A New world order? The geopolitical fallout from Coronavirus.
By Michael Hartt (Partner and Head of International Affairs) and Nick De Luca (Senior Partner)
For 80 years, the complex web of multilateral institutions, governments and the private sector has led the effort to tackle the world’s pressing issues, from climate change to international trade to humanitarian crises. After more than a decade of diminished public confidence, COVID-19 means national government is back on top – and multilateral bodies and companies are on the back foot.
In FleishmanHillard’s new global COVID-19 research, 47% of the sampled public in the United Kingdom, Germany, Italy, United States, China and South Korea collectively rated the performance of national government as “excellent” or “great”, well ahead of major corporations (30%), local businesses (36%), national media (33%) and employers (29%). The high degree of confidence in governments has given them licence to be more active and interventionist than in years.
In the meantime, many of the world’s largest companies are asking for bailouts and facing strong criticism for tapping into support programmes intended to support small and medium-sized businesses and entrepreneurs. Once the health crisis has eased, restoring the economy will be the top priority, but likely on government’s terms not businesses’. There are a few areas facing significant change:
Reshaping of the rules of the economy
For a half-century, much of international trade has been governed by accepted rules built on liberal economic values. But COVID-19 is challenging both our strategy and operations for international trade, with governments grappling with the increased complexity of maintaining the supply chain in a crisis and realising how essential free-flowing trade is.
The result is likely to be a big boost in government intervention and an effort to limit exposure. One path is more restrictive and protectionist, with resources channelled into domestic industry and building redundancy into the system. This approach will almost certainly involve more scrutiny on China and greater pressure to curtail economic reliance upon it. The other is more open and globalist, with adjustments to the rules of trade to make movement of goods easier in order to restore growth. Manufacturers and service providers will need to determine which approach best benefits their business, and start to advocate for it with governments and the public.
Reconsidering the international order
With many governments emboldened by high approvals for their COVID-19 response, the virus may prove another deep blow to the organisations that have shaped our humanitarian efforts and economic systems but have faced sharp criticism recently, including the UN, EU, G7 and G20.
Even in the midst of the crisis, there are calls for radical reform at international institutions so they are fit for purpose. Defining whose purpose will be a contentious question. Some major powers may seek to diminish the power of these organisations to allow for greater national autonomy, but others will recognise the importance they play in reinforcing the ‘rules of the game’, at least most of the time. And developing countries will face the difficult choice of whether to back reforms that maintain the international support that they rely upon or look for a new direction. We also will have to assess whether large, often slow moving bodies can manage crises effectively or are better suited for recovering from crises.
Simultaneously, these organisations have built their development model on active partnership with the same multinational companies now wrestling with instability and uncertainty. Will the world’s largest companies maintain their commitments to the UN Sustainable Development Goals, or climate action, or gender empowerment, or other humanitarian goals, when their balance sheets have become a sea of red? And if not, will UN agencies and others shift their approach away from companies and towards national governments?
These observations only scratch the surface of the coming changes that will affect companies, governments and non-governmental bodies. Fundamentally, there needs to be a recognition that things are changing now – and that waiting for the moment of recovery will almost certainly be too late to shape this period of change. In particular, companies need to move quickly to redefine their needs and contributions, given they start from a reputational deficit with the public as a result of COVID-19 and, in so many cases, are asking for assistance at the same time as they offer it.
This article forms part of a wider collection of articles on ‘What next for public affairs in a post-COVID world?’ from FleishmanHillard Fishburn’s award-winning public affairs team.
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March 25, 2021