Moving from economic inter-dependence to independence

Decisions taken by various governments to avert the economic slowdown caused by the COVID-19 pandemic are now beginning to bring economies back to normal. However, the economic standpoint of cities post-pandemic is significantly different from that in the pre-pandemic period. While the importance that they are giving to public healthcare and emergency response systems is unprecedented, they are also re-aligning their trade and economic policies, particularly those with respect to globalisation.

Although the effects of the pandemic may not be able to end globalisation, they are certainly reversing the trend to some extent. Cities around the world are now looking inwards for economic stability and growth. They are now focusing on developing their domestic markets, businesses, industries and services to increase their gross domestic product (GDP). This, in turn, will not only change the global power dynamic but will also change the flow of goods between cities. As globalisation cannot be ended completely, the flow of goods will continue but may be lesser in volume and concentrated to non-essential goods. Cities in countries like those in Africa and south Asia, however, may not align themselves this way, keeping in mind their constricted capacity of industrial growth.
One of the main reasons why cities are doing this is because the pandemic made them realize that dependence on another country for something as minor as a face mask is extremely dangerous and life-threatening for the country’s public health in the long-run. Additionally, other medical supplies like PPE suits, latex rubber gloves and face shields were in short supply during the pandemic and therefore have renewed importance post-pandemic. It must be also noted that cities are not trying to be self-dependent only in terms of medical supplies but in terms of all economic goods. Thus, the shortage in supply of medical equipment has had a ripple effect on every other commodity too. This rising sentiment in both leaders of city administration and the general public have led to various cities tying up with international organisations and strengthening relationships with sister cities to set up production facilities, or signing agreements to ensure their supply in times of need.
As a result, the polarity of the world’s power struggle may change too. Since a long time, cities in the United States of America and the European Union have been leaders in terms of economic output. This consequently resulted in them being leaders in global decision making too, which has more or less been the case during the pandemic. It must be kept in mind, however, that the position of India as the world’s largest vaccine producer has also meant positive changes for position of Indian cities on the global stage. Although the effect of the two COVID waves which India faced have been pronounced and acted against the positive changes, they have not been strong enough to neutralize them. Therefore, India is now being seen as a leader in pandemic response, its cities have been setting milestones for managing rising COVID cases, and an aid to developing and under-developed countries, in line with the suggestions of the United Nations, the World Health Organisation and other multinational organisations. This example can be used to understand how the pandemic may change how cities are ranked globally, bringing the position of some down while also taking the position of other cities up.

Supply chain management

This brings us to the next aspect of changing economic trends – supply chain management. The ban on international travel during the pandemic not only led to large-scale losses for airlines but also for many exporters and importers. For example, India, being the largest exporter of rice and diamonds faced a huge setback. Although the government was able to use the foodgrains for feeding the poor, exporters had to witness losses like never before. At the same time, countries which imported rice and other foodgrains from India also faced problems as their essential supply chains were temporarily cut-off. Keeping in mind that this was neither the first, nor the last pandemic that the world faces, countries are also working to improve their supply chain management systems.
However, for importers, the problem did not end when supply chains were resumed as they had to not only supply adequate amounts now, they also had to take care of the back-log of demands which had not been met during the supply disruption. Therefore, countries are also realising that managing the risk is not enough, countries need to prevent it too. Although the world is now moving slowly out of the pandemic, they are also realising that they need to work to prevent such disasters from happening again and be ready in case it does strike again.
Moreover, companies need to realise who their basic suppliers of goods are. Before the pandemic, it was thought that knowing and being in contact with the Tier 1 supplier was enough for a company. However, it was only when even the Tier 1 supplier was unable to procure and transport goods that companies, cities and countries, realised that they need to be in close contact with all tiers of suppliers. This, in turn, has also resulted in a more penetrative role of all three entitites in keeping information about the primary sources of imports of all goods. This also means that there is more
information exchange.

Circular economy

Lastly, the concept of circular economy has also received much attention post-pandemic. While the topic existed in international talks earlier, it has caught the attention of many now. Circular economy is when the products in-use in an economy follow a cycle of reuse and recycle. For example, used toothbrushes can be melted together to form a plastic chair, which can be further reformed as some other good. This helps in keeping usage and production of new materials to produce goods at a minimum and also helps in reducing excess waste to the bare minimum. During the pandemic, government, particularly urban administrations, realised the importance of proper utilisation of all types of resources. Therefore, many governments are now turning their focus towards adopting circular economy as their mantra in the hope of reducing waste production and management. Netherlands, for example, has been the leader in adoption of circular economy and has pledged to become a 100 per cent circular economy-based country by 2050. In this regard, the country has already passed the ‘Circular economy in the Netherlands by 2050’, which sets out the actions and strategies to be carried out to manage raw materials, products and services more efficiently. In 2018, as part of this plan, the Dutch government passed agendas covering five sectors including construction, which makes up 50 per cent of raw material consumption in the country. Soon, these agendas were translated into projects like the one which mandates all government buildings built after 2018 to have zero emissions and that as many recycled materials and resources as possible should be used in construction. This was a very big step which has shown significant results in the country.
The pandemic has given a chance to the world to rethink their economic plans and strategies, while at the same time, also adopt greener, cleaner plans. Only time will tell if countries will be quick on their feet to incorporate them in their policies or not.