COVID-19 & the Global Supply Chains

Author Name: Hassan Mujtaba       19 Nov 2020     International Economy

The year 2020 has been characterized by great tumult: political upheavals, polarized elections, economic downturns, lockdowns, and job layoffs. In fact, in most cases, we can establish direct causation between the COVID-19 pandemic and the lamentable political-economic outcomes of the year, with any divergences from this trend arising in large part due to better leadership, good governance, and efficient administration.

Despite certain heterogeneities in outcomes—which are outliers at best—the downward spiral of all economic variables has been widely noted, with the developing countries bearing the brunt of this corona-induced recession. Indeed, according to a recent communique of the World Bank and the International Monetary Fund (IMF), the decline in global output due to COVID-19 has been the worst in the last eight decades, i.e., since the Great Depression. Little wonder then that the global Gross Domestic Product (GDP) is projected by the IMF to contract by 4.4 percent in the last quarter of FY 20, with food inflation in double digits, and unemployment at record levels with 400 million people who have lost their jobs directly due to COVID-19.

Although countless journal articles, policy briefs, and op-eds have focused on the fiscal and monetary ‘levers’ that might be used to jumpstart the pandemic-ridden economy, most have not touched upon the interlinkages between COVID-19 and Global Supply Chains (GSCs), especially of multinational agribusinesses.

On the surface, GSCs and a zoonotic virus may appear as disparate subjects, but in reality, they have a deeply intertwined connection that is not perceptible at first glance. After all, the supply chain is a complex process that involves different people, businesses, processes, production nodes, logistics, etc., the sole aim of which is to produce a good/service and deliver it to the final consumer. With the acceleration of globalization, supply chains have also become more intertwined, resulting in a convoluted web of commercial activity over which no business or multinational corporation (MNC) has complete control. In fact, a recent study conducted at the University of Munich revealed that a single large MNC has on average a whopping 1.25 million suppliers. The entire process is so intricate that no CEO can accurately trace the flow of capital of her MNC’s supply chains. For example, when the coronavirus started spreading early in the first quarter of 2020, 51,000 MNCs had a direct supplier located in Wuhan, while 5 million companies had at least one indirect supplier physically located in ground zero. By February, almost 90% of the GSC network was affected, with many MNCs experiencing major bottlenecks in supply and timely delivery of goods and services.

Since the start of the 21st century, corporate agribusinesses have been expanding aggressively in the Least Developed Countries (LDCs), mainly motivated by cheap labor and natural resources as many of these countries are naturally endowed with vast swathes of fertile land, forests, rivers, natural lakes, and mineral resources. The lust for natural resources and business expansion is such that it galvanizes these agribusinesses to go deep inside the forests where they come into contact with wildlife—often displacing them—thereby raising the probability of contracting a zoonotic virus strain. If a virus breaks out in this manner, it quickly spreads along the routes of supply chains, which because of their transnational nature, facilitate its speedy and large-scale spread. Thus, the virus jumps ship from the depths of the forests to the world’s largest cosmopolitans in no time!

Although researchers are not unanimous about COVID-19’s origin, what we do know is that it is a bat virus, that likely spread via the illicit trade of pangolin, which in all probability acted as an intermediary.

It is a pity, however, that most scientists, policymakers, and other experts—particularly those in the West—ignore this dialectical connection between global capital and the zoonotic viruses and seek other plausible explanations. For instance, they conveniently choose to blame the people of the ‘Orient’ for their exotic cuisine, cultural preferences, lack of education, and overpopulation. The American epidemiologist Rob Wallace, in his prophetic book titled Big Farms Make Big Flu written in 2016, termed this as the view of ‘Absolute Geographies’ which identifies China, India, Pakistan, Vietnam, etc. as hotspots for future virus outbreaks. However, if one traces the flow of capital or money—the view of ‘Relational Geographies’—then suddenly New York, London, Singapore, and Hong Kong emerge as hotspots for potential viruses as these cities are the international centers of global capital and home to the headquarters of nearly all large corporate agribusinesses.

Thus, if humanity as a whole is serious about curtailing the outbreak and spread of future zoonotic viruses, then it is imperative to devise a mechanism to regulate international capital while simultaneously imposing greater restrictions on the destruction of forests and displacement of wildlife. Left to its own devices, global capital will continue to destroy the planet while privatizing the profits and socializing the costs. We should realize that, it is not the virus that comes to us, but we that go to the virus.

 

Hassn Mujtaba is a Researcher in the Economic Affairs section of Centre for Aerospace & Security Studies (CASS). The article was first published in The Business.He can be reached at cass.thinkers@gmail.com.