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Consequences of the Corona Outbreak: Disconnected Economies
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Consequences of the Corona Outbreak: Disconnected Economies

The coronavirus outbreak has been a substantial shock to humankind. A significant number of scientists, professionals, and politicians have begun discussing a new era after the corona outbreak; however, there is no clear expectation about this new era. Would people be more respectful towards nature? Would environment-friendly investing and business be more popular? Or would social-sharing be promoted in the modern era? Perhaps, some states would continue to ignore the harm made to nature and aim at reaching higher economic growth rates through conventional investments. Subsequently, there is enormous uncertainty.

However, there are some observable consequences of the corona outbreak today: disconnected economies in one side of the medal, and a struggle between the states to reach some critical products. No one could guess that a simple mask would be precious four months ago. Furthermore, even the most developed nations have failed at producing enough masks to satisfy their citizens' needs. The main issue regarding the production of masks, the most developed countries have fallen into a trap. Providing goods and services has become challenging while trying to save the citizens from the coronavirus threat. It has been observed that a dramatic price increase for certain products and shortages in medical supplies has increased countries' struggles.

The main reason behind these problems is disconnected economies. The globalization and outsourcing productions to the countries with relatively lower labor costs, and cheaper natural resources have made countries dependent on each other. One product might be produced by assembling parts from different countries. The multinational companies have preferred outsourcing their production to the different countries to minimize their production costs and gaining the logistic advantages in different geographical locations. However, the coronavirus outbreak has disconnected economies, and trading raw materials, semi-products, and machinery become relatively more challenging.

EXIMA

Another essential consequence of the corona outbreak is about labor in developing countries. During the corona outbreak, the multinational companies have not provided proper financial and economic protection for employees, and this situation has degraded the value of the multinational companies for the workers. Before the coronavirus, the workers would think that the multinational companies have strong and stable structures where their payments were made on time, even if the wage was around the minimum legal wage level and below the minimum wages in the developed countries. The local companies in developing countries have some structural problems that adversely influence the workers' payments and their working conditions. Thus, many workers would like to work for a multinational company to have relatively longer working contracts and better working conditions. However, the coronavirus outbreak has shown them that the multinational companies might not provide them with the desired conditions in the new era. At the same time, many of the developed countries have high unemployment rates, and the governments of these countries are expected to spend more effort to get the outsourced productions back to their countries in the post-corona time.

It is quite difficult to foresee the consequences of the corona outbreak nowadays because we are amidst the crisis. However, it is inevitable that some dramatic and radical changes to come true shortly. One of them is that outsourcing production to other countries would be more challenging for international companies. At the same time, the local producers in the developing countries become more valuable because the virus outbreak has shown that reaching products directly is essential, and the local producers can increase their production. Shortly, the locality has become more valuable. In this case, the SMEs have a new opportunity in front of them. They raise their competitive power in their local markets while continuing their international trade activities.

Stay tuned for more developments with EXIMA!

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