Few would have imagined that pigs could rock the foundations of globalization. But the news coming out of Mexico, and now countries across the world, has not only put the world on a health crisis alert—it has derailed the already sluggish global economic train as well.
Globalization is an economic and political reality, and we have embraced the benefits of the interconnected world in all aspects of our lives. Much of what we buy or sell has a global component to it—we eat fruits grown in Latin America, buy clothes manufactured in Asia, and study in foreign universities.
Now our global economy is at risk, at least temporarily, from the spread of the swine flu virus. The WHO has announced that it could become a global pandemic; the World Bank estimates that a flu pandemic could cost $3 trillion and could result in a nearly 5 percent drop in world gross domestic product.
What are the initial signs of a shutdown in global activity? For starters, global tourism could face a major decline as countries started issuing travel advisories to the places with the Swine flu cases. Global trade flows could be hurt next. Any delays will be costly and could only deepen the recession in countries that rely on trade as a significant portion of their Gross Domestic Product.
Markets across the world have reacted sharply too: the Mexican peso was down 3.5 percent against the US dollar. Travel and tourism stocks took an immediate beating: Lufthansa, the German airline was down 9 percent, and United Airlines was down 11 percent. Oil prices fell more than 2 percent to close to $50 a barrel, as investors anticipate significant slowdown in global trade flows.
Countries across the world have benefited significantly from open economic exchanges and open borders. Much of what the nations do now will give us a glimpse of our future responses to such crisis—as well as what we as participants in a globalized world will do, on a personal level, when faced with crises that require global coordinated responses.