[ANALYSIS] The Entropy and Multiplication of Risks: The Last Period of Globalization?

[ANALYSIS] The Entropy and Multiplication of Risks: The Last Period of Globalization?

Joaquin Gomez Amato
Cover by TNGO Illustrator Sara Massidda

Since 2008, the international system has experienced a series of economic, political, and health-related setbacks. Today, the relationships within this system are critical for understanding where and what the future trends may be. The 2008 financial crisis, the proliferation of viruses, and the increasingly fragile democracy in many Western and Latin American countries are important lessons to consider and analyze in conjunction. 

Given the widespread confinement that the start of the COVID pandemic has caused, although later the experimentation and the constant dilemma of governments between opening or closing their geographical limits, prompts us to reflect on the repercussions within the world economic architecture. An outstanding pattern, subject to this endless coming and goings was the blockade and the inoperability of the main world harbor. The traffic jams were such that maritime transport (which brings together almost 80% of global merchandise) disrupted the global economy.

Schematically, the international system has been signed for “political (the emergency of illiberalism at the heart of the stakeholders’ system), geopolitical (the rivalry between China and the United States), and entropic tendencies such as climate change and CGV’s disruptions” (Actis 2021) that have brought on several important consequences. Recent events, such as the debt crisis of one of the most important Chinese real state agencies, Evergrande, strong fluctuations in prices due to a series of lockdowns in ports of vital importance to the world economy, such as Shanghai, the energy crisis in Great Britain, and considerable increases in oil costs will have important impacts on future costs and projections.

Where are we going? How should we analyze it? When can we track the origin of this kind of globalization? Can the COVID outbreak help us understand? 

COVID-19: A Catalyst of Pre-existing Tendencies 

There is nothing like a crisis to clarify things.

Panith and Guidin (2015)

If the international system has suffered several changes – for example, the drop in trade volume, environmental impacts, and the regionalization of production – the powerful COVID-19 outbreak could bring important lessons to analyze. The Green Swan – “disruptive events linked to environmental, sociodemographic and environmental health imbalances” (Actis 2021 and BIS 2020, 3) – is a useful conceptualization that can help us understand how uncertainty is the rule in this current international system.

The COVID-19 outbreak has been wreaking havoc in different but pronounced ways throughout the entire world. The virus has introduced what former US Defense Secretary Donald Rumsfeld once warned about: the importance to differentiate “the known unknowns and unknown unknowns events” (Actis and Creus 2020). In short, the virus is “a chronicle of a pandemic announced” (Sarukhan 2020). COVID-19 is a phenomenon we know very well from near and distant historical experience, but global society, despite previous studies on the probability of the outbreak of a new epidemic, was not prepared in terms of forecasting, calculation, logistics, and capacity to face the crisis. 

There have been several epidemics that have greatly impacted the world, as we can see in Graphic 1, and concern for future pandemics has come from several sources. One example is The Global Trends 2025, an official document of the Office of the Director of the National Intelligence Council of the United States. Further, the warning of the joint investigation group of the World Bank and the WHO is another example. To be precise, the COVID-19 outbreak has not only exposed “the acceleration of preexisting tendencies” (Haass 2019) but also highlighted the uncertainty of the global system, which pretends to be increasingly global, diffuse across borders, with several localized power centres, but is not treated with enough importance by policyholders.  The proliferation of climate risks, the disruption, and relocalization of global chains values, as well as the impact of the multiple and differentiating velocities of technological advances both between and within countries, expose a common denominator: the entropy and risks of the current global system.

Is COVID-19 something new or as the former US defense secretary says something that we know very well, but still have not established a response to mitigate and eradicate such environmental-sanitary imbalances? Source: World Economic Forum

Negative Interdependence and Entropic Bipolarism?

There are two features of the current global system: deep economic, social, and political integration and risks between countries, international companies, and the wide range of non-state transnational actors in the current global system, and an exclusive focus on the Sino-American dispute. 

After the decline of the Soviet Union and the emergence of multiple pro-democratic and market theories such as the “End of History”, The United States’ guidelines have been very clear: the imminent proliferation of democracies, economies-markets, and the extensive liberal component. Towards the beginning of the 21st century, the global system changed abruptly; the presence of China as the second-largest economy in the world, the emergence of non-state actors – like terrorist groups, transnational companies, and international NGOs – and the totality, liquid, and fleeting nature of economic, social, and political flows explain entropic bipolarism. According to Schweller (2014), we observe how “the diffusion of power” (Nye 2011) is understood as the multiplication of economic productive centers of power. As a matter of fact, this tendency towards the proliferation of powerful non-state actors converges with a marked bipolarism between the United States and China – two factors that can explain the disorder and the risks that the current international system can bring. Moreover, the capacity of traditional states to manage the economic, social, and political risks is almost nonexistent due to the globalization of risks and flows.

To understand this global system more clearly, we can use the “entropic” (Schweller 2014) notion to refer to the disorder, proliferation of risks, and potential threats. All of these aspects are results of the globalization of productive matrices and the ecological, social, and political derivations or bifurcations that occur. As a matter of fact,  entropy refers to “the negative philosophical and normative view of complex interdependence” (Actis and Malacalza 2021). While interdependence and its different channels of transmission have always been associated with the opportunities to maximize costs and improve relations, the current entropy process reflects a complete condition of disorder where the lack of coordinated responses and the proliferation of multiple agendas are the law. 

