The months of social confinement and economic hibernation have brought out far-reaching changes in business dynamics. Transformations in value chains, payment procedures and sales strategies. Also in digital ecosystems. With turns in growth patterns. For example, in Europe and its Green Deal: energy neutrality and green projects. The Covid-19 leaves, therefore, without clearing a substantial unknown to facilitate the ability of companies to adapt to this paradigm. Above all, those who have or wish to acquire international weight. The economic world will resume being less open, less prosperous and less free. Although with probabilities of modifying its initial trajectory.
“Crises occur when the old has not just died and the new has not just been born.” The phrase is attributed to Bertolt Brecht, the German poet and playwright, one of the authors who dominated the political and social scene of his country with his dialectical doctrine in the first half of the last century. And it accurately illustrates the current business climate in the throes of the Covid-19 quarantine with the epicenter of the pandemic rotating from continents, from China to Europe to the US and now, according to the WHO, in the South American Hemisphere. This is what is believed, for example, by Carmen Reinhart, who has just been appointed new chief economist of the World Bank, an institution that has chaired David Malpass, for more than a year, one of the most evident ideologues of the protectionist strategies of the Trump Administration. The Cuban-American economist is a professor at Harvard and co-author, along with Kenneth Rogoff – with a past senior position at a multilateral institution (director of the IMF’s study service) and like her, professor at the same prestigious university – of Growth in a Time of Debt, perhaps the most telling essay on the 2008 crisis, seems to subscribe to Brecht’s words, three-quarters of a century later. “The pandemic is the last nail in the coffin of globalization.”
Recent economic literature has left omens and phrases with forceful epitaphs. Like George Soros or other economists on the death of the euro. Almost all, hasty and, of course, too constant. Especially in the years prior to its release in the markets, at the beginning of 1999. Of not a few Nobel Prize winners in Economics. And, although Soros’s prophecies about the euro -in the following crisis to that of 2008- still cannot be taken for granted because, among other reasons, it has just begun, behind Reinhart’s words there is a residue of existential reality: “Without being dramatic, the financial tsunami of a decade ago dealt a serious blow to globalization,” he explained to Bloomberg TV a few days ago, which “was accentuated, with the trade battles declared by the United States., especially towards China, and which are now worsening or with the extreme uncertainty surrounding Brexit ”. In his opinion, the Covid-19 “has raised the tension level one more step”, to a point of “boiling” where the process of internationalization of the markets is now.
The spread of the coronavirus has triggered the closure of borders and raised the already growing barriers to trade. In goods related to food and health. And even some nationals have initiated channels and policies to incentivize or redirect value chains that guarantee the supply of these products. After multiple breaks in the distribution belts of international goods and services due to the sudden recession, the delay in controlling the epidemic and, therefore, in the economic recovery and, finally, due to the doubts about the post-Covid scenario, that it will be substantially different from the one that has sustained the business cycle that has just received definitive burial in a synchronized manner throughout the world. The coronavirus “has left countries feeling that they need to be self-sufficient to a much greater extent than before”, explains the brand-new chief economist at the World Bank, a position that several Nobel laureates like Joseph Stiglitz (2001) and Paul Romer (2018) have spent. “And we will see many more protectionist trends in the future”, predicts this expert in financial and debt crises who also wrote, in 2009, together with Rogoff, This Time is Different: Eight Centuries of Financial Folly, a historical tour of defaults of countries , hyperinflations, recessions, bank failures and currency devaluations that have occurred cyclically throughout history. Reinhart stresses the “precipitous depression” that the WTO has alerted, a spectacular paralysis of global trade, to emphasize that the last time something similar was witnessed, one must go back to the Great Depression, when trade collapsed for a whole year: “now, the renewed trade war with China would bring us a negative impact again; tremendously recessive, ”he warns of the wet role that the agreement advanced at the beginning of the year by Washington and Beijing has become.
