The COVID-19 pandemic will reverse the trends of globalization and urbanization, increasing the distance between countries and among people. These changes will make for a safer and more resilient world, but one that is also less prosperous, stable and fulfilling, writes Wharton Dean Geoffrey Garrett in this opinion piece. (This article originally appeared as part of Penn on the World after COVID-19, a joint project of Penn Global and Perry World House.)
For the past four decades, globalization and urbanization have been two of the world’s most powerful drivers. Global trade increased from under 40% of the world’s GDP in 1980 to over 60% today. Over the same period, the number of people living in cities more than doubled to over 4 billion people today — more than half the world’s population.
COVID-19 will reverse both of these trends, increasing the distance both between countries and among people. Some will laud these changes for increasing safety and resilience. But a world that is less global and less urban would also be less prosperous, less stable and less fulfilling.
Here are two core predictions about the world after COVID-19:
Less global, more isolated. Even before COVID-19, the decades-long trend toward ever-more globalization of trade, investment, supply chains and people flows was beginning to grind to a halt. We began to look closer to home in terms of the products we produce and consume, the people with whom we interact, and where we get our energy and our money.
In retrospect, we will come to view the years right before the 2008 financial crisis as “peak globalization.” Since then, the combination of recession, inequality and populism has created a growing anti-globalization and anti-immigration consensus in western countries, exemplified by the U.S. trade war with China.
The reaction of developed economies to the coronavirus will only strengthen this consensus, as all things international will be viewed as incurring unnecessary and dangerous risks. What was a growing “anti-globalization” consensus is poised to crystalize into a “de-globalization” reality.
We are being told this de-globalization will make us all more resilient. But it will also make us less prosperous — with less choice and higher prices. It may also make us less secure, as international cooperation will decrease and the potential for international conflict will increase.
Less density, more distance. Urbanization is likely to be the other major casualty of the coronavirus. Unlike globalization, the trend of ever greater-urbanization was unaffected by the global financial crisis. Even America — the land of all things suburban — joined the global march into cities. People were attracted to cities not only for economic opportunity but also for the urban lifestyle.
After coronavirus, people will be more fearful of crowded trains and buses, cafes and restaurants, theaters and stadiums, supermarkets and offices. Crowded spaces are the lifeblood of cities. But now crowds are seen as major health risks. People who have the ability to exit the city will increasingly be tempted to do so. People who cannot leave will feel at increased risk, hunker down, and reduce their movements and contacts. It is hard to think about Manhattan without the subway and 10-deep pedestrians on Fifth Avenue. But that may be the increasing post-COVID reality.
“In retrospect, we will come to view the years right before the 2008 financial crisis as ‘peak globalization.'”
De-urbanization would harm economic growth because cities generate enormous scale economies and have proved to be remarkably effective incubators of creativity and innovation. This could be particularly true in developing economies where the movement of people from rural areas to rapidly expanding cities has been perhaps the key driver of poverty reduction. But the shrinking of cities will have other adverse effects too, from reducing cultural vibrancy and cosmopolitanism to exacerbating climate change. In addition to being more productive, cities also tend to be more environmentally sustainable.
A world that is less global and less urban would be far less appealing to me, personally. But it is also a world that would hurt economic prosperity, reduce shared understanding among disparate people, and increase the prospect of conflict among them.
Our immediate reactions to COVID-19 will lead us to want both to de-globalize and to de-urbanize. But we must take fully into account the profound longer-term costs of doing so. Globalization and urbanization generate challenges we must confront, all the more so in a post-coronavirus world. The solution is to manage them, not to reverse them.
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12 Comments So Far
Michael Taylor
I am not sure this trend would be such a bad thing. The virus has stimulated a greater awareness of community and I believe there is a strong argument for a fresh, decentralised approach to life and economic activity with global connectivity and sharing through the technology. I am reading Jonathan Tepper’s “The Myth of Capitalism”, which dramatically illustrates the extent to which excessive centralisation and concentration in the economy is causing the inequality that so many resent. Could it be that now is exactly the right time for a new form of decentralisation to re-balance things. Imagine what could be achieved if instead of prolonging the polarisation of regional and local societies, there was a new initiative to localise enterprise and bring together the disparate elements of local communities – not through municipal or regional authorities (but with their support) – but in voluntary associations under the banner of some form of “community enterprise initiative”. Imagine communities in which rich and poor team up to initiate or revitalise projects across the spectrum of work, education, health, family, food, culture, entertainment and more. Perhaps now is the time for a new debate on the huge potential for growth and development at community level. Just putting it out there!
