This blog is about the effect the coronavirus is having, and will have, on our lives, on world trade and on the long-term effects it may have on the way we live our lives.
This is an image showing what the coronavirus looks like. As a virus, it’s named SARS-CoV-2. The name COVID-19 refers to the disease it causes.
There are seven corona viruses that affect humans including the common cold, and many more affecting animals, birds and bats.
The current virus has basically caught the worldwide medical authorities napping, because of its rapid spread. As of today 08 Mar 2020 the worldwide death toll is about 3,500 with the number of positives at over 100,000, but these numbers will probably rise dramatically peaking sometime around June.
Compare this with deaths from the influenza virus (flu) – up to 5 million severe cases resulting in up to 650,000 deaths every year. And the Spanish flu epidemic (1918) which infected a third of the planet’s population, that is about 500 million cases, with a death toll of up to 50 million.
This pandemic will have an impact on the drive towards globalisation
This pandemic will have an impact on the drive towards globalisation, which uses modern technologies to run the world. The problem with this is that every part of the system depends on every other part doing its job properly and on time, and a breakdown in any one place can bring the whole system to a juddering halt.
Enter the SARS-CoV-2 virus and the illness it causes COVID-19.
For many years, western countries and especially the corporations have taken advantage of cheap labour in the developing world. They have ‘exported’ our jobs to these countries, especially China.
Even though we still make, or at least assemble, manufactured goods in the west, most of the components are made in the Far East, again, especially China. These components are shipped to the west, usually in containers carried in container ships, using something called the ‘Just-In-Time’ inventory. (More about that below)
Enter the container ship
Until recently this was the largest container ship afloat, although another ten of these have been ordered. It is a quarter of a mile long (400m) and can carry the equivalent of nearly 20,000 containers. Yes, that’s 20,000 not a typo.
There are hundreds of large carriers, with a total of five thousand container ships of various sizes plying the ocean’s trade routes.
Now, what’s this got to do with our virus problem, you might ask?
This is where the ‘Just-in-Time’ inventory comes in.
All manufacturing plants and even our local supermarkets have adopted a way of reducing costs by doing away with onsite warehouses and stockrooms. What’s on the production line or on the shelves in the shop is all there is. The various sites rely on components or stock being delivered, you’ve guessed it, ‘just in time’.
Now, imagine supermarket chains having to arrange for the delivery of food items from around the world to arrive at the stores when needed. (There are about 7,000 large supermarkets in the UK). This involves farmers, shipping, aircraft, truckers etc – tens of thousands of people all having to carry out their functions to a high standard and absolutely on time.
It’s even more critical if we consider manufacturing plants, say car assembly plants. They require the components to be delivered to the plant an hour before they are required on the production line – that’s calling it very close.
The China – Europe trade loop
The container ships which operate between China and Europe form a loop or chain which is about 26,000 miles long with up to 150 ships afloat at any one time. The journey time varies but is about 8 weeks, one way.
China went into lockdown because of the coronavirus on or about 23 Jan 2020, so we can assume that the last container ship to leave China with containers full of goods for Europe was in the last week in January, and it should arrive here in late March.
This means that we haven’t felt the effects of the Chinese lockdown yet. The chain has broken – the ocean behind that last ship is empty.
As of today’s date, the Chinese authorities have just begun to lift the lockdown in some parts of the country. However we have no idea how long it will be before the factories are producing goods again.
If we were being optimistic, we could assume that ‘normal’ trade may be restored by the end of April. That would mean that first ships would reach Europe 8 weeks later, the end of June.
From the end of March to the end of June is three months – three months without deliveries from China. Many companies will not be able to survive. There may be mass closures, job losses, workers unable to pay their mortgages or their bills. You may think I’m being alarmist, but it’s already starting in Italy.
Where else will be affected?
The answer is ‘Everywhere’. Consider food. As a nation the UK imports about 60% of its food, from France, Germany, Italy, Australia, New Zealand, South America, Africa, the Caribbean, the Scandinavian countries, Iceland, Canada, North America – I’ve probably missed some out.
Not all will cause long delays, but we don’t know how these countries will be affected by the virus – whether they will have sufficient labour to grow, pick, pack and transport the food, or how distribution within the UK will be able to operate.
As I suggested in the first part of this blog, globalisation is a ‘knife edge’ system, where the slightest break in any of the connections can lead to a total breakdown of the whole system.
Whatever the outcome of this pandemic – even if it not too severe – we are going to have to consider it to be a major ‘wake up’ call. A similar situation could result from many different causes. A solar storm could wipe out the electronics in our world-wide computer systems, in the satellites that support them with information.
In 2003 a bug in the software of an alarm system in an electricity generating station in Ohio caused a loss of power covering the whole of the North East United States and Ontario in Canada, affecting 55 million people, some of whom had to wait two weeks for their power to be restored.
Tiny breakdowns can have massive effects in globalised systems.
A virus particle, and it started off from one, too small to see with the naked eye, can bring the world to its knees. We must learn from this. We must rethink how we run this world.
We must begin to move towards ‘Localisation’ and away from ‘Globalisation’. We must start by making our country more self-sufficient, especially with regards to food production. In the UK we can start this process now that the UK has left the EU, which imposed many quotas on what we could produce.
With the political will, change is possible, but it will still be a long, long road.
Whether or not we can achieve the necessary changes remains to be seen.
Looking at the upside, the virus is no respecter of money or position. The wealthy, the fat cats, the deep state controllers, they will be hit too, not just the poor.
Perhaps this will wake them up. I hope so, but I won’t be holding my breath.
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