The beginning of de-globalization
The term has spread throughout all latitudes. At least, between the industrialized powers and the large emerging space. Coronavirus is changing the global economy. Safety in production has become more important than efficiency, Der Spiegel explained a few dates ago in his pages. The German seminar described it graphically: the Covid-19 has arrived and it is not known how long it will stay between us, it has imposed social distancing and a new code of behavior, modified labor guidelines and production protocols and set new priorities . In addition to ePush entire sectors, such as tourism, into the abyss and specific segments such as airlines on the verge of suspension of payments and to the States to re-stock actions that, in any phase of greater or less normality, remain in the hands of the private sector. Governments, and much more than in 2008, have become rescuers to the rescue of numerous companies. In the instruments of the front line fight against Covid and in the only channels capable of minimizing the collateral damage of the pandemic on entire industries, their companies and their workers.
So, is the coronavirus reversing the course of globalization? Or, to put it another way: have you created unacceptable competitive disadvantages in the foreign sectors of nations, in your international companies? Der Spiegel believes that global markets, in the Great Pandemic, are limited to exchanges of virtual products and data. And he suggests that digitization will be one of the open windows to restore the principle of free movement of trade and cross-border capital. The lever that will return productive stimulus to factories and efficiency to offices. The search for specific technological tools to lead the transformation that has interrupted the coronavirus.
“Digitization is the answer to the maintenance of globalization”, declares the economist Thomas Straubhaar in the German publication, so “we will have to be sure that another biological epidemic does not happen to the biological pandemic,” he clarifies. Because its consequences could be more lethal than those of the coronavirus. Homes without electricity, offices without Internet connection, banks without the capacity to formalize transactions. A complete disaster, he points out. The post-Covid scenario, he insists, requires total expense prevention.. Not only from states, but also from companies. Business and consumption and investment plans. It is what leaves the crisis. And the revival of globalization will depend on this exercise of introspection and good management.
Straubhaar’s message is not only a speculation from the academic world, it is also shared and transmitted from the business spectrum. Mihir Mysore, an analyst at McKinsey, assures that companies “will need more muscle, not just a good plan” to resume their activities, and that their return to business will require high capacities from the engine room of the boards of directors and management: “In just four months, the Covid-19 has fulfilled 2020 expectations“And has left the private sector facing a crusade full of” distortions in their value scales and their trade circuits at one speed and one scale unparalleled in the modern era. ” Hence, in the executive sphere, the urgency has been installed to address constant changes, in the directions, the assumption of telework and telematic habits that until now existed, but were not, far from it, among the strategic priorities of the firms. And, above all, they have obligatorily focused on analyzing consumer behavior. With a clear phenomenon on the rise: digital shopping. E-commerce has lengthened its tentacles by 60% in some of its product categories and, however, it is not entirely accepted that it does not retract after the pandemic, that consumers return to tradition and return to small commerce.
Allison Bailey, from Boston Consulting Group (BCG), sets some of the priorities for a return to productive tasks. To this concretion of goals necessary to reorient the workforces and balance the financial costs, to gain in competitive capacity with which to approach domestic and foreign markets and adopt new flexibility mechanisms that guarantee the sustainability of their businesses. And he cites seven areas of action to face this long phase of uncertainty. Focused on management and leadership and with significant transformative effects in their organizations.
Another consultant, Oliver Wymann, explains the risks that most concern the top management of companies. Especially from multinationals. Apart from the depth and longevity of the crisis, they express their fear of the fiscal weakness of large economies, restrictions on trade in goods and services, distortions in value chains, the possible increase in cyberattacks and the upturn in fraud related to data. From the World Economic Forum (WEF), the entity that organizes the Davos summits, they have channeled these extraordinary changes, which have left some – few – industries and companies victorious in this interim of the pandemic, while the majority will find it impossible to avoid being reformed , restructured or, in the worst case, far from the market, he says. And, among the first, digital ones stand out. That is, those that have online advances that have given them qualitative advantages. Huw van Steenis of UBS and a member of the WEF Council emphasizes that companies operating under the digital economy are more resistant to payment formulas, attract young consumers, adapt to banking models more quickly and to changes and trends in societies. Already since the initial dates of the declaration of Covid-19 as a global pandemic.
