This is the moment for women to step up and be counted. We have the opportunity to do things differently. We can no longer play by the rules of profitability and money at all costs because it will take us a long time to rebuild the whole economy. In this enlightening article, Dr Rebecca Harding shares her thoughts about the Covid-19 and the effects on the global economy and how we can address the new challenges.
Dr Rebecca Harding is an independent economist specialising in trade and trade finance and CEO of Coriolis Technologies, providing data as a service to the trade and trade finance space.
She is the co-author of the acclaimed “The Weaponization of Trade: the Great Unbalancing of Policy and Economics” and “Gaming Trade: Win-Win Strategies for the Digital Era.” She frequently appears on Ian King Live, Sky News, BBC World and BBC Radio 5 live, Newsnight and Radio 4 and is cited in the Broadsheet press, including recent articles in the Financial Times, Telegraph and CityAM.
Rebecca is a member of the World Trade Board. She advises the Council of the Society of Professional Economists. Her senior roles in business and academic institutions include Founder and CEO of Delta Economics, CEO of Equant Analytics, Senior Fellow at London Business School, Global CEO of the Global Entrepreneurship Monitor, Head of Corporate Research at Deloitte and more. She was a Specialist Advisor to the Treasury Select Committee and Chief Economic Advisor to the All Party Parliamentary Group on Entrepreneurship.
2020 – an Economic Collapse?
If you feel like you have over-indulged during lockdown, you probably have. Chocolate, sweets and confectionary, packaging, chemicals and pharmaceuticals and tobacco products are five of the six sectors globally whose trade in 2020 is set to grow (Figure 1). As a world, we have been online shopping, cleaning, eating and smoking our way through a year unlike any other in living memory. Sometimes data really do feel too real.
Figure 1: Trade growth sectors, 2019-20 (% change) and CAGRs (2013-18, 2019-23) by Dr. Rebecca Harding
Perhaps reassuringly, every other sector in the world, except arms and ammunition, is likely to experience negative growth this year. We are expecting trade in commodities to be particularly severely hit, with oil, copper, iron and steel all likely to fall back during the course of the year. This is unsurprising – the near-simultaneous drop in oil prices, equity markets and world trade that we saw in March mirrors the pattern of the Global Financial Crisis. We can expect the patterns in trade to be similar because the correlation between oil prices and the value of trade is extremely high, and there is no sign that the price of oil will recover significantly any time soon.
This of course puts the oil producing economies back into their third price shock since 2007. Norway, Russia, Malta, Nigeria and Saudi Arabia are the worst affected and all are likely to see their value of trade decline by between 35% in Norway’s case to 44% in Saudi Arabia’s. But while Norway’s economy has the underlying strength and wealth to recover, Saudi Arabia’s oil dependency undermines its attempts at economic reform while the price of oil remains at below $70 a barrel. It has never recovered its economic growth after the oil price collapse in 2014 and 2015.
But unlike the financial crisis, this is a policy-induced economic collapse.
World Trade – the Victim of Public Health Interests?
At the beginning of 2020 there was a degree of optimism around: despite uncertainties around the rate of Chinese growth, the US election and Brexit’s impact on the EU and the UK, the year promised a reduction of trade tensions between China and the US, and as a result, markets started the year off on a buoyant footing.
But public health interests globally have taken precedence over the global economy and world trade has been its victim. Even if the WTO’s “worst case” forecast of a fall in trade of up to 32% does not materialise, it is very likely that the value of trade will fall by a similar amount to the financial crisis – by around 22% – because oil prices are still low and there are similar deflationary tendencies while the reaction from Central Banks to Covid-19 makes the extraordinary monetary policy after the Global Financial Crisis look modest.
The global economy and trade are unlikely ever to be the same again. This is not just because we cannot be certain of the type of recovery we are likely to see. Discussion of a ‘V’ shaped bounce-back, a “U-shaped” steady return to growth or the depressing “L” shape where growth stays flat is a misdirection from the real issue: the world is going through a major structural change and this will impact everything.
Covid-19 Consequences – will it Change the Way we Work, Trade and Live?
Rather, it is because banks and businesses are investing in the rapid acceleration of digitisation which will change the way we trade as well as the way we finance trade. Businesses are likely to use the time now as a reason to accelerate automation of routine tasks, changing the way we work and not just where we work. Supply chains will shorten while the phrase “reducing dependency” has become part of a political as well as an economic discourse since the crisis: inventories have crashed because of their dependency on one supplier in automotives (remember the Jaguar-Landrover trip to China with suitcases to bring back components?), in electronics and most worryingly of all, in pharmaceuticals.
But perhaps most concerning is how Covid has pushed the world back to a nationalism that cannot be healthy for the future of trade or the globalisation that we once held so dear. Over 95 countries in the world have imposed restrictive tariff regimes on products associated with Covid 19 medical supply chains, even within the EU. The United States has bought up supplies of the drug Remdesivir, walked away from the World Health Organisation and threatened sanctions on China because it thought it was insufficiently transparent about the origins and spread of the virus. China, in return, has imposed trade restrictions on Australia for agreeing that there needed to be an independent, global inquiry into its origins. The tech wars that are part of the “strategic competition” between the US and China mean that even algorithms can now not transfer easily across borders; as both sides start to build up their “national security” to protect themselves against what is an inevitable result of globalisation, we should not be over-surprised at the rate at which arms trade is growing (Figure 1).
Doesn’t this have an all-too-familiar ring to it? Is it really justifiable that the big super-powers are comparing the size of their nuclear buttons while the rest of us try to deal with the financial, business, and personal fallout from the Covid pandemic? Is it a coincidence that Germany comes out well from the crisis and is led by a woman? It is one of the few countries that has liberalised its exports of medical equipment, been one of the most successful countries to control the coronavirus, and taken a more cautious approach to escalating the rhetoric around the poisoning of Russian opposition leader, Alexei Navalny.
New Rules for the Future – a Chance for Women to Step up and be Counted?
This may seem like a cheap point to make. But the important thing is this. After the last financial crisis, there was a broad clamour for a change – to make capitalism more inclusive, to protect against the inequalities that had grown through globalisation, to make our world more sustainable. After a few months it was clear that the rules had not changed: money, profit, shareholder value and a focus on growth and returns at all cost were not replaced by anything better. The result is where we are now – a world which has been pushed into a radical change in the way it works, innovates, socialises and trades because we have not been able to follow the old rules any more.
This is the moment for women to step up and be counted. We have the opportunity to do things differently because everyone, male or female, is viewing the world and appreciating value, in an entirely different way. We can no longer play by the rules of profitability and money at all costs because it will take us a long time to rebuild the whole economy. That reconstruction of the global economy has to be on the basis of technological solutions delivering sustainability, equality of opportunity and supply chains that deliver for everyone in the world – not just the rich. These can be our rules because they are stakeholder rather than shareholder based; they are about multilateralism rather than globalisation. Future generations will not forgive us if we do not seize the moment.