The incoming chief economist of the leading multinational organization seeking to help integrate developing nations into the world economy said the era of globalization is probably dead.
“Without being melodramatic, Covid-19 is like the last nail in the coffin of globalization," Carmen Reinhart, a professor of international finance at the Harvard Kennedy School, told Bloomberg TV’s Alix Steel and Michael McKee.
“The 2008-2009 crisis gave globalization a big hit, as did Brexit, as did the U.S.-China trade war, but Covid is taking it to a new level."
The spread of the coronavirus has prompted governments to shut borders and raise barriers against exports of food and even health products. Some nations are seeking to redirect production of key supplies back home after factory shutdowns frayed global supply chains.
“Covid has left countries feeling that they need to be self-reliant in a way we haven’t seen before," said Reinhart, who was named World Bank chief economist on Wednesday. “We are going to see much more inward tendencies."
The blow against globalization will cut global growth and be particularly damaging for developing countries, especially those reliant on exports, she said. The World Trade Organization is expecting trade volume to fall “precipitously" in the first half of this year.
“The last time we had anything like that, you have to go back precisely to the Great Depression, where we had that kind of collapse in a single year of trade," said Reinhart. A renewed trade war with China would also have a “very negative impact," she said.
Reinhart is known as co-author, with Kenneth Rogoff, of the 2009 book “This Time Is Different: Eight Centuries of Financial Folly." The book made them go-to resources on the history of government defaults, recessions, bank runs, currency sell-offs, and inflationary spikes.