Geo- Economics in the Post-Pandemic World
Archana Gupta – Student, Kautilya
The beginning of the 21st century was seen as a great restart for humanity bruised by World Wars and the Cold War. New institutions were set up and commitments were made to conserve a relatively balanced world order. The third industrial revolution was set to enter many developing nations and potentially transformed the economy, governance, and society.
However, the ascendency of Asian powers has given a new dimension to the entire debate on Geopolitics vs. Geo-economics. The development of such debate brought more focus to challenges in the field of Geo- economics and how it has become a concern for public policy transnationally.
According to the World Economic Forum, Geo-economics is the application of power politics through economic means instead of a traditional battlefield. It has emerged as a new tool for passively attacking nations wherein daily lives are hit. The adverse effects are reflected through respective national incomes and inflation. The world is going through a confluence of calamities in terms of economic sanctions, traditional war, pandemics, and climate change. All of these factors call for collective action to save economies from crumbling down.
The primary defense to save economies has resulted in the seeming retreat of globalization. What began with 25 per cent duties on Chinese goods by the Trump regime has taken the form of Trade Wars. Both parties imposed counter-economic sanctions. The situation got further aggravated by the COVID-19-induced lockdown of economies. While the countries started looking inwards, economic fragmentation increased. It has affected technological transfers, world investment, and exchange rates.
These challenges unraveled current supply chain constraints. Economies struggled to meet demands for key pharmaceutical and health products. Consequently, the global supply chains got reconfigured during the pandemic (e.g- alternative sea routes, and more warehouses). The ongoing war has especially hampered the supply of semiconductor chips and pharmaceutical products. Since the world seems more prone to such shocks in the coming days, the time demands a framework for transparent policies on the freedom to diversify imports and to work on alternative supply routes.
Another emergent trend is the growing interest in bilateral and mini-lateral trade systems. Brexit and India’s withdrawal from Regional Comprehensive Economic Partnership were significant geo-economic events. There is a growing debate on multilateral trade treaties that often subjugate domestic economic concerns. With the growing consensus for like-minded minilateral free trade pacts, there will be more economic decentralization. It is likely to lead to the phenomena of what Ian Bremmer refers to as the G-Zero era. Hence no one country will rule the global economy. There is a need to formulate policies where parties have greater negotiating capabilities and the freedom to establish trade relations without fear.
Russia- Ukraine armed conflict, China’s interference in the South China Sea, and the fall of Afghanistan to non-state actors are not just isolated events. All of these have caused severe economic shocks in terms of food shortage, oil and gas prices, defence technology transfers, and new trade equations.
Even though Russian oil and gas have become cheaper for many nations, factors like economic sanctions and choked maritime trade routes may hamper economies in more than one way. The thrust on phasing down fossil fuels requires having robust supplies of key resources like Lithium, silicon, and nuclear fuels. The supply of such elements is highly skewed, thus directly impacting import bills. It has served as a ‘weapon’ to bring down economies. So geo-economics will shape the orientation of fuel-based economies on key issues of market supply and their distribution at just prices.
Data is the new oil and right now, it has been monopolized by a handful of technology giants like Google. Ownership and access to data provide companies an upper hand in controlling market and customer preferences, thus directly affecting people. The regulation of big data companies has started on an experimental level. Going forward, these regulations will affect geo-economics in terms of business locations, regulatory provisions, etc. Refined tax policies will also be needed to prevent a shift to tax-haven countries.
With the Fourth Industrial Revolution unfolding, virtual systems and devices run critical infrastructure across the world. Cyber security concerns have descended along with it. It has become a convenient tool for the revisionist powers of the world. Cyber attacks on critical infrastructure and private firms can adversely affect developing economies, the most recent being a power breakdown in Mumbai, and ransomware attacks on healthcare institutions. It may lead to breakdowns of sectors if not reached on a collective consensus to prevent state-backed cyber-attacks.
Thus we are living in times where trade and economies define the geopolitical strength of a nation. Trade, investments, and economic sanctions have become a part of war without weapons. India especially needs to build capabilities to shape geo-economics in its favor to achieve a $5 billion economy.