Mohamed A. El-Erian, an advisor to Allianz (the corporate parent of PIMCO where he served as CEO and co-Chief Investment Officer from 2007-14) and to Gramercy, is President of Queens’ College, University of Cambridge. He is is the Rene M. Kern Practice Professor at The Wharton School at University of Pennsylvania and was Chairman of US President Barack Obama’s Global Development Council. He previously served as CEO of the Harvard Management Company and Deputy Director at the International Monetary Fund. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author of two New York Times bestsellers, including most recently The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.
LAGUNA BEACH – Having already been buffeted by two big shocks in the last ten years, the global economy’s highly interconnected wiring is suffering a third because of the COVID-19 pandemic. Globalization thus faces a three-strikes-and-out situation that could well result in a gradual but rather prolonged delinking of trade and investment, which would add to the secular headwinds already facing the global economy.
Appeals to recommit to the current globalization process are almost certain to fall on deaf ears – particularly because this latest shock will be driven simultaneously by governments, companies, and households in developed countries. Those keen to preserve globalization in the longer term would instead be better advised to focus on minimizing the disruption caused by the coming period of deglobalization and laying the groundwork for a more sustainable process thereafter.
For starters, it is already clear that many firms will look to strike a more risk-averse balance between efficiency and resilience as they emerge from the damaging pandemic shock. The corporate world’s multi-decade romance with cost-effective global supply chains and just-in-time inventory management will give way to a more localized approach involving the reshoring of certain activities.
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