September 27, 2022
Good morning. In today’s either/view, we discuss the impact of Slowbalisation. We also look at Delhi’s efforts to reduce pollution during winter, among other news.
📰 FEATURE STORY
Slowbalisation – A Boon or a Bane?
In 2019, The Economist highlighted several factors that were contributing to a process coined “slowbalisation.” The term is used to signify the waning of globalisation as we know it. Also called de-globalisation, it is indicative of a less connected world, characterised by “powerful nation states, local solutions and border controls rather than global institutions.”
International trade and investment relative to gross domestic product (GDP) have started to decline, multinational companies have witnessed a dip in their share of global profits, and the pace of the world’s economic integration has waned. While this may seem like a phenomenon that would negatively impact the economy, slowbalisation could be exactly what the world needs right now.
Context
There has been ongoing research and debate about the concept of globalisation and its many dimensions. The World Economic Forum, in its 2019 publication, summarised the four waves of globalization. Starting in the late 19th century, boosted by the industrial revolution, the first wave saw improvements in transportation and communication.
The second wave kicked off post the Second World War in 1945 and ended in 1989. The fall of the Berlin Wall in 1989 marked the beginning of the third wave, while the global financial crisis in 2008 saw its ending. Kicking off in 2010, the fourth wave experienced the recovery from the aforementioned crisis with a rise in the digital economy, artificial intelligence and other progressions.
In order to understand the current global dynamic, we must take a look at the previous retreat from globalisation. The 30-year period from 1914 to 1945 arrested the possibility of globalization in light of the geopolitical and economic impact of WWI and WWII. Other factors, such as the Spanish Flu pandemic from 1918-20 and the Stock Market Crash of 1929, followed by the Great Depression in the 1930s, led to a retraction in international trade.
Fast forward to the current global context, and the parallels are undeniable. The world economy and supply chains are still recovering from the hit of the Covid pandemic. The Russia-Ukraine war has caused major food insecurity, fuel price hikes and global uncertainties. For the first time in 40 years, world inflation is aggressively on the rise.
The report published by The Economist also noted that local rivals of multinational firms are giving them stiff competition. Trade is shifting towards services which is harder to sell across borders, and the cost of moving goods has stopped falling. Against this backdrop, the environment for globalization is not particularly conducive.
VIEW: Slowbalisation is a bane
The data on economic globalization reveals that the deceleration in the intensity of global integration began before the pandemic hit in 2020. The world GDP fell from an all-time high of 31% in 2008 to 28% in 2019 and further to a low of 26% during the first pandemic year of 2020. The number of multinational companies, that are a significant vehicle for economic globalisation, slipped from 82,000 in 2008 to 60,000 in 2017. This means that poorer countries will find it much harder to integrate and grow with their developed peers.
The events that have occurred over the last three years are indicative of how heavily economies around the world are integrated. This is also the reason the potential US recession is impacting currencies across the globe. This is also why the Russia-Ukraine war is leading to an increasing threat of global food insecurity and a hike in oil prices. Slowbalisation may lead to further conflicts between nations, with trade taking a backseat.
Another significant consideration is supply chains. Many multinational corporations set up their manufacturing units in different places depending on multiple factors. The Covid pandemic further highlighted the interdependence of global economies as the validity of the manufacturing and supply-chain model was undermined due to lockdowns. This led to many operators straying away from offshoring manufacturing, which inevitably had a negative impact on ports as their operations revenue suffered.
COUNTERVIEW: Slowbalisation is a boon
Owing to the recent trend of “reshoring” or bringing manufacturing back to the home nation, more jobs have been created, shifting to highly skilled labour resulting in better pay. In the US alone, the manufacturing sector saw the creation of over 16,000 jobs, resulting in a 20% increase in manufacturing output between 2008 and 2017.
With the slowing down of global trade, countries have been forced to turn their gaze inward and lean on domestic resources. Not only does this reduce the interdependence of nations on each other but it also makes the countries more self-reliant. Consumer preferences also align with this as the “buy local” movement did wonders for the agricultural sector. Buying food that is locally produced ensures better employment, reduces economic equality and increases local tax bases.
Additionally, global supply chains have a drastic environmental impact. Logistics that support international trade account for 6% of total human-generated carbon, according to the World Economic Forum. Due to slowbalisation, supply chains become more regionalised. As Kumar Mangalam Birla, the head of Aditya Birla group, highlights, GenZ has been born into a world where decisions need to be made keeping in mind their impact on the environment 50 years from now.