Companies adapt to circumstances
Facebook is one of the numerous multinationals that illustrate with their tactical movements of the last weeks, the complexity of the post-Covid scenario, the ocean of doubts that assault the headquarters of the companies. In Silicon Valley, teleworking seemed like a strategy already adapted to the workplace culture. And, in fact, this is the case for the vast majority of its technological networks. Twitter or Square announced their intention to have all their employees work at home when the pandemic ends. But Mark Zuckerberg expects that just over half the Facebook workforce will take over telecommuting … in the next five to ten years. “We will do it at our own pace, on our scale,” he says. This mode of work not only turns out to be safer; It also generates transportation savings for employees who, if this formula is perpetuated, could decide to move their residence and, consequently, retract rental or mortgage expenses. Hence, Zuckerberg warned that Facebook could cut wages for employees who live in areas of less cost of living than the Bay Area. Among Facebook’s predictions to make that decision is the introversion that telecommuting will create among employees and the alleged loss of ambition and empathy. Quite a question mark for Zoom and other firms in its successful remote audiovisual connection business segment during the Covid-19 crisis.
In Business Insider Intelligence they list several collision fronts between multinationals in the rarefied atmosphere of globalization. Sometimes at the expense of the states. The Chinese, for example, has revealed that it prepares “powerful countermeasures ”against the US corporate navy by the decision of the Trump Administration to “irrationally suppress” the international advance of Huawei, and that among its objectives are American technologies such as Apple or Qualcomm. Beijing talks about initiating legal claims against these companies and their blacklisting of “unreliable entities” that would be investigated under Chinese anti-monopoly laws. In response to new Washington restrictions that have put TSMC, Taiwan’s semiconductor manufacturing company, which is Huawei’s largest supplier of components, in an awkward position. While the Chinese multinational is gaining support among European countries to implement its 5G technology in the Old Continent, despite the reluctance and threats of the White House, and is advancing in the development of an operating system and its own software for its terminals.
McDonald’s and Apple are also undergoing significant operational changes that could limit their profits and delay the resumption of their businesses. The adoption of protocols to keep their sales circuits open to the public, with rapid Covid-19 detection tests and hygiene measures, collides with the uncertainty of whether or not these steps will contravene consumer habits in the future. New costs … without knowing for sure if the income and profits will be maintained. With limits of stay of clients in surfaces and stores that could limit sales ostensibly.
In the banking sector, entities like Citigroup, HSBC and part of the Asian financial firms have pressed the accelerator of the digital revolution with the pandemic. HSBC has decided to update its online channels in Hong Kong during confinement to provide its customers with guidelines and applications through electronic transactions. Within a climate in which banks are increasing their demands for telematic services, both in traditional financial operations and in the purchase of insurance policies or in investment portfolios in which mobile phones are the cornerstone of negotiations with consumers.
Similarly, Bank of China has pushed its digital plans, with Hong Kong as a pilot space. While Singapore stands as the other major focus of this trend with multiple digital banks in the region centralizing online channels in this city-state. DBS has opened more than 24,000 online accounts since the beginning of April. HSBC has also formalized 94% of its retail transactions through digital means, with operational jumps of its mobile apps of almost 40% in March, where this data comes from, reaching 1.12 million customers. “We anticipate the idea that Covid-19 could accelerate the process of adopting digital media, a paradigm shift that will continue in the future,” explains Greg Hingston, chief analyst of private and personal banking at this entity in Asia. Citi has revealed a 37% increase in its investment fund transactions in Hong Kong during the first two months of the year and an expansion of the mobile banking offer during the pandemic. For Gonzalo Luchetti, “customers will become enthusiastic about the online version when we leave the epidemic behind, after having experienced the advantages it offers.”
Payment methods have been comfortably installed in the collective subconscious of banking users. PayPal has developed a QR code capable of managing its apps in 28 markets with maximum security levels, including the US and the US, allowing customers to pay for products and services without the need for additional hardware outlays. Just by scanning the QR code. The telematics transaction company withdrew in 2018 an application with a similar conception, but its CEO, Dan Shulman, indicated at the end of 2019 that his entity had already restored its ability to meet the challenge. And the pandemic has been its catapult to success.
Because, according to Capgemini, two thirds of global consumers prefer to use their terminals to carry out operations and thus avoid social or screen contact during face-to-face payments in supermarkets in the long weeks of global confinement. And 62% think about maintaining this habit once the pandemic is overcome.
