Globalization was already on the retreat in some countries before the COVID-19 pandemic struck. Will the crisis be globalization’s ultimate undoing? Chicago Booth’s Randall S. Kroszner says the world won’t give up entirely on globalization in the wake of the pandemic, but we will forego some of its benefits in exchange for more robust risk management.
There are going to be some very important, lasting changes internationally from this. We were already having trade disputes before this happened, and now we’re having a variety of other challenges that come related to health: a lot of restrictions on travel, quarantining, blocking people from coming from other countries. And there are some legitimate concerns about the spread of virus for that.
But that also means that there’s a risk that these could go on longer and could be imposed more frequently going forward. I think that is going to make people more careful about global supply chains. We’ve seen for medical supplies, for example, there are concerns that maybe if we have to rely so much on other countries for supplies of medicines, for medical supplies, medical devices, that it might be wise to try to develop more native capacity for that, or at least an ability to bring that up more rapidly than we have been able to do in the past.
That’s not something that’s unique to the US, I think that’s something that’s going to be global.
Do I think globalization will come to an end? Certainly not. There’s still a lot of global trade that will occur, and there will still be a lot of global travel that will occur. But I do think it’s going to be dramatically less than it was before.
I think the production processes are going to be thinking much more in a risk-management context about, yes, there are benefits of globalization, but there are also potential downsides in, whether it’s a pandemic or there are many other negative shocks that could happen globally that could lead to those same issues. So I think people are going to be doing much more careful risk management, which is going to lead more stuff to come at home.
That means you’ll forego some of the benefits of globalization, but I don’t think you’ll forego all of them.