Need for non-economic globalisation: Lessons from the Coronavirus pandemic

While the post World War II global order has successfully promoted trade openness and free markets, it has failed on non-economic metrics such as climate change and health

Even as we write, Covid-19 virus has directly affected 166 countries and more than 340,000 people across the globe, with 14,748 reported deaths. Indirectly, it has brought the lives of billions to a standstill, with many organisations now stating that the pathogen is the biggest threat facing the world since the second world war. One significant outcome of World War II was rise of “Multilateralism”. With the memories of war time destruction afresh, the world had an incentive to “co-operate”. The broad shape of the international order after the war was a multilateral liberal internationalist system embracing, in principle, collective security, economic openness and social progress. Seven decades into its inception, we find that this process has successfully promoted trade openness and free markets, via its flag-bearer institutions including IMF, WTO and World Bank. High economic globalisation is clearly reflected in the fact that trade as a percentage of GDP for the world stands close to 60 per cent. 

But in the shadow of this Coronavirus crisis, it has become fairly obvious that this order has completely failed in promoting non-economic globalisation. World Health Organisation was established on April 7, 1948, to provide technical assistance to countries, set international health standards and guidelines, and collect data on a wide range of health issues through the World Health Survey. The failure of the WHO in recent times to actively control pandemics is an example of this failure. We must, therefore, take note of why we could gather global support for economic co-operation but failed on non-economic ones. 

Fundamentally, globalisation works by creating common rules for all countries, on which terms of interaction depends. In such a system, countries deciding the rules could very easily promote their preferences through these institutions. With the rise of nationalism in the recent times, another important question is to think about conditions under which global co-operation is desirable and when it is not. The general perception is that when any national policy has local impacts it should be governed locally and there is a need for international governance only if it has international effects. However, in today’s hyper-connected world, there are hardly any areas where there are are no cross-country spillovers, making global cooperation even more pertinent. Economic theory suggests that there is a market failure for global public good or bad and international co-operation is must in such cases. Information sharing on pandemics and knowledge on ways to tackle them is the best example of global public good, so this is definitely a case for global co-operation. But, sadly, we have failed precisely in this area. In 2005, taking lessons from the SARS outbreak in China, international health regulations were revised to grant extraordinary powers to WHO, including acting on non-state sources of information and to question member states on their decision making, empowering WHO to declare outbreak of public health emergency of international concern even over objection of the states most directly affected. However, many countries have time and again not honoured new regulations or taken them seriously. For example, the coronavirus testing kits developed by WHO were not used by the US even at the cost of slowing down the frequency of testing that could be done. Another example is the withdrawal of United States from the Paris Agreement that was signed in 2016 to deal with greenhouse-gas-emissions mitigation, adaptation, and finance. In case of the Covid-19 epidemic, there are reports that the local authorities in China initially suppressed information about outbreak of coronavirus and, contrary to what has previously been pointed out, this is an example where prompt and detailed sharing of information would have helped better in containing the effect of the virus.

In this light, the recent initiative by our Prime Minister to use existing mechanisms such as SAARC Disaster Management Centre to pool in best practises and create a common Research Platform to coordinate research on controlling epidemic diseases within the South Asian region is the perfect example of government intervention for a larger international public good.

Further, for cooperation within the SAARC countries, India has proposed creation of a Covid-19 Emergency Fund based on voluntary contributions from all the countries, with its initial offer of $10 million towards the corpus. Everything in the world is not necessarily a zero-sum game and measures to ramp up global coordination and cooperation will be a Pareto improvement in the quality of lives of people across globe. Such initiatives in these testing times doesn’t only motivate us all to rise to the occasion, but also have strong backing of economic theory.  This step is also commendable as it fills the vacuum of leadership in global order by taking steps at regional level for tacking emergency health crisis like Corona virus.

In the light of the ongoing coronavirus crisis and other broader climate change issues staring at the world, such initiatives are the need of the hour. So the next big policy question facing the world is ways to strengthen non-economic globalisation.

Aakanksha Arora is from Indian Economic Service posted as Deputy Director, Ministry of Finance and Aasheerwad Dwivedi is Assistant Professor, Shri Ram College of Commerce.

The views are author’s personal views.