Written by: Elizabeth Khoo Yuk Min (21-U1), Emma Shuen Lee (21-O1), He Jizhao (21-U5), Lim Junheng, Jovan (20-O5), Martha Henrietta Soetedjo (20-U2), Ng Teck Zhong (20-E5), Tiew Zuo Yuan, Richard (21-I2), Zuo Yuning (21-A1)
Designed by: Lay Kai En, Ashley (21-O1)
In economics, globalisation is defined as the integration or interconnection of national economies through the trade of goods and services, capital flows [Foreign Direct Investment and short-term flows (“hot money”)], and labour migration. All in all, globalisation refers to just how interconnected we are in this day and age. Globalisation is important to many countries, in part because it allows countries to specialise in areas with comparative advantage while trading with each other to obtain what they cannot produce competitively. This entire system has allowed many to benefit from lower and more efficient production of almost anything.
Many countries depend on globalisation to obtain what they cannot produce themselves. One key example would be Singapore—with a lack of natural resources, as well as a tropical climate, Singapore is not able to produce everything that it needs, including the daily necessities of food and water. Without globalisation, Singapore would not have been able to even survive her initial years, let alone be prospering as she is now.
However, the arrival of the SARS-CoV-2 virus has changed the global outlook. With COVID-19 came lockdowns and restrictions, including measures to limit exports for the purposes of one’s own consumption. On the flip side, such lockdowns and restrictions have increased the demand for online services, including the Internet. So, how then has the SARS-CoV-2 virus changed the global economy? Will such changes be permanent? And, of course, how will they impact globalisation as a whole? Read on to find out more!
How COVID-19 has Impacted Globalisation
The course of globalisation has been wonderfully guided by the interconnection between first world countries and countries with adequate access to the Internet. Multiple countries, such as Australia, Singapore and China went into lockdown with the rise of COVID-19 cases. This led to a boom in the demand for digital connections, such as Internet access and online telecommunication, to continue work and business meetings. The burgeoning growth of videotelephony software has risen the virtual meeting landscape to greater heights, by forcing producers to improve bandwidth capacity in order to accommodate the sudden rise in new users.
Additionally, being in quarantine has forced countries to ramp up their digitalisation efforts in order to commence cashless payments by online banking as well as contact tracing. The Straits Times reports that nearly 75% of firms in Singapore have accelerated digitalisation efforts within, as COVID-19 has pushed along the urgency to be innovative and efficient in a time of worldwide distress. Overall, digitalisation has reached greater heights in the wake of COVID-19 globally.
While globalisation has faced disturbances widely felt throughout the world, we should have the tenacity to consider how globalisation itself is in fact the solution to the problem. A global problem has to be solved with concerted efforts globally, thus COVID-19 has just sparked the beginning of such cooperation. The COVID-19 virus has taught the world that countering it necessitates banding together to come up with solutions. Take COVAX for instance, a worldwide initiative to accelerate the development of COVID-19 vaccines for more equitable access to low-income and middle-income countries. It is precisely this global crisis that has led us to formulate solutions that cannot be achieved by one country alone. As Michelle Dean claims, “Crisis forces commonality of purpose on one another”, clearly displaying the opportunity for us to strengthen our ties and move forward together in the fight against COVID-19.
However, as national lockdowns around the world continue to hinder the flow of raw materials and completed goods, COVID-19 has substantially interrupted global supply chains. While office goers have the option to work from home, those employed in factories have to adhere to new rules such as physical distancing, contact-tracing and wearing personal protective equipment (PPE). These cumbersome practices, coupled with the restrictions on travelling between countries, has resulted in many delays and even complete halts in production.
One only has to look at the garment industry to observe the adverse effects of supply chain disruptions on globalisation. The garment industry relies more heavily on human labour compared to other industries like the automobile industry. According to a 2019 report by the International Labour Organization, the Asian clothing industry alone employs over 43 million people. As a result of high human involvement in their operations, clothing businesses are extremely vulnerable to manufacturing disruptions and continue to suffer huge losses as the pandemic ravages on. For instance, the US Census Bureau reported that there was a 73.5% drop in clothing sales in America between March and April 2020.
