Virus spreads concern for future of Scots global exports
AS Covid-19’s Danse Macabre continues to play out through the economy, questions are increasingly being asked about the future of globalisation. The pandemic has dealt a serious blow to public confidence in the economic and commercial virtues of our interconnected planet, with the tide now shifting definitively towards greater autonomy, less free movement and diminished free trade.
The question is, what implications does this have for businesses in Scotland, which have been told repeatedly through the years that their economic fortunes are largely dependent on an international outlook? What will recovery be like in this new and less open world?
Even before the outbreak, globalisation was in trouble. Driven by price and manufacturing efficiency – regardless of location – its mutual dependencies were meant to guarantee stability. But geopolitical tensions from Brexit and the US-China trade war were furthering a trend kicked off by the collapse of Lehman Brothers in 2008, which led to a stagnation in trade and foreign investment that never emerged into full recovery.
In a virtual debate hosted earlier this month by the foreign policy think tank at the London School of Economics, Professor Michael Cox, the group’s director, talked about the deglobalisation pressures already evident prior to the pandemic. As the disease forced the world’s top 10 manufacturing nations into simultaneous lockdown, the hunt for local suppliers acutely intensified.
“The 2008 financial crisis certainly did a massive amount of damage to globalisation, putting it under immense stress with the rise of populism and the challenge to globalism, particularly in the US,” he said.
“It raised a whole host of questions around the relationship between national economies and societies, and their integration into the wider global economy. So in a way, the challenge to globalisation we’re witnessing isn’t a new problem.
“However, at this moment in time, the challenge has intensified to a huge degree. People are now asking the question of whether Covid-19 has undermined globalisation all together, due to the fragmentation of the world economy.”
Though none foresaw the catastrophic black swan of novel coronavirus, some companies were already putting contingency plans in place to deal with potential shocks to their cross-border supply chains. Many of those plans have been co-opted into strategies for coping with the health crisis, which has simultaneously sent the rest of the business world into a scramble to secure their operations.
In the search for resilience, corporations around the world are examining their options for on-shoring or “near-shoring” certain manufacturing operations, along with the relocation of research labs and service centres. Similarly, the push is on for shorter and more diverse supply lines.
The catchphrase that’s been coined for this is “economic distancing”, as firms try to isolate themselves as much as possible from the spillover of events outside their control.
It has been estimated that multinational firms could cut their cross
Exports are only one side of the economic coin. The stream of vital elements such as raw goods, labour, intellectual and financial capital into Scotland would also be restricted with equally damaging consequences