Resilient Flows in a Volatile World: The Covid-19 pandemic has not managed to break global connections
The worst health crisis for more than a century forced governments and companies around the world to take unprecedented action. Borders closed, flights were grounded and millions of people faced restrictions on their work and social lives. Arriving at a time when cross-border flows were already under pressure from rising geopolitical tensions, the scale and reach of the crisis might have stopped the forces of globalization in their tracks.
Yet the defining economic trend of recent decades has proved surprisingly resilient in the face of these challenges. That’s a key finding from the latest edition of DHL’s Global Connectedness Index (GCI), which tracks the flows of goods, people, capital and information that power the globalized economy.
After a bumpy recovery from the 2008 financial crisis, global connectedness had reached a plateau in 2019. The pandemic knocked it back, but the report’s authors – Steven A. Altman and Phillip Bastian of the DHL Initiative on Globalization at New York University’s Stern School of Business – expect their overall measure of connectedness to remain above its 2008 level this year.
From airport to remote support
The impact of the coronavirus has played out very differently across the four flows that make up the GCI. Flows of people have been hit hardest, with international travel expected to fall to levels last seen in 1990. Trade in goods, by contrast, rebounded quickly after a steep drop early in the crisis. Capital flows, which also saw a sharp fall, are showing signs of a recovery as policy responses by governments and central banks help to stabilize markets. Digital information flows, meanwhile, have spiked as remote working became the norm for many, and more business and leisure activities moved online.
Some countries and regions have always been more connected than others, and the GCI also provides insights into the breadth and depth of cross-border flows on a national and regional level. Strong trade links and people flows helped Europe claim the top spot as the world’s most globalized region, with eight of the 10 most globally connected countries located there. North America, meanwhile, is the top region for information and capital flows.
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Network effects
At the national level, the Netherlands emerges as the world’s most globally connected country, while second-place Singapore has the largest flows relative to domestic activity. The U.K., meanwhile, is the country with the greatest global distribution of flows. Cambodia, Vietnam and Malaysia all beat expectations on overall global connectedness, driven by their roles in regional supply chains.
Beyond the impact of the pandemic, the GCI team also looked for signs that geopolitical tensions are putting globalization into reverse. Their data suggests that the decoupling of the U.S. and China economies has advanced over the past year, but they found no strong evidence so far that the world economy is fracturing along regional lines.
That’s good news, the report concludes. Countries that connect more to international flows tend to enjoy faster economic growth, and stronger global connectedness could accelerate the world’s recovery from the COVID-19 pandemic. — Jonathan Ward
Published: December 2020
Image: Adobe Stock
