The Pacific Council recently hosted a teleconference with Meg Lundsager of the International Monetary Fund and Dr. Henry Farrell of George Washington University, and moderated by Dr. Abraham Newman of George Washington University. They discussed the COVID-19 pandemic’s impact on globalization.
Here are key takeaways from the discussion:
- Lundsager argued that the economic crisis brought on by COVID-19 is worse than the Great Recession of 2008. “Even though the Federal Reserve and international institutions have taken unprecedented steps to restore liquidity, liquidity support is not a long-term solution for our economy,” she said.
- Farrell said that COVID-19 has shown that globalization doesn’t work the way that we thought that it did. “There are risks and vulnerabilities instead of only positives,” he said. “We need to think systemically about addressing these vulnerabilities before they cascade. COVID-19 has exacerbated weaknesses in our systems that existed before this pandemic. There are cracks in the system.” He added that we are now seeing a rise of reverse protectionism, with barriers to prevent companies from exporting goods that a government thinks are essential. “This risks a domino effect of all countries starting to do reverse protectionism, with all of them worse off as a result. This is a selfish ‘beggar thy neighbor’ mindset building into more general distrust among countries, even on issues that should be as collaborative as possible such as medical support and vaccine research.” A worst case scenario could be government-to-government interaction descending into tit-for-tat relationships, imposing increasing restrictions to punish the other.
- Lundsager said we are not seeing the kind of coordination and response we saw in 2008 when all countries were legitimately concerned about a shared fate. “We should already be scared into a global unified response,” she said. “We should all work together in the same way that doctors and researchers work together. We shouldn’t care which country makes a vaccine first. Getting the credit for that shouldn’t be important.”
- She pointed out that COVID-19 is making us ask fundamental questions: What do we really need a secure supply of? How many alternative producers do we need? If we’re always searching for the lowest cost that will still meet our standards, how can we change? What is our next crisis? Another pandemic? Climate change? Energy disruption?
- Farrell said he hopes the electorate learns the lesson from the COVID-19 pandemic, that competence is still valuable. “We could see a near future where party matters less and voters ask: can a president, regardless of party, confront a crisis and be accountable? I hope to see a shift but this could also go the other way.”
- Newman said COVID-19 is bringing our attention to the inherent problems of globalization, the fragility of supply chains, and inequality, but added that these don’t have to be intrinsic to the globalization process. “Countries should institute a series of policy responses,” he said. “We can’t have our cake and eat it too. We can’t all be in this global economy but all fend for ourselves when a problem emerges. A collective response should be a key responsibility of a globalized economy. We need to redouble our efforts to solve problems that emerge because of globalization.”
Listen to the full conversation below:
The views and opinions expressed here are those of the speakers and do not necessarily reflect the official policy or position of the Pacific Council.