We Globalised Everything but Governance
40 years ago, China started opening to market economy and capitalism, with the effects on the world economic structure and the businesses’ value chain we’ve already been observing during all the 21st Century. Together with the fall of the Berlin Wall, in 1989, these two factors are considered to be the trigger of the globalization process we’ve been experiencing during the latest decades. At the same time, the developement of the Third Industrial Revolution (computers and telecommunication technologies) boosted the enourmeous wave of changes not only in the economy, but also at political, social, cultural and even personal levels. Once recovered from the Oil Crisis of the 1970’s, globalization process led to the most intense growth and development period after the World War II. The latest 70 years have been extraordinary, and while during the 20th Century the economy created half of the GDP in history, the 21st Century started with even bigger strength, prodicing in the first 10 years the equivalent to half of the 20th Century, or 25% of the whole history. That’s what technology and trade were doing.
Basically, globalization changed our world in most of senses. We started talking about VUCA world, this new Volatile, Uncertain, Complex, Ambiguous context in which change is a must, in which innovation is a fundamental activity for every company, in which everyone of us have become more flexible, more adaptable, agile, even “antifragile”, to put it in the words of Nassim Nicholas Taleb. Lots of new concepts appeared, and after the 2008 financial crisis and the Great Recession period, we started talking about the New Normal, to name the new conditions that emerged after the brutal turmoil we suffered after Lehman Brothers. To most of us in the Western World, it meant that nothing was ever going to be the same. In some sense, it was the end of innocence of the happy 80’s and bubbling 90’s, it was a definitive wake-up call after the dotcom crisis and the 9/11.
One of the main traits of this New Normal was the shift from the power of governments to the power of technology and its new giants. We all heard about the GAFA world, and we thought that the control over information flows, data, privacy, and everything related to intelligence was going to be of utmost importance for the world power games. We suspected that environment, climate change, natural resources and the energy model would be also a very important character in this New Normal. Even cyberwars and the new face or terrorism were overcoming “traditional wars”, and the hangover of the Great Recession arrived in the shape of populism, new protectionisms and a resentment against the plutocracy of the “winners” of capitalism. #OcuppyWallStreet, Arab Springs, or the #15M in Spain were looking for the vindication of the weakest, of the “damaged” from the liberal status quo that Francis Fukuyama named “The End of History”.
If there was to be a New New Normal, we thought it should probably be the evolution of any, or a combination, of these factors. But no. Then came Covid-19, and reset everything, and provoked nor even a “new”, but already the “next” Normal, as McKinsey is posing it. The “Normal” will not last for a long time anymore, but it is changing more rapidly according the VUCA context aforementioned. How do we navigate through these transitions? Five words seem to give us some tips about it: Resolve, Resilience, Return, Reimagine, and Reform (see the full McKinsey article for a more detailed explanation of these concepts).
If we reached globalized dynamics and globalized problems, then we need globalized solutions, don’t we? This is were the chain has broken. Donald Trump talks about “Chines virus” (though it seems he finally quit doing that), while China said that the US army may have brought it into China. Amid the turbulence, UK and the European Union are behaving quite different, and the approach in every country (Italy, Spain, Germany, France, The Netherlands…) is also substantially different. In Latin America, again the picture is diverse: while Brazil’s president is almost laughing about it, Argentina has decided a lockdown with far less cases than Europe. The first question may be: who’s right? And the second one would be: is anyone taking care of the pandemic as a whole?
With regards to the impact on the economy, besides the dramatic consequences for population and health systems, measures are clear as the countries and regions are taking action. The message in the USA and European Union is, with slight differences, the same: “We are going to do whatever it takes for the economy to survive”. No matter how much money we need to put, we’ll do it.
But how about the rest? We already have the formal bodies, the institutions who should be able to take this responsibilily, and they are 75 years old. After the World War II, IMF and World Bank were created during the Bretton Woods conference, and United Nations came to existence a few months later. World Health Organization, a body part of the UN, seems like a relevant voice in the crisis, but not a decisive one. In the case of IMF and World Bank, they might be a tool, but not much more than somehow helping.
And this is not the end. Some governments tried 20 years ago to set up “the premier forum for international economic cooperation”, the G20, involving “the leaders of both developed and developing countries from every continent”, but they have not been very decisive in its latest meeting, where members were calling upon a joint action about the coronavirus crisis. As South China Morning Post reported, G20 “faces pressure to take coordinated action against a pandemic that has jolted markets and stoked fears of a global recession”, but they were “underscoring the challenge they face in garnering a consensus on how to deal with the rising economic risk from the coronavirus outbreak”. G7, the group of the major economies of the world (US, Japan, Germany, UK, France, Italy, Canada) created as a result of the 1970’s oil crisis, also pledged these days to do “whatever is necessary”, and it probably has a lot to do with the (apparently) coordinated actions taken in terms of monetary and fiscal policies during last week, but it has not a formal role at a global level in the management of the crisis.
It is true that governments today are not probably the best tools to effectively manage a global situation, but shouldn’t we have some kind of world-level powerful institution to govern globalisation? Wouldn’t it be good to rely on the authority of someone entitled and ready to put global priorities to global challenges? As Martin Wolf, the chief economics commentator at the Financial Times, said in his most recent article, “This pandemic is an ethical challenge; To avert disaster, solidarity between countries must be as strong as within them”. As in many other times in history, if everyone’s left to its fate, emerging economies and societies are going to suffer much more than developed ones. As usual. Wouldn’t it be time to bring globalisation one step forward? Market (or darwininsm) is not going to take fair decisions about it. Never did, not its fault, it was not created to accomplish this function, and creating equality was not ever among capitalism abilities. It will not start doing it now, and besides, we already created the institutions to balance that. The only thing we have to do is to give them power for the global problems to be solved (or at least addressed) in a global way.
