The virus that shut down the world
By ANTHONY FAIOLA | The Washington Post | Published: June 27, 2020
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Not long ago, to step through the lushly planted Green Wall at Singapore's Changi Airport was to walk into an ever-more-globally connected future.
Millions of passengers each month rushed to and from destinations throughout the world via the most advanced travel experience on Earth — traversing Changi's new $1 billion terminal meant checking in, dropping bags and boarding flights with just the touch of a few buttons.
Long layover? Good problem. You could linger at the airport's Changi Jewel, with its jungle canopy and 131-foot Rain Vortex, the world's tallest indoor waterfall. Wander up to a rooftop swimming pool and plane spot. Or leave the airport for a free tour of the ethereal towers of the city-state at the center of the world's financial and trade systems.
But like fire through Notre Dame, the coronavirus pandemic of 2020 has now silenced this cathedral of interconnectedness — turning Changi into an emblem of what analysts say could now be a lost decade of travel, trade, investment and migration as decades of globalization give way to a new era of global distancing.
"In the absence of warfare between major powers, we have never seen anything like this," said Adam Posen, president of the Peterson Institute for Economics in Washington.
At Changi, one of the world's great travel hubs, traffic plunged from 5.9 million passengers in January to a mere 25,200 in April — a 99.5 percent drop. The number of airlines serving the airport collapsed from 91 to 35. Two of the four main terminals have been temporarily mothballed; plans for a fifth have been set back at least two years.
"Industries that depend on travel, like aviation, hotels and tourism, will take a long time to get back on their feet, and may never recover fully," warned Singaporean Prime Minister Lee Hsien Loong.
But travel is only one way that the coronavirus is disrupting global interconnectedness. The pandemic is interrupting the flow of workers, money and goods that increasingly bound the postwar world, helped to lift more than a billion people out of poverty since the fall of the Berlin Wall and delivered unprecedented stability and prosperity to much of the planet. To encapsulate: U.S. investment in China raised demand for soybeans that enabled Brazilian farmers to buy German cars.
Rising economic nationalism was already chipping away at globalization before the first patients in Wuhan, China, began to fall ill in December. But the coronavirus, which has sickened at least 9.6 million people and killed more than 487,000, is now reshaping long-standing cultural, economic and political relations in an increasingly polarized world.
"The pandemic has made it so that you now have an additional excuse to block human-to-human contact and intellectual and economic exchange," Posen said. "It's a corrosion of globalization, but it's also an acceleration of a realignment that was already happening."
The golden era of globalization brought prosperity, but it also brought hubris. The Great Recession of the late 2000s, when frantic over-borrowing by people and governments, combined with cheap, easy and toxic financial instruments and weak regulation, led to a collapse that hollowed out personal savings and national reserves. The decade that followed saw a resurgence of protectionism; global trade patterns and foreign direct investment never really got their groove back.
But that might be nothing compared to what comes next.
Few are suggesting a complete unwinding of globalization. The pandemic's substantial but relatively shallow hit to shipping, as compared to travel, show a world of people, companies and countries still prepared to do business with one another. Yet even as rebounding stocks and reopening businesses suggest a desire for a rapid return to normality, the way we travel, work, consume, invest, interact, migrate, cooperate on global problems and pursue prosperity has likely been changed for years to come.
Passenger numbers suggest what happens when the world freezes in place.
The pandemic has impacted global travel like no other event in history: By spring, every country in the world had thrown up some sort of entry restriction, according to the United Nations World Tourism Organization. In April, international air passenger travel fell to levels not seen since the 1970s.
Analysts now project a record year-over-year drop in international tourist arrivals of as much as 80 percent. Compare that to the Great Recession of 2009, when arrivals dropped only 4 percent, or the SARS pandemic of 2002, when they fell 0.4 percent.
Chile's LATAM, Colombia's Avianca, Virgin Australia and Britain's Flybe airlines have all declared bankruptcy. But the collapse of travel endangers not only airlines and hotels — it also threatens conservation efforts in places such as Namibia, for example, where tourist dollars allowed a poor nation to maintain vast natural preserves for the world's largest population of black rhinos. It threatens cultural exchanges, such as the semester- and year-abroad programs that send hundreds of thousands of American students overseas each year, now suspended, postponed or canceled.
And it threatens business and other communications. Daniel Runde, director of the Project on Prosperity and Development at the Center for Strategic and International Studies, recalled a recent Zoom call that brought together 20 people from the United States, Brazil and Colombia for a conference on the future of the Amazon rainforest.
"There is no pulling people aside before the meeting to work things out," he said. "You can't pick up on body language from a grainy video image. Nonverbal communication is lost, and there were tensions on the call, maybe because of it.
"Afterwards, you can't just go upstairs and finish the conversation. It feels like you're missing 50 percent of the information you need to do your job."