In this context, concepts like “risk societies”(Beck 1992) or “entropy” (Sweller 2014) are useful in order to understand the current stage of globalization. Despite each analytical lens, all reflect a doubled movement, while the risks climate, economic and social increase, the future is less and less clear. The restructuring of entropic bipolarism – the doubled moment where the disorder, risk, and uncertainty of the globalization process combines with the great concentration of economic, technological, and financial capacities from the United States and China – brings a series of challenges that it is critical to the question:

  • How will the Sino-American political and economic elites understand this dispute?
  • Will it be a rivalry that is expressed in a pronounced way in all areas, or will it be a cooperative rivalry where common agendas, such as climate change and the prevention of systemic risks, create bridges to establish concrete policies?

Risk Societies 

Ulrich Beck (1999) warned of international anomie when he explained how globalization “generates new uninsurable risks that exceed the state capacity to face them”. In fact, the low degree of joint capacity within the liberal-international architecture reflects a process of “organized irresponsibility” (Beck 1992), that is, “there is scientific knowledge that informs the risk and uncertainty, but collective management or assurance against these risks is waived with the necessary resources, policies and institutions’‘ (Sanajua 2020). There are several useful practical instances to observe the complete disorganization of multilateral responses, for example, the global health architecture such as WHO and COVAX’s fund. There was a clear lack of informative transmissions about the origin of the pandemic at the beginning of the pandemic outbreak and the provision of joint state actions to moderate the pandemic impact. Further, There was a strong asymmetric degree of access to vaccines in African and Asian countries according to data from Our World In Data.

Source: Our World In Data

What will the future of the areas of multilateral discussion be? Will they continue to be marked by electoral political pendulums, joint forces, or mechanisms that will be defined that outline a series of minimum but necessary common objectives? 

The emergency that the COVID-19 virus has, once again, put into discussion shows the scope and risks of an interconnected system. Even now, there are important declarations by figures like Barack Obama, Bill Gates, and Tedros Adhanom Ghebreyesus – the current Director-General of the World Health Organization – about the importance of attendance and financing the anti-pandemic mechanism.

International Trade and Supply Chain Disruptions

Global supply chains have conventionally been focused on achieving financial efficiency above all else. The result is messy and fragile global supply chain systems” (Worth 2021) 

Much of the attention on international politics was framed around the idea of multinational companies as actors with strong economic-political weight. From 1970 to 2008, according to estimates by the World Economic Forum (2020), GVCs trade grew steadily. In these years, the outsourcing and offshoring tendencies – or the complete productive relocation – had been the main aspect of the global economy. 

Source: World Development Report 2020: Trading for Development in the Age of Global Value Chains.

In the last few months, there have been several clear situations, for example, the number of waiting containers vessels due to a series of lockdowns or the mismatches in the provision of semiconductors that express strong impacts on the perspectives of production and consumption. Additionally, the search for transnational companies in robustness and geography brought their supply chains closer together.

Source:  Financial Times (2021)

In a world impacted by the COVID-19 outbreak and the exacerbation of political, economic, and health tendencies, it is very improbable to manage as well as the non-existent political capital to build joint international policy frameworks, we can see how the multinational companies’ policies are oriented for locating their CGV’s from geographically close places, such as the Mexico-United States connection. In concrete terms, the economic impacts are clear; according to Bloomberg “there are 25,000,000 shipping containers at sea at any given time” at the same time that the cost of moving a container from China to the west coast of North America is estimated to have increased by 650 percent since before the pandemic”. 

Race to the Bottom? A Point of Inflexion to Think About Change

The race to the bottom – a capitalist symptom that constantly finds economic and productive solutions to improve the cost at any price – is contradictory to the efforts that the most important actors must do to reduce the climate risks. According to McKinsey Sustainability (2016) “The supply chain of a typical company is responsible for 80 per cent of its greenhouse emissions and more than 90 percent of its contribution to air pollution generated in the production and distribution of a consumer product.”

If we look at a large number of official documents and research from the academic community, such as the IPCC, World Bank, and BIs, we can see how the environmental situation is critical. Despite isolated efforts by, for example, Great Britain and France to rethink their energy structure towards cleaner forms, joint efforts to mitigate the impacts remain insignificant. The enormous distance between current policies and the objectives that the global community must achieve in the next few years is remarkably problematic.

Source: The New York Times (2021)

That being said, at the UN Climate Change Conference (COP26), there are several problematic and discouraging components such as the absence of a country with doubled emission of CO2, the United States, China, and important Latin American countries (Brazil and Mexico), as well as the critical problems of US’s Congress to approve the substantial financial plan to create more sustainable energetic matrices. In fact, The United States, the second-largest emitter of CO2, currently has widely varying financial priorities between Pentagon expenditure and Climate funding.

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Source: Stephen Semler

Finally, the climate-economy dichotomy never exists, as they are two sides of the same coin. How can we explain the carbon dioxide footprints left by by-products that travel extreme distances – even unnecessarily many times? And how could we explain the political capital within the customs union to tax those industries and products that have high levels of pollution?

The political-economic elites must accelerate and take advantage of their large learning curves and incorporate more green technology, in addition to redefining their total national expenditures and defining green publishing policies. In addition, generating a significant reduction of climate risks will have positive externalities in economic returns and the rise in health and social welfare standards.

Responsibility must be assumed by political and economic elites to improve the tendencies of the international system. Nowadays, there are important political forces that make it difficult to agree on different policies such as the generalized process of trans-governmental construction anomie at the same time as a set of centrifugal forces, both domestic and systemic, that create even more complications to building certainty. The disorder risks and uncertainty, as well as the series of potential disruptions, highlight the necessity to create holistic and pragmatic transnational policy frameworks and actions

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[ANALYSIS] The Entropy an…

by Joaquin Gomez Amato time to read: 9 min