And is that habits have changed. For the increase in health care and to keep jobs. Consumers have increased their time management towards issues that they consider useful for their daily life. Under a dense mix of more contained predisposition to spending, advertising consumption and brand perception during the crisis that has left highly accurate snippets of their behavior. Tending to e-commerce -with 41% of Americans using this business procedure, according to an Ipsos survey, far from 13% in April of last year-, to greater television consumption (with increases of around 40%) and a sharper predisposition towards brands. A March 4A poll indicated that 56% of respondents -in the US- positively valued the contributions and donations of their favorite brands to social causes.
A new, more uncertain and competitive global order
Therefore, the coronavirus has not only generated a global health emergency and a historical economic depression, but it has precipitated the world into a new order. Geopolitical, but also economic-financial. Sinan Ulgen explains it, in European terms, in Foreign Policy. In his opinion, the shock of the Great Pandemic has raised the vulnerability levels of its southern and eastern partners, who will experience situations close to economic collapse and, in parallel, border crises due to the conjunctural worsening of their external neighbors. Nations such as Turkey, Egypt, Morocco or Ukraine have so far not received multilateral aid from the IMF nor are they the object of development programs by high-income powers.. They have markets more prone to destabilization and companies and companies with greater aversion to financial and stock market risk and more conducive – by recent custom – to declarations of suspension of payments on their sovereign and corporate debts. Covid-19 has brought economic and political instability at the gates of the EU and within its institutional building. To which is added the tourist break in countries -the southern of the Union and the closest on its external borders- with a very high dependence on this productive sector. In Jordan, tourism receipts account for 41% of total export goods and services, while in Egypt they represent 25%, according to the United Nations World Tourism Organization. The critical fall in foreign revenue has been dramatic for countries that had already endured declines in capital flows in emerging markets – due to the overvaluation of the dollar for much of 2018 and almost all of 2019 – which put a few foreign exchange. Like the Turkish lira, which depreciated again, in this case 7% in April, amid a deterioration in the trade balance of these countries with the EU due to the fall in European demand. Morocco directs 65% of its sales abroad to the domestic market, Turkey 50% and Ukraine 43%.
In this sense, European support for possible IMF trillion-dollar lending lines to distressed emerging or developing countries would in part mitigate border tensions. The same as an increase of 15.6 billion euros in its Team Europe Package, launched in April to support its neighboring neighbors, within the half a billion euro program, 3% of the community budget. Or agreements (swaps arrangements) between the ECB and the central banks of these nations to obtain euros in situations of collateral damage to their foreign exchange reserves. The EU “cannot cannibalize” its resources in this scenario, least of all against the countries that make up its first border line, says Ulgen, for whom a “concerted response” is necessary to move Europe away from its “introversion” and revitalize its role as gendarme of continental and regional stability under a conjuncture of “high severity, which could end up involving it” without remedy.
The bleak horizon in Europe is just a sample button of the changes that the Covid-19 is going to bring to the international dynamics. Like the energy transformation that places coal, oil and gas before an existential dilemma, after having led the progress of the industrial revolution. From its origins. In favor of clean energies that still have to demonstrate their stabilizing capacity of industries, sectors and companies. In other words, reveal all its energy power with economic and financial parameters. Transferring profitability and ratios of sufficient income in the market. In an expected leap forward, after the energy transition has stalled for the past five years. Energy production and consumption contributes to two thirds of CO2 emissions and 81% of the global energy system is still dominated by fossil fuels. The same percentage of 30 years ago.
Twelve turns in global markets
The clean energy challenge also marks another corollary that has accentuated the coronavirus. But there are many others. Everywhere. And they affect international relations and, of course, the foreign projection of companies and businesses. John Allen comments on it in Foreign Policy. “Like the Berlin Wall or the bankruptcy of Lehman Brothers, the coronavirus is another of the global events that has changed the geopolitical and financial reality.” These are twelve turns described by many other international observers, with their respective post-Covid-19 predictions.
