Question

"Insofar as the world economy was already on a fragile, unsustainable path, COVID-19 clarifies the challenges we face and the decisions we must make. The global economy will be shaped in the years ahead by three trends. The relationship between markets and the state will be rebalanced, in favor of the latter. This will be accompanied by a rebalancing between hyper-globalization and national autonomy, also in favor of the latter. And our ambitions for economic growth will need to be scaled down."

1) Which growth model will developing countries have to choose after Covid-19 pandemic? Which growth theory will be the most explanatory to this model? Explain.

2) How will the role of the state and globalization be affected after the pandemic? Explain.

3) How will international trade exist in the global economic order to emerge?

Answer 1

1) The impacts of the Covid-19 pandemic is global and has already affected most of the global economies. There have been effects like complete lockdown which caused the industrial purposes to be shut down and thus had much impacts on the production and labour force of a nation and its economy. With much impacts already caused to an economy, some prudent economic models have to be analysed so that the future economy in the post-covid scenario could be varied to an advantage for most of the economies

                                    In the post-covid scenario, it is better to depend on the Solow-Swan economic model. The model suggests the how a long-run economic growth could be maintained with due analysis of the impacts of capital accumulation, labour, productivity, technological progress etc. In the post-covid scenario, although the international trade practices would be on a reduced scale in the short-run, a long-run economic model has to be relied upon so that the lost economic growth is brought back. The Solow-swan model has a focus on the neo-classical economic growth theory and thus it can be relied upon to find the effects of increasing labour activity in an economy and how well the economy could be brought back to a stable level in the long-run. It is also an extension to the Harrod-Domar model and hence it would represent the older model also with the new addition of labour as a factor of production and the capital-output ratio. The major analysis of the Solow-swan model is that a stable economy in the long-run is a result of higher technological progress and in this scenario, we can see that a higher progress in the health-based technology is essential for the future economy. Hence, the above model could be sufficient to plan the future economy in the post-covid scenario.

2) The following are expected to be the changed role of state and the impacts of globalization in the post-covid world

· The state would have to focus more on the health sector of an economy and hence there should be more budgetary allocations for such related sectors

· The budgetary allocations for production sectors would have to be reduced at least in the short-run economy

· There could be more focus on the local economy and its growth which would have serious effects on the international trade in the short-run

· The interest rates would remain low in the near future so as to attract investments and improve the production in an economy

· Global markets would have to be satisfied with many stranded local markets until economic stabilisation is achieved across the globe

· The local labourers could gain an advantage of the local economic progress and there could be a substantial change in the work force sectorization of the economy

· There could be serious changes in the market products with more focus on the health of the society and thus such products could see an increase of business in the post-covid economy.

· The world could see changing cultures and globalization effects could be lower in the near future

3) With the restrictions imposed on the international travel and related affairs, the pandemic is expected to cause serious effects on the international trade in the near future until global economic stability is attained. The following are expected to be the changes in the international trade scenario in the emerging global economic order

· International trade would have to be limited to trade in essential commodities at least for some time till a control over the pandemic and its spread has been attained

· There could be localization in many products which could hamper the international movement of such products

· With emerging domestic economies, many of the international business could get stalled in the near future

· With the threats to the health of an economy, international tourism would have the most negative impacts and the related sectors of business could be seriously affected in the global scale

Thus, considering the above facts, it can be understood that the international trade would exists, but it would require more time for the international trade to get back to its older levels.