2020 seems to be one of the darkest times for globalization. Throughout history, globalization has been a great narrative about us and all forms of human achievement. It is described as the process of integration of economic activity and culture across borders. The effects of globalization are not only felt from changes in welfare and economic conditions, but also changes in culture and political systems.
Through the openness of trade flows and post-second world war ideas, we witness the longest dramatic rise in prosperity and peace in modern human history. In the 1980s-1990s, a more open trade policy became the key to Indonesia's high growth. China, with dramatic growth since the late 1990s, is also a vivid example of the benefits of globalization.
But in the last two years everything seems to be moving backwards. When COVID-19 began to spread, almost all countries closed their doors to human mobility. It's probably one of the biggest closed-door policy orchestrations ever. In addition, many countries are looking for individual lifeboats when the pandemic problem becomes global. For example, many countries close exports of personal protection supplies such as masks and others on the grounds of securing domestic demand.
Entering 2021, science gives hope that we will win over COVID-19. But on the other hand, the findings of vaccines even unmask inequality between countries. Vaccine producing countries, mostly developed countries, choose to cultivate more vaccine stocks above their needs. While the population of developing and poor countries are still in long queues to get the first dose of vaccine.
We seem to forget that the story behind the COVID vaccine, which was present in a short matter relative to the previous vaccine, is also a success story of globalization. BioNTech, which is based in Germany and is behind the BiNTech-Pfizer vaccine, was founded by German scientists Dr Ugur Sahin and Dr Ozlem Tureci. The two are good friends of Albert Bourla, Pfizer's Turkish chief executive. Pfizer is a major U.S. pharmaceutical company. Without human mobility and the idea of cross-borders, as a form of globalization, it's hard to imagine a COVID-19 vaccine would be found in such a short period of time.
But it must be recognized that globalization provides uneven benefits. There are those who are disadvantaged as a result of more open trade, and for a long time this group feels marginalized from the currents of globalization.Much of the discontent over globalization comes from developing countries. But interestingly, dissatisfaction with globalization is now also voiced by the middle class of developed countries such as the US, which has been enjoying the benefits of globalization.
Professor Joseph Stiglitz, a Nobel Economics economist in his book "Globalization and its Discontents Revisted: Anti-Globalization in the Era of Trump" (2017), writes that opponents of globalization now also come from the lower and middle classes of developed countries, groups that had benefited from globalization. President Trump then used this discontent and applied it to political commodities. Even policy is transformed into U.S. foreign policy. Under President Trump's administration, the U.S. is embroiled in a trade war with China.
With the widespread dissatisfaction over globalization to developed countries, the question arises whether indeed the trend of globalization will end? And has a pandemic indeed accelerated the pace of deglobalization?
Throughout history, globalization has not always been linear and certainly experienced ups and downs. Recent trends do show the ebb of globalization. For example, when we look at the ratio between international trade—exports and imports—to global gross domestic product, there is a downward trend in this ratio. The ratio of international trade to global GDP reached its highest peak in 2008, reaching 60.9 percent in 2008 — an all-time high since the second world war.
But since the global financial crisis in 2008-2009, this ratio has plummeted to 52.4 percent in 2009. The Covid-19 pandemic and the previous U.S.-China trade war, also suppressed this ratio. In 2020, the ratio of international trade to global GDP fell to 51.5 percent, lower than the period of the global financial crisis.
The COVID-19 pandemic appears to be exacerbating the trend of globalization. The latest DHL Global Connectedness Index reports that human movement in the pandemic era, marked by international travel per capita, in 2020 fell to an equivalent level in the 1970s. The only indicator of globalization that is still strong is the information index, which is due to the drastic increase in internet use due to COVID-19.
But on the other hand there are indications of backflow from this deglobalization trend. Entering 2021 we see a drastic increase in global trade flows. The findings suggest that the world's busiest trade route remains the transpacific eastern route between Asia and the North American region. Even amid supply chain disruptions, the Port of Los Angeles— one of the busiest ports in the U.S.—recorded a dramatic increase in September 2021 (Greene 2021).
Global issues need global cooperation
In addition to the covid-19 pandemic, we also face global problems that should strengthen global cooperation. Climate change, a real existential threat, desperately needs solutions and cooperation that is global. Recent reports from the Intergovernmental Panel on Climate Change (IPCC) have very clearly shown that without serious action to tackle climate change, global temperatures will rise by more than 2 ͦC in 2100 compared to the era before the Industrial revolution. When this happens, humans have lost the opportunity to save themselves from global catastrophe.
The IPCC meeting is also the backdrop to the importance of the 26th Conference of Parties (COP26) summit in Glasgow, England. The COP26 summit in Glasgow has agreed on 4 major objectives that include 1) Mitigation, 2) Adaptation, 3) Global financial mobilization and 4) Collaboration between countries to achieve ambitious targets.
For some, the commitment of developed countries at COP26 to reduce emissions and also help developing countries to reduce emissions is still considered insufficient. Professor Jeffrey Sachs of Columbia University strongly judged that the COP26 decision is far from necessary to save the earth from climate change (Jeffrey Sachs, Fixing the Climate Finance 2021).
One of the causes is the mobilization of sources of funds for emission reduction. This became the epicenter of many countries' disagreements. Developing countries see that developed countries, which are also the largest accumulative contributors to emissions, are not keeping their promise to mobilize $100 billion a year to deal with climate change by 2020.
Indonesia itself through the Nationally Determined Contribution (NDC)—the contribution of emissions reductions—is about 29% with national efforts to 41% of the emissions generated in the business as usual (BaU) scenario by 2030. Nevertheless, Indonesia needs at least a total financing of Rp3,779 trillion from 2020 to 2030, or equivalent to Rp346 trillion per year (Ministry of Finance 2021). Of the total funding above, Indonesia itself faces a large financing gap. For this reason stronger global cooperation to mobilize international financing is essential. Indonesia itself, as a representative of developing countries, must voice this need in international forums.
The future of globalization is in question
Entering 2022, a number of outlooks provide a number of expectations about globalization. The DHL connected index— one of the globalization metrics— projects that the index is expected to reach 130 in 2022, a new high in the index's history. In addition, throughout 2020 to 2021, the pandemic has been a major test for connectivity, global integration is expected to remain higher compared to previous periods. This is encouraging news.
But the uncertainty is still huge. Geopolitical competition, especially between the U.S. and China, remains a major stumbling block to addressing global issues such as climate change. In addition, pandemics also have the potential to change the international order.
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