A less open, prosperous and free world. According to Stephen Walt (professor of International Relations at the John F. Kennedy School of Government, Harvard University), the epidemic has reinforced nationalism, as governments of all political signs adopt emergency measures to manage the crisis. Covid will accelerate the transit from west to east of economic and political power. The response to the pandemic in Europe and the US has been fraught with errors and the aurea of the West brand has lost its luster. Compared to the good management of Singapore, South Korea or even China. The conflict between civilizations will have more nature cards. None of the preceding pests brought with it a strengthening of global markets and the Covid-19 will not either. We will see a retreat from hyperglobalization. Citizens see their protective shields in national governments, and firms will reduce their future vulnerabilities. Incompetence in world leadership does not augur a profitable path.
The end of globalization and how we know it. Robin Niblett. British expert in international relations, since 2007 he has chaired Chatham House, the Royal Institute of International Affairs. China’s growing economic and military weight has already forced a break in US bipartisanship among supporters of continuing diplomatic conciliation and who you think – republicans – that it is necessary to provoke US decoupling.. With official attempts to get the American allies to raise their demands on technology and intellectual property. The war of the new generation 5G towards Huawei has come to light without masks. Also the pressures of companies with interests in China to reduce CO2 emissions that have made the companies of the Asian giant rise on the accelerator and relax the rhythms of their value chains. But Covid-19 has put aside the idea of the mutual benefit of the globalization process. And, without the incentive to protect profits in the financial and integrated economic architecture that emerged in the 20th century and settled in the first years of the current century, markets will be subject to episodes of atrophy. For this reason, it will take a great deal of self-discipline and leadership to avoid jeopardizing geopolitical competitiveness.
A globalization that turns more on China. Kishore Mahbubani, academic and former diplomat from Singapore. Fundamentally, the Covid-19 will not dramatically alter the global economy. But yes to a certain extent. More because a part of the American population has lost faith in globalization. They understand that free trade agreements are toxic. Regardless of whether or not Donald Trump is in the White House. In contrast, China trusts it. Because it has deep historical ties to commerce. And because the century of Chinese humiliation, which is located between 1842 and 1949, was caused by the isolation of its world leaders. Instead, the recent decades of prosperity have arisen as a result of globalization. The US has two options. OR maintain its global supremacy, with responses that seek zero sums in geopolitical and economic matters with China. Or seek as an alternative to improve the living standards of their fellow citizens with greater cooperation with the Asian giant, the most desirable; but, at the same time, the least probable, given the toxic environment that has been generated around Beijing.
Democracies will come out of their security shell. G. John Ikenberry. Professor at Albert G. Milbank of Politics and International Affairs. Princeton University. The crisis will act as fuel on several fronts. But it will focus on the dialectical battle between nationalists and supporters of the anti-globalization theses, on the one hand, and the internationalist liberals who see an urgent revision of their guiding principles.. In the short term, it is difficult to foreshadow anything against a strengthening of nationalism, which will crack globalization and strain relations of a geopolitical nature. It does not seem that, as in the thirties of the last century, those that preceded World War II after the Crash of 29, could give rise to a globalizing boom, which gave way, after the armed conflict, to cooperation between markets. . Multilateralism, in any case, will be protected. Like democracies, which will take refuge in their shell in an attempt to protect themselves while another process of pragmatic and protective internationalization breaks out.
Less benefits, but more stability. Shannon K. O’Neill, researcher at the Council on Foreign Relations (CFR). Companies are redefining their strategic plans to recover the capacity of their value chains, after the debacle in the global supply of manufactures and the collapse of trade left by Covid-19. And after years on the battlefront, with rising labor costs in China, advances in digitization and automation. Links between the private sector and between business and consumers have been severed, who get hooked on online solutions. Under a climate of greater state interventionism that will add security at the cost of benefits.
A pragmatic purpose. Shivshankar Menon. Retired Indian diplomat. The power and influence of governments has returned and it is not exactly clear that national-populist cabinets are better managing the pandemic. If not the opposite. The best answers come from South Korea and Taiwan, two democracies based in Asia that have fled authoritarianism. It is the practical reading left by the coronavirus. Along with two others that invite optimism. It is not yet the end of the interconnected world, but the pandemic deepens in interdependence in which we are immersed. Unless a propensity to control and autonomy of judgment arises among the nationals. And secondly, there are signs of hope and good sense. Like common responses to the threat in Asia. Multilateral cooperation is cornered, but it is still very much alive.