Another industry that has suffered under COVID-19’s wrath is (to no surprise) the tourism industry. With the extensive lockdowns and travel restrictions, many of such businesses struggle to receive new customers. Popular metropolitan areas in Singapore including Orchard Road and Marina Bay have seen drastic falls in retail sales of up to 52%. Just recently, an announcement was made to close the terminals and the connected Jewel Complex of Changi Airport—a place that has been crowned as the world’s best airport for its eighth consecutive year and a popular destination for both tourists and locals alike—in response to heightened concerns over the rise in community cases.
With Singapore’s economy riding on tourism and trade, the impact of COVID-19 has no doubt brought various challenges. Nonetheless, our country is determined to revitalise its tourism industry, opening our doors to the global market once again.
Some people are worried that COVID-19 will slow globalisation down or even encourage the emerging de-globalisation movement. However, their worries are likely misplaced. Although the world has never seen COVID-19 before, it has seen similarly unexpected and disruptive events. How the world fared then can teach us much about where we will go in the near future.
Look at the 1970s, for instance. The golden age after World War Two came to an end when the outbreak of war in the Middle East in 1973 and the Iranian Revolution raised the global oil prices by multiple times, placing a great strain on both the economies of wealthy countries like the United States and that of poor countries like the Republic of Congo. Many feared a collapse of the global economy then. Yet, globalisation continued.
Similarly, in 2008, a disruptive turn in the stock market eliminated the life-time savings of millions around the world, and negative growth proceeded in many Western countries.
Many again became worried about globalisation. Yet, it continued.
The truth is that downturns are as unavoidable as growth in capitalist economies. And, contrary to what Karl Marx predicted, the global economy does know how to adapt to changes. When oil prices rose, countries began exploring ways to improve energy security. When the stock market crashed, countries began implementing policies to reduce risky behaviours in the financial market.
Similarly, as COVID-19 wrecks countries and robs lives, countries will and should adapt by looking for technologies that will make work less dependent on face-to-face interaction. Perhaps technologies like video calls will be made more easily accessible, so that economies can function even when people are stuck at home. Dramatic adaptation will definitely be challenging to do, but it is ultimately necessary.
Hence, what Singapore must do now is manage the present COVID-19 threat, as well as ensure that the future transits to a more digitised and flexible economic model.
In conclusion, we are very certain that COVID-19 has significantly affected the process of globalisation. The pressing demands to be dealt with have expedited the innovation of internet infrastructure and brought a boom to e-commerce. COVID-19 has also ruthlessly cut the complex supply chains of multinational corporations and caused huge losses of revenue. Now, we can go back to the question that we had ventured at the start: how does COVID-19 impact the process of globalisation as a whole? Does it impact it positively or negatively?
The answer is both.
- Harapko, S. (2021, February 18). How COVID-19 impacted supply chains and what comes next. EY Singapore. https://www.ey.com/en_sg/supply-chain/how-covid-19-impacted-supply-chains-and-what-comes-next.
- Singapore Tourism Board. (2020). Impact of COVID-19 on tourism in Singapore & the road to recovery and transformation. Singapore. https://www.visa.com.sg/dam/VCOM/regional/ap/singapore/newsroom/documents/impact-of-covid-19-on-tourism-in-singapore.pdf
- Singapore’s tourism sector emerges from 2020 with greater resilience and reinvention. STB. (n.d.). https://www.stb.gov.sg/content/stb/en/media-centre/media-releases/Singapore-Tourism-Sector-Emerges-From-2020-With-Greater-Resilience-and-Reinvention.html.html.
- Will covid kill globalisation?: The Economist. (2020). YouTube. https://youtu.be/KJhlo6DtJIk.