When walls fail

When walls fail

Covid-19 shows globalisation can’t be ignored.

It was on the last day of last year that the world learnt of Covid-19, the infectious disease caused by the most recently discovered strain of coronavirus. From its epicentre, China, it’s spread across the globe at unprecedented speed. Now there are about one lakh reported cases and over 3,000 deaths. In a space of two months, the Covid-19 outbreak has not only disrupted everyday life, it’s also had an adverse impact on the global economy. Till it’s brought under control, the economic costs will multiply.

You could call it globalisation’s revenge – globalisation telling the nationalists, the populists and those who like to build walls that it cannot be ignored. The only way to fight back against Covid-19’s effects is through global coordination. WHO, the coordinating authority for health under the UN system, observed that global health security is as strong as its weakest link. Therefore, enlightened self-interest suggests that multilateralism cannot be abandoned. Breaking the chain of transmission of Covid-19 and helping the infected are global priorities. Moreover, its economic impact is two pronged. Both demand and supply sides of economies are affected.

China, which is at the heart of many supply chains, is the worst affected. This has disrupted supply across the world. Separately, the recourse to quarantines to break the transmission has dampened retail demand everywhere. The US Federal Reserve this week made an emergency cut in interest rates to combat the fallout. Unlike 2008, central banks haven’t fallen back on a coordinated response as contexts vary. In India, RBI had already prioritised economic growth over inflation. Now, it has to work in conjunction with the government to handle the combined impact of an unexpected shock and the problems at Yes Bank. Government will also need to display policy flexibility in helping the worst affected sectors.