Andrea Guatelli
Geo- Political collaboration will change both for better and worse
Global supply chains will restructure and a greater emphasis will be placed on domestic self sufficiency
An increased profile for ESG oriented businesses and investing in them
More emphasis on personal health management
A greater attention on Population Health economics
Further momentum in AI, Genomics, and Diagnostics
Changes to work patterns with even greater home working and electronic based meetings
Changes to leisure, recreation and travel
Increased use of smartphone based personal health Management
There is a line of argument which is “the biotech industry has an opportunity to step up to a greater awareness of the importance of personal health at an individual, national and international level….. it will require new business and operational models that move towards prevention rather than cure and long term value to the community rather than short term profits”
A question is whether Latin America will this time step up to the opportunity presented or again rely on traditional thinking that has made the issue worse.
Narayan Manandhar
The shape of things to come is still not clear. As per The Economist, there will be bigger states and to match this there will be the rise of big oligopolistic businesses. What is sure is post-Covid 19 will, definitely, not be a normal situation. I am just pondering over the words written by somebody else somewhere: Had it not been the Great Depression of 1930s, Hitler would not have rose to the power and without Hitler WW II would not have happen and without WW II, the world would have been totally different. Similar to this, had it not been financial crisis of 2008, there would not have been Brexit and we would not have seen President Donald Trump. The shape of things wold have been totally different from what we are currently facing.
Andrew Shier
…But it will also make us less prosperous — with less choice and higher prices…
I believe the author needs to clarify who ‘us’ is. Having spent a lot of time in small town America I struggle to think how, as a society, this group could be less prosperous than they are now. Bringing manufacturing jobs back will only boost incomes and prospects for the non-coastal communities.
I believe a renewed focus on prosperity based on building things vs prosperity based on financial engineering will do far more to help the average American.
JC Wandemberg
A world that is less global and less urban may actually be more prosperous, much more stable and fulfilling!
Stuart Eichert
Urbanization and globalization were not sustainable. Together, they rapidly spread a global pandemic. We were centralized and fragile. Now, we will become decentralized and anti-fragile.
Jonathan Soria
Urbanization and Globalization usually bring to us a necessity to buy things that we don’t really need and they have helped to break the sense of belonging that people used to have in small towns and that directly attack fulfilling. I am not saying they are bad but I think it is not bad to stop them for a while.
John James
I must be missing something. I cannot equate this most recent medical emergency with a fundamental shift in human behavior. The displays of a reversion to the mean, of human behavior, as jurisdictions relax safety protocols contradicts the argument that people will take this issue to heart.
Not withstanding the underlying structural economic issues, I can’t understand this series of comments from Roubini, El-Erian, etc. regarding a change in behavior. Is it wishful thinking?
c s
Every fundamental shift in human history regardless of source has led to greater prosperity and personal fulfillment opportunity globally. No reason to believe this moment in history would be any different.
Let the event point the way, a delightful surprise awaits ! Greater emphasis on efficient use of the earths resources, maximum occupancy in areas of the planet according to minimum impact on resources. maximizing use of the technology we just created !
The Human body also has a long history of dealing with viruses,
trust the protections a healthy body produces not untested “science” Sure, sometimes science gets it right, but with viruses NOT. The guessing game being played here doesn’t even come close to the expert intelligence of the body.
The list is long.
Human bodies and our imagination are a boundless source of solutions.
The global outpouring of support in so many ways is a good sign of movement towards improvement. I’m in !
Wish you all wellness and inspiration !
Thomas Maddison
Urbanization and Globalization usually bring to us a necessity to buy things that we don’t really need and they have helped to break the sense of belonging that people used to have in small towns and that directly attack fulfilling. I am not saying they are bad but I think it is not bad to stop them for a while.
John Eldon
For at least three decades, the US has been de-urbanizing, with people moving out of crowded, expensive, noisy urban cores and opting for suburbs, smaller cities and towns, and rural areas. With modern high-speed telecommunications, we no longer need to cram people together to achieve innovation and economic prosperity. Work-from-home is a longstanding parallel trend that has merely been accelerated by COVID.
A reduction in globalization is a good thing if it supports reshoring of US jobs and industries. Automation reduces the need for low-cost labor and any advantage to overseas manufacturing.
loc nguyen
Armish way of life, before & after Influenza, then now in the middle of Covid-19, teaches us something? Am all ears, TY