• The London Financial

What happens to the world after 2020?


By Cristiana Sandeva, MA Political Economy of the Middle East, King's College London


2020 has marked the onset of a paradigm shift, the evolution of which still has not reached its climax and the consequences of which are imaginable, but largely unpredictable.

The past year has also proven that the long-running global economic model, which was in place until national lockdowns began worldwide, was not sustainable [1].


Differently from the 2008 financial burst, the IMF is now advising countries to increase public spending, in view of lowering interest rates and a need to build back from the inside out in every country [2]. While Keynesianism may prove to be an efficient way out of the down falling economic spiral for individual countries and may show positive effects in the short-run, the long-run outcome of the Covid-19 pandemic is hardly predictable through standard reasoning.


As we know, the economic and social future of globalisation is likely to be one that has nothing to do with what globalisation has been thus far. The anti-austerity approach which is being undertaken by world economies right now, such as Biden’s recovery plan and Europe’s recovery fund [3; 4], will help recover economies in the short run. However, it may not necessarily be met with excitement and hope by the citizens of western countries.


The more consumerist, socialite, portion of the western population used to be the ones with high-pay, low-interaction jobs, which started being performed from home in 2020 and may not make it back to an office space soon - or ever [5]. Social events requiring social expenses have been discarded, as has been leisure travel, casual daily consumerism, and an overall serendipity-based middle-class approach to life. The middle class, made of degree-qualified but not the most successful individuals, is going through a social deconstruction. The working class, which works in the sectors providing goods and services to the middle class, may lose its purpose as its primary target clientele goes through structural change. The most demanded and relied upon commodities by the west have been falling in demand since 2020 [6].


As demand changes, production will change as well. Hi-tech and high-quality goods will probably be the most looked-for products in the future economic climate. There will be fewer and wealthier buyers still pursuing the lifestyle left behind by mass society, as the concept of mass is changing. Society as it was and social classes as they were are facing significant changes, and they will probably not make a comeback in the western “new normal”. The setting of “new normal” appears to be one where there always is broadband data, a restricted but solid social bubble, and more interest in media, arts and culture than in fashion, fine dining and expensive trips to exotic destinations banned from travel corridors. The “new normal” has started stepping in and will perfect its shape over the coming years. How it will develop are, as said above, imaginable but not predictable. What is deductible is that this new normal will implement a “new global”, as well: major structural changes in the hotspots of the globalised economic system are to cause structural changes to the system itself.


What may the new global look like, then?


Right now, leading economies appear to be taking an overall break from globalisation and focusing on regional funding and recovery. This is likely to temporarily prompt a system with isolated economies, centred around building themselves back up, increasing public debt and only supporting the international partners they have strong diplomatic ties with. The importance of borders will also be enhanced: with each country or bloc vaccinating its population, inbound and outbound travel to areas following a different jab provision scheme will be discouraged. This may last from a minimum of one or two years, up to an indefinite period of time, given the continuously emerging variations and the vaccine shortages, some countries are about to face [7]. The products of this transition may thus be more unified regional blocs with less focus on emerging on the classical, horizontal global market stretching from east to west throughout the northern hemisphere.


This picture seems to envision a closed system of a world where globalisation has gone extinct [8]. However, the ongoing paradigm shift is not only changing international relations but national societies as well. The current changes to the demands of middle-class citizens and their lifestyles, discussed above, are likely to be a spear that may change - and potentially switch the course of - globalisation. As the course of the pandemic will be improving, but the disease will not have been eradicated, remote working will probably remain the norm for the formerly office-based workers, and for other employees whose physical workplace was not originally the corporate office.


The highly qualified workforce, e.g. teachers and legal practitioners, is likely to keep their job, though seeing it being rearranged to fit the new normal. A more significant portion of the home-working population, who are educated but do not hold essential qualifications, are likely to be slowly replaced by people who can do exactly what they do, at the same exact time of day, in return for a much lower paycheck - this may result in new, vertical globalisation relying on outsourcing by northern hemisphere companies to southern hemisphere countries with lower living costs and based in the same meridian time zone as the outsourcing employer.


In a potential vertically globalised world, capital flows would be from north to south and vice versa, more than from west to east and vice versa. The living preconditions in southern countries are more favourable to the “new normal” lifestyle and values discussed above. The main issue with surviving in southern environments has been unemployment, which has dragged hundreds of thousands of people towards northern destinations, where they could have financial stability in exchange for inadequate qualities of climate, food, and life. If globalisation adopts a vertical model of remote outsourcing, shown to be able to function throughout 2020, unemployment in economically challenged countries with a tradition of emigrating population may see a major improvement. This would also benefit employers in rich countries who would spend less on rewarding their employees for their work. In the short run, globalisation appears to be about to attend its burial, but in the long run, it may just join the world’s paradigm shift and become vertical instead of horizontal.


The global north would lose in population density and urban overcrowding would see an ebb period, which would also benefit the environment. With a more accessible lifestyle and more favourable life conditions, the global south would thrive instead of suffering strife. The north would be the administrative hub of capital flows, but investments would be directed towards the south, both in the forms of payments to individuals and of payments by individuals. Two questions emerge at this point - would such a “new global” be advisable, and if it were to happen, would it be durable? The world system is undergoing a paradigm shift, and this is one of the many scenarios which may or may not stir the wheel towards the new - normal, the new global, and the concept of “new” itself.



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References:

1. https://unglobalcompact.org/academy/sustainable-finance-and-the-future-of-the-global-economyhttps://www.ft.com/content/4041ea03-996b-468b-a7ab-ee15405505d4


2. https://www.ft.com/content/4041ea03-996b-468b-a7ab-ee15405505d4


3. https://joebiden.com/reopening/


4. https://ec.europa.eu/info/strategy/recovery-plan-europe_en


5. https://www.cnbc.com/2020/08/20/its-month-six-of-remote-work-for-many-and-theres-no-end-in-sight.html


6. https://www.worldbank.org/en/news/press-release/2020/04/23/most-commodity-prices-to-drop-in-2020-as-coronavirus-depresses-demand-and-disrupts-supply


7. https://www.ft.com/content/ac5e5ef8-bccb-482b-9f8d-0dab5cac6f9a


8. https://www.ft.com/content/3c352034-fa6e-4b41-b10b-cfb5666d6a75

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