Across the globe, third- and fourth-tier cities — Cordoba, Argentina; Krakow, Poland; Austin, Texas — face a long, slow climb back to full connection with the wider world.
But this is about more than just air travel. Vehicular and pedestrian traffic at U.S. land borders with Mexico and Canada fell in April to their lowest levels on record. New barriers that have shot up on the once-open borders of the European Union might prove far more difficult to take down.
"What it does is increasingly isolate, and leads us to insular protectionist attitudes across the globe in everything that we do," said John Grant, senior analyst for the British travel data provider OAG. "All of the wonderful learning and sharing, of history, of knowledge, of multiracial sharing of cultural experiences, is heading for a setback."
National lockdowns have also slowed the irregular flow of people across borders — undocumented immigration. On the U.S.-Mexico border, the number of people apprehended or expelled by the U.S. Border Patrol fell to 15,862 in April, down 47 percent from March — the largest one-month drop in at least 20 years, according to the Pew Research Center. In one striking move, Saudi Arabia announced this week it would slash the number of people allowed to make the Hajj, the annual pilgrimage to Mecca, to no more than 10,000. The pilgrimage, which able-bodied, practicing Muslims are expected to make at least once in their lives, drew 2.5 million people last year.
Data collected by the International Organization for Migration at 35 key transit points across West and Central Africa showed a decrease in migration of 48 percent from January to April. The number of irregular border crossings along Europe's main migratory routes fell by 75 percent in April to about 1,470 people — the lowest number since Frontex, the European border agency, began collecting data in 2009.
Some of those drops are proving to be temporary. Irregular arrivals into Europe, for instance, bounced back up to 4,260 in May — still unseasonably low, but a number that suggests that in some developing countries, rising food insecurity is beginning to weigh more heavily on people than the risks of crossing borders in the midst of a pandemic.
The irregular flow could grow as legal routes become more complicated. Wealthier nations have closed migration and asylum offices and consular services, worsening backlogs that in some cases already ran into years. At least two countries — Japan and South Korea — have suspended the validity of previously issued visas.
Some Chinese students are suddenly facing new obstacles to American educations, and President Donald Trump's move to halt many new green cards and visas for foreign workers, although said to be temporary, has clouded the immediate futures for Swedish advertising executives and Brazilian jujitsu masters seeking to build new lives in the United States.
As poor migrants languish in unemployment or return home, the World Bank expects remittances to low- and- middle-income countries to decline by almost 20 percent this year — the largest decline on record. That virtually assures more of the world's poorest families will have less access to food and medicines. As a share of GDP in those nations, remittances this year are set to fall to their lowest level since 1999.
Behind those numbers lies unspeakable hardship. Venezuelan migrants, refugees from a humanitarian crisis that has placed them at the bottom of Latin America's socioeconomic ladder, are also heading home, after finding themselves jobless in neighboring countries suddenly mired in recession. Luis Medina, a 21-year-old Venezuelan laborer, fled the collapsing socialist state last year for Guayaquil, Ecuador. He managed to secure a job as a house painter; the majority of his earnings — $160 a month — went home to his mother, for food, and to aid her battle against cancer.
When the coronavirus ravaged Ecuador, the country locked down, and Medina's work dried up.
"I could no longer afford the rent or the food," he said.
He called an end to his immigrant's dream. Lacking even the money for a bus ticket, he set out in mid-March on the 1,700-mile walk home on foot.
Two months later, he's still walking.
"I'm returning with empty pockets," he said from Colombia, with 900 miles left to go. "The future is uncertain, and I'm afraid. For myself, but especially for my family."
Perhaps more painful for the global economy is the slowdown in the flow of capital, goods and services. World trade is projected to fall 13.4 percent this year, its steepest drop in at least 60 years, kicking volumes back to 2014 levels. Foreign direct investment in emerging markets — the new bridges, roads, factories and ports that bring the developing world a chance for prosperity — is expected to plunge by about 20 percent, to levels not seen since 2006. Foreign direct investment as a share of GDP is expected to fall to the lowest level since the early 1990s.
The massive Vaca Muerta project, projected to create 22,000 jobs and double Argentina's oil and gas output in six years by tapping into the world's second-largest shale deposits, was clouded by the country's economic woes before the pandemic hit. But after lockdowns sent global oil prices plummeting, foreign firms are rolling back planned investment.
Developing countries are particularly worried about a possible pullback in Chinese investment, one of the main drivers of infrastructure projects in emerging markets. Analysts cite a massive port planned for Lima, Peru, and a railroad project intended to link inland farmers and miners in Brazil's impoverished Bahia state to an Atlantic port and global markets.
