Over the course of the next several weeks, JP Marvel will publish the series “2025: Long Term Effects of COVID-19”, an exploratory imagining of life in 2025, after COVID-19. Each series entry will provide a hypothetical 2025 reflection on the pandemic’s impact since 2020, focusing on a key aspect of American industry, commerce, government, society, or culture.
Heading into 2020, many Americans were highly focused on the upcoming presidential election because they believed its outcome would have an outsized effect on the country’s direction for decades to follow. Little did they know that a pandemic would leapfrog the election in geopolitical importance. Five years later, the United States – and most other developed countries – have moved away from globalism at a rapid rate. This dramatic shift has had a mammoth effect on international trade and investment. The change is ongoing, but some countries have already emerged as comparative winners and losers.
The Twin Crises: Globalism & International Health
For the last half of the 20th Century, globalism was widely hailed as the economic tide that lifted all boats. When the 2008 Great Recession hit, globalism began to fall out of favor because nations across the globe felt its dangerous shortcomings. Globalism, in fact, had unanticipated indirect negative effects. While it increased wealth overall, it also increased income inequality. Some countries became dangerously dependent on international sources for critical supplies, equipment, and resources. It also moved jobs from countries – frequently high-wage ones – to lower-wage nations. The first big wave of anti-globalization came with the Great Recession, leading to the rise of populist leaders like President Donald Trump and Prime Minister Boris Johnson, but a second tsunami hit with the arrival of COVID-19.
In 2020, globalist trade and travel ensured that COVID-19 would have rapid global effects. Warm international relations turned lukewarm, and chilly rivalries froze. Governments halted or severely restricted international travel to curb the spread of the virus. Labor ceased to move freely among nations. International commerce within some industries suffered. Today, most international travel lanes have reopened, but overall travel has not returned to pre-virus levels because the added safety costs have hurt demand.
Developed countries certainly struggled in 2020 and 2021, but they have fared much better the past few years. They successfully leaned on strong telecommunications infrastructure, healthy financial systems, top notch medical institutions, and cash-rich governments to rejuvenate their economies. Underdeveloped countries lacked these resources and, consequently, have had a difficult time coming back from the economic damage caused by the pandemic.
Spending on Strengthening the Self
The fallout from COVID-19 reaffirmed many nations’ desire to become more self-sufficient, but few countries have been able to move meaningfully in that direction the past few years.
The United States is one success story. Over the past five years, the US government has used both regulation and financial stimulus to bring home more manufacturing in industries deemed “essential”. Significant funds have been allocated to the medical institutions and technology companies that the country relied upon heavily during the lockdown. While these agencies and entities were responsible for saving many lives, they did fall short in some respects, revealing their structural faults and funding deficiencies… and the public, President, and Congress all wanted to see improvement.
The United States also reinvested more in the resource channels that have long blessed it with a competitive advantage. The country has plowed more investment into its vast natural resource network (particularly oil and gas), entrepreneurial technological sector, world-class education system, best-in-breed agricultural system, and highly educated workforce. The US remains one of the few developed countries that can fully feed its own population, and it is fast approaching energy self-sufficiency.
Having finally acknowledged the widespread foreign theft of its intellectual property, the US added more legal and cybersecurity safeguards to protect its assets. The country has also taken big steps to fulfill its own high-tech manufacturing needs. Roughly half of countries are dependent on US companies for technology infrastructure, and 40% use Chinese companies for this vital provision. Countries have essentially been forced to make a Cold War-like choice: build their technology on the backbone of a foreign entity or go without. Regardless of the divide, most hardware and software remain too complex for one country to completely bring manufacturing supply “in-house.” While tech supply chains are shorter than they were pre-2020, tech companies supply chains in 2025 are not yet wholly self-reliant.
Other developed countries have struggled to move away from interdependence. A post-Brexit England and Japan remain dependent on global trade to sustain their citizens due to limited domestic natural resources. The European Union is busy managing a flood of refugees (mostly from Syria, Afghanistan, and sub-Saharan Africa), supporting member nations hurt severely by COVID-19, and navigating the UK’s exit from the union. Efforts by the EU to expand economic institutions were unsuccessful, and citizens of richer states resent providing ongoing support for their poorer neighbors. The Eurozone is weakening, it recently lost Greece, and it is on the verge of losing other Mediterranean countries.
Developing nations have had it the worst. They were unable to spend their way out of the depths of the pandemic. Many tapped the IMF for assistance, but that funding alone was insufficient. Some countries were forced to accept austerity measures, and the backlash from their citizenry now threatens government stability. Hit doubly hard by both the disease and the economic fallout, a few unfortunate nations entered dubious deals with China as a lender of last resort. They pledged sovereign resources as collateral and, after failing to repay debt in a timely fashion, were forced to forfeit control of national assets to China. This has created political instability, as indigenous populations are fighting both the local government and Chinese corporations to maintain control over natural resources.
The Single Resource Curse & Energy
In the decade leading up to COVID-19, several countries began to fall victims to “the resource curse.” These countries had built their economies largely on the back of a single valuable resource like oil, gas, or a precious metal. Most of these countries were controlled by corrupt authoritarian politicians or military juntas. Usually these countries had poorly educated populations, insufficient agriculture, few if any meaningful natural resources, and basic infrastructure. Their governments were ruled by despotic figures who tightly controlled financial markets, job creation, commerce, and income flows. Monopolistic control of money, employment, and law enforcement made it impossible for an underfed, poorly educated populace to contest political power. The end consequence is that these countries became hotbeds for social unrest and, in select places, terrorism.
Not surprisingly, when COVID-19 took hold, these commodity-export reliant countries spiraled. As developed nations brought as much commodity production home as possible, these “cursed” nations saw their economic losses mount. Wage declines and job losses led to greater civil unrest, as dictators and despots had less money in the coffers available to placate the people through handouts.
Perhaps the countries reliant on hydrocarbon-based exports have been hurt more than any other single-resource nations. OPEC’s stranglehold on energy began to slide at the onset of the Great Depression. Member nations feuded intensely over production levels even as demand was plummeting and global energy investment increasingly poured into alternative sources of energy. The power of the cartel only weakened further with COVID-19, which led to an even sharper drop in global oil demand, and five years later OPEC is now a shell of its former self.
2020 pushed renewables to the forefront, as all nations had some capacity to produce renewables, unlike traditional hydrocarbons. The proliferation of renewables over the last five years has not completely replaced hydrocarbons. What it has done is create a suitable alternative and put a ceiling on oil prices, removing the pricing power of the cartel. Without artificially inflated prices of oil, many of the OPEC member countries have fallen to political instability, and a few have even left the cartel to make good on their own. Oil has lost much of its value but also much of its volatility. These countries are now in political decline, if not revolution.
Tech one step forward, Globalism two steps back
While the pandemic moved technological progress and adoption forward five years, it also moved global relations back decades. Rich developed countries have rebounded and brought more production in-house. Meanwhile, developing companies have destabilized, and the world’s aggregate GDP has fallen from pre-pandemic numbers. The gulf between the nation “haves” and the nation “have-nots” has grown wider. This does not bode well for international relations, and it does not bode well for restoring globalism to its former popularity.
We will have more reports in the coming weeks on what the world might look like in 2025…