible.

All these problems exist for many years, but the globalists chose not to see them or to conveniently sweep them behind the rugs while making speeches about progress and diversity.

Do not get me wrong though. I am not an anti-globalist, and I deeply believe that Globalization has brought countless positive changes and developments to the world. Among others, it helped to decrease extreme poverty and famine in a striking way or open new possibilities for entrepreneurs to make a change in the world.  However, it would be a mistake to rest on our achievements: it is time to assess the issues created by our worldwide economy and deal with them. The COVID-19 pandemic acted as a catalyst in many fields and made clear the major cracks in our system.  The absence of an international political order means that domestic industries are highly needed for every nation to remain independent in vital sectors such as health and agriculture.

In that respect, the French example is interesting to analyze. France is one of the most powerful economies in the world, an influential power on the international stage and one of the most developed European countries. However, it highly suffered from the pandemic for very surprising reasons. One of them was the shortage of masks that legitimately angered the population. At first, it is very unlikely to think that such a well-off country is not able to produce enough masks for a quite limited population. Le Monde, a famous French newspaper, revealed that over the years the successive governments decided not to renew the expensive reserves of masks and to rely on the international trade capacities in the case of a pandemic with a production-based in China and partnerships agreements. The strategy failed as, in times of crisis, nation-states tend to look after the safety and the health of their citizens or to pursue their national interests. As a result, the masks never came and French doctors were forced to tinker their own equipment themselves. France even had to receive help from countries like Morocco with massive importations to face the health crisis.

Regarding health, the United States is not better off; according to the Department of Commerce, 80% of the antibiotics used in the country are imported from China.  These situations may look bizarre and even upside-down, but it is only the logical consequence of the policies of globalized liberalization with the relocation of vital industries to foreign nations.

No wonder why the countries who handled the best the pandemic were the ones who kept their industrial power and capabilities like Germany or Israel (whose self-reliance for food and health is a matter of national security since its independence).

Various world leaders, considered as liberals, even announced the need to bring back industries to ensure economic  independence in the most important categories of the economy. Such moves sound just reasonable but it represents a major backlash for globalists as the Western World would go back to some kind of protectionism.

Globalization is a dream. A beautiful dream. But as long as nations would not find a way to create an effective political system to regulate international trade, domestic industries are still a high necessity for every country. And it is not only an economic issue when people’s lives are at stake.