"The looming challenges could be more consequential than we have until now chosen to imagine, but our capacity to reset could also be greater than we had previously dared to hope," wrote the World Economic Forum (WEF)'s founder Klaus Schwab in "COVID-19: The Great Reset."
This observation in the bestseller born out of the pandemic has become particularly revealing as global leaders gather at a WEF virtual event on Monday to discuss the state of the world: Big changes must be made to address common challenges in the post-pandemic era.
At the core of the changes should be an upgraded type of globalization, a smarter one, featuring better utilization of new technologies and wiser global governance, to shepherd the world out of the pandemic gloom.
Globalization, a natural process driven by technological breakthroughs, free flows of people and profit-thirsty capital, will not be reversed or annulled by a single global crisis -- as was not by the 2008 global financial crisis, the 2011 Japan tsunami, or the 2021 Suez Canal blockage, and certainly will not by COVID-19. After all, the interdependent complexity has made society bigger than the sum of its parts. But globalization can certainly be made to work better for everyone in the future.
For starters, a more advanced globalization is important for an efficient and sustainable post-pandemic recovery.
The global economy is expected to be 2.3 percent smaller by 2024 than it would have been without the pandemic, noted the Global Risks Report 2022 released by the WEF last week. To invigorate the economic backwater as quickly as possible, it is imperative to inject new development momentum into the world economy, as by leveraging more opportunities in the digital and green sectors.
The velocity of innovation has provided fertile ground for a continuous upgrading of globalization. For example, information technologies like blockchain, big data, artificial intelligence and robotics, all products of the fourth industrial revolution, can help stimulate productivity, efficiency and service delivery, renovating local business modes and even the larger global supply chain system.
Apart from promoting eco-friendly projects around the globe like water management, waste control, renewable energy and sustainable tourism, governments should also coordinate with one another to steer public and private investment across countries for green recovery and liberalize trade in environmental goods and services.
Secondly, a more balanced globalization is crucial to a resilient recovery. One lesson drawn from the pandemic and its blight over the global supply chain network is that the process of globalization has tilted toward maximizing opportunities without much attention to minimizing risks.
To optimize the supply chain network design for a stronger recovery of supply capacity, countries should join hands to strengthen awareness of risk management, for example, by adding redundancies to the global manufacturing processes, decentralizing supply chains in both weight and position, and collaboratively monitoring financial and operational health between suppliers.
Just as a paper titled "Global Supply Chains in the Pandemic" noted, "renationalization" of global supply chains does not in general make countries more resilient to pandemic-induced contractions in labor supply, but would rather make the global average real GDP decline due to the pandemic shock greater.
Globalization should never be just about the exchanges of goods and services, but also of ideas. Sadly, this has not been the case. From energy, chips to Christmas trees, a still ongoing worldwide supply chain crisis, which has been partly caused by supply chain members forecasting in isolation and without much coordination with their upstream and downstream partners, lays bare the misery of the bullwhip effect.
To mitigate the cost and risk of not knowing and improve accuracy of procurement, production and distribution, it is necessary to promote timely information sharing and build stronger relationships between members of a supply chain, as well as between them and end users.
Thirdly, a more comprehensive globalization is key to an inclusive recovery. The ravaging pandemic has exposed that globalization in the past years has not turned out to be a rising tide lifting all boats.
While advanced economies are expected to surpass their pre-pandemic growth by 0.9 percent by 2024, most developing countries will be 5.5 percent below it, showed the Global Risks Report 2022. The European Central Bank (ECB) noted in an analysis that against the backdrop of rising protectionism, over 1,900 new restrictive trade measures were implemented worldwide in 2020, 600 more than the average of the previous two years.
At a time when global solidarity and cooperation are much needed to heal the wounds of the pandemic, uneven recovery trajectories in different countries will trigger divergent priorities and policies, and eventually threaten long-term common prosperity. Therefore, for the benefit of all, it is of paramount importance to bridge the wealth and health gaps and get poorer countries more involved in the globalization process.
To that end, decision-makers worldwide need to work together to implement faster and design new international aid directed towards vulnerable countries, to help them shift from low-value to higher-value added areas, reform unequal structures of trade, finance and taxation by restructuring debt burdens, repurposing unused special drawing rights, lowering borrowing costs and providing adequate climate finance, and develop rules for global interactions based on shared interests of all.
"A globalized world in transition -- the pandemic has so far only reinforced this message," ECB President Christine Lagarde said in late 2021.
What the global community needs now is to pool efforts and wisdom to steer the world towards a better future with a smarter globalization.