The Brazil project "requires a lot of financing and it's not begun to be constructed, and there are plenty of reasons to not begin it," said Margaret Myers, director of the Asia and Latin America Program at the Inter-American Dialogue in Washington. "When you look at the various risk factors, those are the kinds of projects most likely to fail now."
Announcements of new investment projects and cross-border mergers and acquisitions both dropped by more than half year-over-year in the first months of 2020, according to the U.N. Conference on Trade and Development.
The pandemic is threatening international cooperation on global concerns. Argentina, plunged into a brutal recession and self-isolating, has halted the rollout of alternative energies to fight climate change indefinitely. The International Energy Agency forecasts that the amount of new renewable electricity added to global capacity will decline by 13 percent in 2020, the first deceleration since 2000.
Global distancing — of people, of goods, of capital — is deepening the brutal economic impact of lockdowns, fueling soaring joblessness and weakening demand. The global economy is suffering its deepest recession since World War II, according to the World Bank, with most countries experiencing downturns at one time since 1870. It's the fourth deepest recession in the last 150 years, twice as deep as the Great Recession of the late 2000s.
Up to 100 million people globally are poised to fall into extreme poverty, the first increase since the Asian and Latin America financial crises of the 1990s, and the biggest increase since the World Bank began tracking the number in 1990.
"Whatever progress we have made over the past decades, we might end up losing that progress," said Ayhan Kose, director of the Prospects Group at the World Bank. "There is no way some of the gains won't disappear. The threats to globalization are quite important."
Even before the pandemic, growing economic protectionism after the Great Recession and the return of trade wars — chiefly, between the United States and China — had begun to clog the pipes through which goods, services and capital flowed. Now, in the shadow of covid-19, some wounded nations are moving as never before to protect their own industries.
Italy has long scrutinized foreign investments in its security, defense, transportation and telecommunication sectors. But as the country languishes in a brutal recession and mourns its dead, an emergency decree has vastly expanded the government's authority to veto meaningful foreign investment in any firm working in electricity, water, health, media, data collection, aerospace, elections systems, banks, insurance, robotics or biotechnology.
"There's a need to raise a shield against predatory colonization, both from countries of the East and European neighbors," said Adolfo Urso, a senator of the right-wing Brothers of Italy party.
The coronavirus, he said, has changed the very definition of what constitutes a critical national asset.
"Say the vaccine industry is threatened by hostile takeovers," Urso said. "Well, today, that's as strategic as any defense company."
The new restrictions have raised an alarm among Italian industrialists, who say their country's long-stagnant economy will need more foreign capital, not less, to emerge from this crisis.
"That's the whole of our economy right there, in that list, with the exception of Giorgio Armani's jackets, and some Brianza-made chairs and sofas," said Antonio Calabrò, deputy head of Assolombarda, a Milan-based group of industrialists. "It's the opposite of open markets."
At the onset of the pandemic, the sudden worldwide need for ventilators, masks and other personal protective equipment, coupled with the inability of companies that make everything from tractors to computers to secure parts from shuttered factories in China, caused a global mad dash to scoop up whatever substitutes could be found — often at whatever price. As factories reopen and supply chains stabilize, the experience has left countries and companies traumatized, empowering calls to bring manufacturing jobs home — or at least to spread them among more and mostly closer countries.
That could mean a new set of winners and losers. Pressure will increase on some companies to shift away from China, where growing wages and land costs have already moved jobs to lower-wage countries such as Vietnam and Indonesia. For companies targeting U.S. markets, Mexico — which sends goods across the border by land, sea and air — could see more jobs.
Yet actually repatriating globalized jobs can be far more difficult than politicians tend to portray. Carlton Solle found out the hard way.
G95, the company Solle runs just outside of Atlanta, should have had a corona moment: It makes apparel — hoodies, scarfs — fitted with a special filtration technology ideal for pandemic times. When his Chinese suppliers were locked down, Solle attempted to move production to Michigan. The effort quickly bogged down in production delays, poor quality and soaring costs.
The cost of making the company logo alone jumped from 20 cents in China to $3.40 in the United States. Solle says he was forced to raise prices, and his profit margin still took a hit.
He restarted production in China in May.
"At the end of the day, the thing the Chinese do really well is know how to mass-produce items," he said. "Trying to shift to the U.S. was a monumental task for us as a company. I don't know. We're going to keep looking for options in the U.S. and other countries nearby.
"We'd like to do more here, but I just don't know."
The Washington Post's Stefano Pitrelli in Rome, Tom Brenner in Singapore, Marina Lopes in Watercolor, Fla., Ana Vanessa Herrero and Mariana Zuñiga in Caracas, Venezuela, Simon Denyer in Tokyo, Yuan Wang in Beijing and Regine Cabato in Manila, Tim Meko, Armand Emamdjomeh and Chris Alcantara contributed to this report.