Virtually from the beginning, the World Health Organization has labelled our present predicament as a “global” pandemic. This isn’t just about COVID-19s reach, but it’s ability to turn back the clock on so many international advancements made on the economic front. It’s so frightening, in fact, that the Economist recently ran an article with the headline, “Has Covid-19 killed globalization?”
Well, has it? Not likely, though it has definitely been delivered a significant blow, unlike anything in recent decades.
For Canada the implications are enormous, potentially crippling, in fact. A nation that discovered its origins in the movement of fish, minerals and furs overseas, then went on to become an essential partner in Commonwealth commerce, and ultimately signed on to most global compacts inspired by the UN, International Monetary Fund and the World Bank in the modern era pretty well owes its affluence to the rest of the world. So, yes, we need to pay attention to COVID’s threat to our very well-being.
The Economist is helpful in reminding us that globalization was in trouble prior to the pandemic and the desire to return to what was could well jeopardize how we get out of current predicament. Political dysfunction, re-enforcing of borders, the encroaching economic war with China – these and more were increasingly limiting the capacity of the global trade system to do its job.
And that dominant economic architecture of the global model – capitalism – was falling into trouble for years, as movements around the world came to the conclusion that the hoarding of wealth was actually dividing humanity instead of empowering it. Adam Smith, the early godfather of capitalism 250 years ago, actually warned about this very thing. Smith intensely proclaimed that the effectiveness of the financial market worked when there was a rough equality between sellers and buyers and where neither one became overpowering enough to influence the market price. More intriguingly for our purposes here, he affirmed that capital was best spent locally, since it permitted owners to see directly what was happening to their investments and the impacts at ground level.
This is nothing like what we have now, where the human, social, cultural and environmental damage currently plaguing the globe seem to directly correlate to the activities of the global financial order.
Canada has played its own role in this rather willfully ignorant approach. In such a fragile world, disruption of financial norms could have dire consequences. COVID-19 has now ripped away that veneer and virtually every prosperous nation is scrambling to find a way out with as little damage as possible.
For this country, the implications are more than massive. We exist because we trade. We have influence in the world because we are a soft but connected power in that world. Upend the balance of that and Canada lies vulnerable to an unpredictable future. We are the 12th largest export economy in the world and the 24th most complex economy, according to the Economic Complexity Index. That just means that it’s our global connections that have got us this far. In 2017, we exported $377 billion and imported $326 billion. Our top exports are Refined Petroleum, Cars and their parts, Crude Petroleum and Petroleum Gas. That word petroleum comes up a lot on this list, and in a world endeavouring to move away from fossil fuels, in part due to COVID, it implies we are overly dependent on one sector that is shrinking.
And then there are our top two trading partners. Number one is America, but the second is China, and we can all see how that relationship is going. Both appear to be at one another’s throat and Canada is caught in the middle of a trading war that could be catastrophic.
And now COVID-19 is exacerbating all of it. If the query of the Economist proves true and the pandemic effectively nullifies globalization, this country, which for decades has banked its success and affluence on its trade deals, stands to suffer disproportionally. We can’t blame COVID for the world’s ills in recent years. Politics has turned into a knife fight in both developed and developing nations. Climate change has overcome any global effort to seriously mitigate it. Jobs are disappearing. Wealth is accumulating in ever-concentric circles. And trade? Well it’s going increasingly over to the dark side of favouring the wealthy over everyone else, just as Adam Smith had feared.
Our underlying failures are being exposed – not by the pandemic but by the flaws that preceded it. We didn’t correct them at that time and COVID is rubbing them in our collective face now. There is some serious thinking to be undertaken, not just about how we emerge from a season of pandemic, but how we construct a new world trade order that gets back to the equality of outcome that it was meant to induce.