Tag Archives: COVID-19

The Post-Zoom World

In March, as much of the country was shutting down to slow the spread of COVID-19, I attended an annual conference. Instead of meeting in Charlotte, our association convened on Zoom. The president’s thoughtful address came off flawlessly. I delivered a paper, moderated a session, and saw a dozen interesting presentations, each followed by animated discussion. By workaday measures, our conference was a great success.

Yet for me, it wasn’t successful at all. I ran into no one in the hallway and met no one for a drink. I had none of the unexpected encounters that make academic conferences worthwhile, and came away with no great inspirations for new projects. And I had very little opportunity to renew ties with friends and colleagues, some of whom I routinely encounter at conclaves such as this. Our conference was less a gathering than a business meeting that just happened to be online. I promise that if we can manage to pull off our next one in person, I will never complain about hotel coffee again.

So when I hear the claim that COVID-19 will change something or other forever, I’m skeptical. Yes, plenty has changed for the time being: road warriors and bucket-list travelers are stuck at home; shopping malls are silent; fine restaurants are reduced to serving take-out; most people are working remotely if they’re lucky enough to be working at all. Some airlines and department stores may die, the gig economy doesn’t seem so cool, and would-be hoteliers have learned that buying a house to rent out on Airbnb isn’t a sure-fire bet.

Yet the fact that we’ve learned new ways of living doesn’t mean we won’t go back to the old ones. Watching travel videos isn’t much of a substitute for being there. While shopping malls were in trouble long before COVID-19, Amazon.com, for all its brilliance, has not figured out how to turn online shopping into a fun social experience. Spending big bucks to carry out a meal in a plastic bag provides the same calories and taste sensations as dining in the restaurant, but it doesn’t provide the same pleasure. After years of complaining about their long commutes, many teleworkers are champing at the bit to return to the office because, well, working alone at home leaves them no office mates to complain to.

My bet is that after we eventually ease out of social distancing, the post-Zoom world will be a lot less different than we might expect. Yes, some of our familiar shops and eateries will have vanished, but the empty spaces they will leave behind will rent for less, offering opportunities for entrepreneurs. Yes, we’ll be wearing face masks on planes for a while, but competitive pressures will drive airlines to offer low fares, and many of us will choose a middle seat in sardine class to save a few bucks. Some big banks will take a beating, but then they’ll go back to packaging speculative loans into incomprehensible securities, because that’s what big banks do. And yes, firms will pay a bit more attention to the resilience of their supply chains, but globalization won’t be put back in a bottle. If anything, COVID-19 has reminded us that much of what matters is indifferent to borders and to national identify, whether we like it or not.

No, the Coronavirus Won’t Kill Off Globalization

The spread of COVID-19 has brought much commentary about the impending end of globalization. While the virus has indisputably disrupted the world economy, I think that many of the claims about its impact on international trade are overblown. Globalization is far from dead. Rather, it is changing in ways that were already apparent well before COVID-19 appeared in Wuhan last December.

When people talk about globalization, they often have something specific in mind — the long value chains that have reshaped the manufacturing sector since the late 1980s. These chains emerged after the development of container shipping, falling communications costs, and more powerful computers made it practical to divide a complex production process among widely dispersed locations, performing each task wherever it is most cost-effective to do so.

Value chains underlay the torrid growth of international trade in the final years of the twentieth century and the early years of the twenty-first. During those years, trade grew two or even three times as fast as the world economy, mainly because of increased shipments of what economists call “intermediate goods,” items made in one place that are being sent elsewhere for further processing. I refer to this period as the Third Globalization, because it was distinctly different from other periods — the decades before World War One, the years between 1948 and the mid-1980s — when international trade and investment grew rapidly, but international value chains were uncommon.

Many companies decided where to locate various parts of their value chains based on production and transportation costs. But over time, complicated long-distance value chains often proved to be less profitable than they had imagined. As freight transportation became slower and less reliable, and as earthquakes and labor disputes resulted in goods not arriving on time, executives and their shareholders became more attuned to the vulnerabilities. Minimizing production costs ceased to be the sole priority. 

Companies have taken a variety of measures to reduce risks in their value chains. They are keeping larger inventories in their warehouses, producing critical components at multiple locations rather than in a single large plant, and dividing exports among several ship lines and sending them through different ports. All of these measures help limit losses when value chains malfunction. But all of them make international sourcing more expensive.

For most of the past decade, international trade has grown more slowly than the world economy, reversing the trend of the previous sixty years. Greater care when it comes to arranging value chains is one reason why. COVID-19 offers further reason to be careful. But it is not likely to cause manufacturers, wholesalers, and retailers to give up on globalization. The alternative, relying on a purely domestic value chain that can be interrupted by a flood or a fire, might create risks rather than contain them.