Reference Links:
- ‘Slowbalisation’: Will the slowing global economy be a boon or bane? (Business Standard)
- Slowing down or changing track? (European Parliament)
- Slowbalisation is setting in (Telangana Today)
- Forget globalisation, slowbalisation will be the new mantra (Mint)
- Slowbalisation affects ports (Fitch Ratings)
- Slowbalisation is the new globalisation (PWC)
What’s your opinion on this?
(Only subscribers can participate in polls)
a) Slowbalisation is a bane.
b) Slowbalisation is a boon.
🕵️ BEYOND ECHO CHAMBERS
For the Right:
Why India’s Firms Aren’t Making Investments Despite Nirmala Sitharaman’s Pleading
For the Left:
RSS Wasn’t Involved In Leicester Violence. But Here’s Why It Won’t Mind The Blame
🇮🇳 STATE OF THE STATES
Fighting winter pollution (Delhi) – The capital city is gearing up to combat winter pollution. The Public Works Department (PWD) will hire 150 smog guns and sprinklers. The smog guns will be installed at pollution-prone construction sites and dump yards. The truck-mounted moving water sprinklers will be used to settle the dust on the roads. For both, the government has floated tenders. 11 anti-smog guns have already been deployed across some locations, including the Bhalswa and Ghazipur landfills.
Why it matters: According to an IIT Kanpur study, dust from roads and construction sites makes up a majority of the particulate matter sources in Delhi. More than 130 tonnes of dust are generated in Delhi every day. The government has identified 13 locations across the city as pollution hotspots with special teams to monitor the pollution levels of the areas. From October 1, municipal officials will begin inspections to verify environmental permissions issued to factories.
Registering health facilities (Karnataka) – It has been a year since the Ayushman Bharath Digital Mission (ABDM) of the National Health Authority (NHA) was launched. Karnataka leads in the number of health facilities logged in its Health Facility Registry (HFR). Because Bengaluru is a digital hub, the state health department was ready to house the NHA’s regional tech unit at Arogya Soudha.
Why it matters: Three months ago, the state lagged in the service. Now, in addition to health facilities logged, it ranks second in the Health Professionals Registry (HPR) and the digitisation of health records linked to the Ayushman Bharath Health Account (ABHA) ID. The state employed district health officers and district family welfare officers to convince government health centres, doctors, and nurses to get registered.
Naxal hotbed is now a coffee hotspot (Chhattisgarh) – The state’s Bastar district was until recently known as a Naxal hotspot. Now, officials have been able to keep a check on its growth by educating and engaging with the locals. It’s trying to remodel itself as a tourist spot, particularly for coffee lovers, with its own Bastar brand. Local farmers are now experimenting with a rare type of coffee seed. There’s also a Bastar cafe. The government wants to expand cultivation to more than 5,000 acres.
Why it matters: Traditionally, coffee in India has been cultivated in Kerala, Tamil Nadu, and Karnataka. Forests occupy more than 40% of the state. With the introduction of coffee, locals now have the opportunity for new avenues of income and employment. Local officials are promoting coffee as a non-conventional agriculture product. Out of the seven blocks in the region, four are at a higher altitude conducive to coffee cultivation.
Rise in pendency at the Consumer Commission (Maharashtra) – For consumers who want justice for being cheated, their wait gets longer. At the State Consumer Disputes Redressal Commission (SCDRC), information from an RTI application shows a steady fall in the disposal rate of cases. It has fallen to less than 5% as on September 20 compared to less than 30% in 2018. The number of cases filed saw a fall each year as 2022 saw less than half compared to 2018.
Why it matters: Officials said vacancies are to blame. The President’s post at the Commission was filled only four months ago. Also, only one of the three courts is functioning. The State Commission takes up cases that pertain to more than ₹50 lakh but less than ₹2 crores. Even before the pandemic, the disposal rate was falling.
Walkathon for Frontier Nagaland (Nagaland) – The Eastern Naga Students Federation (ENSF) has announced a mass walkathon on October 7 to support the August 26 resolution of the Eastern Nagaland Peoples’ Organisation (ENPO) to not participate in any state or central election till a separate Frontier Nagaland state is created. The walkathon will be held in the eastern part of the state in six districts. The events will be used to educate people on the statehood demand in local tribal languages.
Why it matters: The movement was endorsed by the United Sangtam Likhüm Pümji (USLP). It said it wouldn’t participate in any election process in solidarity with the ENSF and in line with the ENPO resolution. The USLP has also asked political parties to refrain from any campaigning or declaring candidates without its permission.
🔢 KEY NUMBER
₹21,000 crores – The Directorate General of GST Intelligence (DGGI) sent a tax demand notice of ₹21,000 crores to Bengaluru-based online gaming company Gameskraft Technology (GTPL) for tax evasion. It’s the single-largest indirect tax demand to date.