Viewpoint: Revisiting Globalization and Economic Resilience

07 JUN,2022 | MEDC

  • Viewpoint: Revisiting Globalization and Economic Resilience
  • What is the cause-effect relationship, if any, between globalization and economic resilience? For the two biggest global economic disasters this century – the financial meltdown beginning in 2008, and the Covid-19 pandemic starting in 2020 – economists were unable to provide any satisfactory answer to that critically important question. Regarding the 2008 crisis, most economists underestimated the risks of financial globalization, and regarding Covid, most economists overestimated the risks of trade globalization. The lesson to remember is that we need to understand where policy analysis could go wrong and the adjustments needed to make to get things back on track. The networked problems of our times are amenable to networked solutions.
  • Globalization does create systemic risks, but humankind has now gone too far to halt or reverse it. Given the current situation, stopping globalization will not diminish the socioeconomic threats worldwide, but rather will amplify them. There is no policy devised as yet which is sufficiently foolproof to deal with climate change, pandemics, and many of the other catastrophic events we face today. Protectionism limits the potential for cooperation required to manage our shared global risks. It dampens investment, trade, tourism and technological advancements, all of which have employment generation capabilities. This reduces the ability of countries to build economic resilience. The only way out now for the world is to make globalization safe and sustainable, and ensure that it delivers continuous benefits to the maximum number of people.
  • Every country needs some strategic and visionary leadership to manage the negative effects of globalization, and harness the positive. This is difficult, but not impossible, and it is also necessary to ensure that economic progress is not stalled by populist ideologies and vested interests, which are found aplenty globally. Any economy is only as strong as its weakest links, and fortifying them could have a positive and cumulative effect on systemic resilience.
  • The past two years have highlighted our lack of immunity to natural threats, as well as the need to enhance our economic resilience. There is no shortage of ideas regarding green policies, which offer the potential to build back better and accelerate the transition towards the development of renewables as well as stronger risk management systems. In this regard, India’s Power Ministry has identified 81 thermal units that will replace coal by renewable capacity by 2026. This is a bold policy step for meeting the ambitious 500 GW renewable energy target and tackling the annual issue of coal demand-supply mismatch in India. Such measures will help enhance our economic resilience by decreasing our dependence on fossil fuels, and thus, prepare us to face the multifaceted challenges of an increasingly uncertain world.
  • At the national level, economic resilience can also be enhanced by decentralization, so that individuals, businesses and regions are empowered to make their own decisions … and take responsibility for them. That is the logic behind vocal for local. We should remember the Pareto principle (which states that 80% of effects result from 20% of causes), and modify our operations at all levels accordingly. The next global crisis will come without warning, and it will not confirm to our conventional mental maps. We must use this opportunity to build new and stronger bonds, in our communities, in our state, and at both the national and international levels.


Picture Credit :- Google 


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