ENGR OMAR SHAHKAR
THE entire world is affected by an evil with which it is incapable of dealing effectively and regarding whose duration no one can make any serious predictions. The economic repercussions of the novel Corona Virus pandemic must not be understood as an ordinary problem that macroeconomics can solve or alleviate. Rather, the world could be witnessing a fundamental shiftinthe very nature ofthe global economy. The immediate crisis is one of both supply and demand. Supply is falling because companies are closing down or reducing their workloads to protect workers from contracting COVID-19, the disease caused by the new Corona Virus. Lower interest rates can’t make up the shortfall from workers who are not going to work—just as, if a factory were bombed in a war, a lower interest rate would not conjure up lost supply the following day, week, or month. The supply shock is exacerbated by a decrease in demand due to the fact that people are locked in, and many of the goods and servicesthey usedto consume are nolonger available. If you shut countries off and stop air traffic, no amount of demand and price management will make people fly. If people are afraid or forbiddento goto restaurants or public events because of the likelihood of getting infected, demand management might at most have a very tiny effect—and not necessarily the most desirable one, from the point of view of public health. The world faces the prospect of a profound shift: a return to natural—which is to say, self-sufficient—economy. That shift isthe very opposite of globalization.While globalization entails a division of labour among disparate economies, a return to natural economy means that nations would move toward self-sufficiency. That movement is not inevitable. If national governments can control or overcome the current crisis within the next six months or a year, the world is likely to return to the path of globalization, even if some of the assumptions that under girded it (for example, very taut production chains with just-in-time deliveries) might have to be revised. Even a seemingly small requirement—for instance, that everyonewho enters a country needsto present, in addition to a passport and a visa, a health certificate—would constitute an obstacletothe return to the old globalized way, given how manymillions of peoplewould normallytravel. In the current crisis, people who have not become fully specialized enjoy an advantage. That process of unravelling might be, in its essence, similar to the unravelling of the global acumen that happened with the disintegration of the Western Roman Empire into a multitude of self-sufficient demesnes between the fourth and the sixth centuries. In the resulting economy, trade was used simply to exchange surplus goods for other types of surplus produced by other demesnes, rather than to spur specialized production for an unknown buyer. In the current crisis, people who have not become fully specialized enjoy an advantage. If you can produce your own food, if you do not depend on publicly provided electricity or water, you are not only safe from disruption that may arisein food supply chains orthe provision of electricity and water; you are also safer from getting to be infected, because you do not depend on food prepared by somebody else who may be infected, nor do you need repair people, who may also be infected, to come fix anything at your home. The less you need others, the safer and better off you are. Everything that used to be an advantage in a heavily specialized economy now becomes a disadvantage, and the reverse. —The writer is freelancer, based in Islamabad.
