The people of a country that has had the highest trade surplus rate in the world for many years are expected to take a positive approach to the process that has been a major factor in their country’s prosperity and economic growth in recent decades. We are talking about the process of globalization in Germany.
With an 80% export rate in machinery and 65% in automobile industries, Germany has a significant presence in the global economy, and this presence is not limited to these industries. The main actors in this economic presence are small and medium-sized German companies that have managed to create a highly efficient business network around the globe.
The creation of this global network dates back to almost 30 years ago. “For a long time after the fall of the Iron Wall in the late 1980s, we saw a multilateral world. A world where everyone was looking for global solutions. Global institutions such as the World Trade Organization, the International Monetary Fund, or the World Bank all became powerful during this period. The reason was to understand that close cooperation and reaching common solutions would benefit all of us. “This trend has changed in the last decade, to make matters worse,” explains Professor Marcel Fratzscher (1), head of the German Institute for Economic Research. Efficient global networks are gradually giving way to protectionist policies, similar to those we have seen in recent years in the United States and the United Kingdom. Beyond this gradual process of erosion, with the onset of the Corona Crisis, the vulnerabilities and losses of this efficient global network suddenly appeared for everybody in the world, in an undeniable way.
THOMAS BREDEHORN, HEAD OF HEALTH PRODUCTS LOGISTICS AT FRAUNHOFER INSTITUTE, “ALMOST ALL THESE PRODUCTS ARE MADE IN CHINA.”
Over the years, the process of globalization has made it possible for manufacturers and companies to transfer their factories and production processes to countries and regions that offer the best and most economical working and production conditions. A kind of global division of labor had formed. In this division of labor, economic activists competed for the greatest exploitation of their strengths. This maximum exploitation of global structures has also created a phenomenon in the global economic system, which in computer science is called software “bug”. When a drug or any other commodity needed is produced by just one or a few large companies in just one particular country, then a dangerous and highly dependent form of trade is created that, under unpredictable conditions, can hit the system and It even has the ability to disable it. In the Corona crisis, the bug was well illustrated, for example, with respirators and disinfectants.
Professor Gabriel Felbermayr (2), a senior economist and head of the Institute for World Economics in Kiel, Germany, compares the economic crisis caused by the Corona outbreak to the 2008 financial crisis of Lehman Brothers. According to him, the peak of the globalization process was between 1990 and 2008, a period he called, “hyperglobalization” (3): “Trading volume, investment transfers, economic services and human mobility have grown more than the whole economy. Growth has stopped with Lehman Brothers’ bankruptcy, and since 2008 it has shown a gradual decline.”
Ursula von der Leyen, President of the European Commission, says “We can no longer take into account only the economical considerations about the supply chain for necessary goods” about “cautious globalization.”
Social distancing was one of the reactions that all countries showed to the coronavirus spread. This distancing, however, was not limited to social life. At the economic level, we are witnessing the same gap in international trade relations. Coronavirus has caused widespread disruption in the supply chain of goods and logistics, which is a vital artery for all manufacturers and factories. German industries began to change the logistics routes and supply chain of their raw materials almost overnight.
One out of four jobs in Germany depends on exports. This has long been the main reason why most Germans support globalization. The coronavirus has suddenly created a deep rift in this maximum support. In a poll commissioned by the German media outlet SPIEGEL, conducted by the Civey Research Institute over the years, only 38.3% of respondents view the “globalization process” as an opportunity. For 57.7% of them, this process is a risk. In comparison, in May 2017, the results were different: For 63.5% globalization was an opportunity and only 38.8% believed that globalization was a risky process.
Although COVID-19 has overturned this ratio, the charts show that globalists or supporters of the globalization process in Germany are no longer in the majority. Another interesting point that can be deduced from these polls is that this change of approach has occurred mainly among supporters of moderate parties. Supporters of both the far-right and far-left parties have had a relatively consistent approach over the past few years to the globalization phenomenon. Supporters of moderate parties, the parties that currently form the coalition government, show the greatest change in approach.
This political division in public approach to the globalization has another social aspect: the majority of the educated strata of society no longer support the globalization. The results of this survey show that a profound change has taken place in the way of thinking of strongest and widest stratum of German society, the middle class, in terms of globalization.
“If the whole world wants to act based on the same logic of self-sufficiency and economic independence that is now common in Germany, Germany will be the biggest loser in this game,” Professor Flebermayr predicts. Because he believes that by doing so, the Germans will ruin their economy in the medium term. He sees a direct link between this erosion process and what happened in Britain as the Brexit, and warns: “For years, the British people have been told that whatever evil there is in society comes from Brussels. Until one day the supporters of Europe finally became a minority. The process of globalization in Germany is very similar to the one in Britain. It’s a dialogue that goes hand in hand with general and imprecise arguments.”
On a transnational scale, the coronavirus brought the structural weakness that was deeply hidden within the globalization process to the surface. The system, which became “global” on the basis of collective good and industrialized and developed countries benefited the most from, globalized a deadly virus in the face of which all international institutions suddenly became paralyzed or dysfunctional. Countries have sunk back in their national shell. The borders were closed. The supply chain of essential goods for production was torn. Transnational organizations such as the World Health Organization have become political toys in the hands of corrupt, authoritarian, and undemocratic regimes such as China or the Islamic regime in Iran, and are now being targeted by the worst-hit countries by Corona. The European Union could not even guarantee quarantine in EU member states.
Corona revealed another truth:
There has never been anything called a global community. Whether a plurality has become a community or not, can only be determined in the face of harm and threats. The family, as a small social cell, is no longer a family if it is disintegrated as soon as a foreign threat arises. It is a “unit of mutual interests.”
(1). Prof. Marcel Fratzscher, president of DIW (Deutsches Institut für Wirtschaftsforschung) in Berlin
(2). Prof. Gabriel Felbermayr, President of IfW (Instituts für Weltwirtschaft) in Kiel
Translation of this article by Sahar