Transformation of the Globalization Process: Pandemic as a Game Changer?

Introduction

The goal of this chapter is to outline future scenarios regarding the process of globalization and on this basis present recommendations for the Czech Republic, which is an open economy strongly integrated into the world economy.

To achieve this goal the process of globalization and its roots have to be analysed and understood. Furthermore, special attention is given to the COVID-19 pandemic that may be a game changer when it comes to the international division of labour.

The globalization process is a complex one, intertwining economic, financial, technological, social and political spheres. The author defines the globalization as a dynamic process with technological-economic core that has ambiguous impacts on the economic, social and political sphere (Švihlíková, 2010). The roots of the process can be found the in 70´s. The 70´s are a highly problematic decade. This decade is an illustration of problems´ concentration. The Bretton-wood system of fixed exchange rates breaks down and paves way for flexible exchange rate regimes and a different position of the central banks. In the framework of the European integration first steps are made towards the goal of common currency, first in the form of the European monetary system. The breakup of the Bretton-wood system causes financial chaos and instability and questions the post-war economic order.

Further problematic features of the 70´s include the oil shocks. The aim of this chapter is not to describe the evolvement of OPEC and its position on the world oil market. Rather, the consequences of both of the oil price shocks are relevant. The oil shocks resulted in stagflation, a new phenomenon combining economic stagnation with inflation. This new combination led to a reformulation of monetary policy stance and later to a whole different view of economy and the role of the state.

The complicated decade also marks an end to the post-war recovery and the “golden” years that meant high employment, increasing living standards and high economic growth on the background of labour- creating technologies. In most developed countries we see a structural shift towards the service sector. The service sector gains prominence in the developed economies, being the most important in terms of GDP ratio or employment. However, decline in the heavy industry (mining) leads to the origins of structural unemployment.

These profound changes in the economic environment are accompanied by new technological achievements that mark a shift towards labour saving technologies. Examples could be a microprocessor, or a personal computer. The spread usage of container shipping is widely underestimated, although it was one of the key preconditions for new division of labour controlled by the transnational corporations.

The objective conditions of labour-saving technologies were completed by a profound change in economic policies. Keynesian policies characterized by progressive taxation, government interventions and strong social policy fell into disgrace. The new policy mix combined features from monetarism and supply side economics. Neoliberal policies, practised firstly by the New right (personalized by Margaret Thatcher in the UK and Ronald Reagan in the US), presented practically an antithesis to the Keynesian economic and philosophical view.

Neoliberal policies put emphasis on the market, supporting policies of deregulation, liberalization and privatization. The state and its economic role were to become smaller, as well as the position of trade unions. Less care was shown for social problems (unemployment) and more for the inflation and structural economic change. It were these policies that opened way for globalization and a stronger expansion and influence of transnational corporations. With deregulation of financial flows, it became easier to invest abroad, or to even shift parts of the production to cheaper countries. At the same time, technological achievement enabled systemic decline in transport costs, modern IT technologies facilitated control from abroad.