American power will need a new strategy. Joseph S. Nye. Geopolitologist and professor in the USA, co-founder with Robert Keohane, of the theory of neoliberalism in international relations. Trump’s invocation, in 2017, of national security to gain muscle and competitiveness as a great economic and military power has been revealed, with the Covid-19, as an inadequate theory. The 20th century has left us a global technology, not only in its distribution but also in its consequences. Pathogens, Artificial Intelligence system, radiation or cyber viruses are some of them. Agreeing on a shared information, control and contingency system, with common rules and treaties to address mutual risks is the smart thing to do. If each nation puts its national interests first, it will be difficult to assess the priority of those criteria to face threats. The Covid-19 reveals that we must retune the strategy to a new world order
The history of the Covid-19 will be written by the victors. John Allen. US General in reserve and expert from the Center for Strategic and International Studies (CSIS). Each country, if the thesis of national individualism thrives, will proclaim its management experience in the pandemic as valid. Y tratarán de preservar como único su sistema político y económico. Con el consiguiente efecto perjudicial sobre quienes proclaman el triunfo de la democracia, el multilateralismo y la Sanidad universal. Aunque balsámico para los partidarios de la ley y el orden, del imperio autoritario de las normas. La arquitectura financiera internacional y los mercados globales sufrirán embestidas y los trabajadores se volverán más frágiles. Si triunfan la segunda opción, la inestabilidad se irá propagando por los países.
Un dramático estancamiento del capitalismo global. Laurie Garrett (EEUU) periodista científica que predijo la pandemia y ganó el Premio Pulitzer en 1996. La globalización permitió a las firmas participar en un mercado de manufacturas sin límites, estableciendo canales de paso y variantes en los precios, con la consiguiente proliferación de inventarios a futuro en no pocas industrias y sectores. El Covid-19 ha roto esta estructura. Ha envenenado también el sistema. Desde febrero, las empresas han visto cómo se ha dispersado la producción. Con un resultado dramático. Se ha parado el capitalismo global y sus métodos de suministro y producción. Lo único que el sector privado puede hacer a corto plazo es asumir menores beneficios y restaurar sus modelos de la forma que consideren más eficiente.
Más estados fallidos. Richard N. Haass. Diplomático americano y director del Council on Foreign Relations (CFR). En relaciones internacionales el término permanente es una entelequia, pero me atrevería a asegurar que en los próximos años los gobiernos serán más introspectivos y se verán decisiones tendentes a la autosuficiencia, dada la vulnerabilidad de las cadenas de valor empresariales. Veremos un menor compromiso para combatir problemas regionales o globales, incluido el cambio climático. La mayoría de países tendrán dificultades para su recuperación y se debilitarán los estados, alguno de los cuales pasarán a engrosar la lista de fallidos. Se vivirá un deterioro de las relaciones entre China y EEUU, aunque también avances modestos en Salud universal. La globalización sale más debilitada de la pandemia y el mundo, más incapaz de llegar a acuerdos multilaterales.
EEUU ha fallado su test de liderazgo. Kori Schake dirige el International Institute for Strategic Studies (IISS). La Casa Blanca ya no es el líder global. Ha perdido interés multilateral y ha ganado en incompetencia. Los efectos globales de la pandemia podrían haberse atenuado con una más intensa implicación de las institucionales internacionales, las mejor dotadas para difundir datos relevantes a la aldea global. Washington ha suspendido el examen y el mundo es peor por ello.
Cada país se mira al ombligo. Nicholas Burns, ex diplomático y catedrático en Harvard Kennedy School. La gravedad del Covid sobre la globalización es enorme. La pandemia amenaza a 7.800 millones de habitantes. Las secuelas económicas superan a las de la crisis de 2008 y su shock es un terremoto sobre el orden mundial y la globalización que sufrirán importantes cambios. No es de recibo que se crucen acusaciones entre China y EEUU sobre el origen de la epidemia. La UE no puede escatimar en gastos y asistencia a sus 500 millones de ciudadanos si quiere que sus socios no acudan a Bruselas a reclamar la devolución de sus soberanías cedidas, sobre todo, las de índole económico y monetario. La solidaridad civil con el personal sanitario en todo el mundo debe servir de acicate para que el mundo sepa reaccionar de manera extraordinaria y revertir los acontecimientos.
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