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COVID-19 and Learnings from the Digital Economy

By: Kees Bos

Scientists tell us that the pathogen made its leap from animal populations to human hosts somewhere in Eastern China, at the foot of the central Asian steppe. The disease quickly spread along busy trade routes, first to the Middle East, before gaining a foothold in Italy, where it hit the unsuspecting population hard. From there, it fanned out across the whole of Europe, leaving first a health crisis, then economic devastation in its wake.

Reel back to circa 1346-47, when the Black Death cut a deadly path from Asia to the West, carried by unwitting merchants via the fleas that migrated freely between them and the rats that travelled with them.

The fact that it was possible for an infection to travel from its origin among the rodents that lived in remote, mountainous regions of northern China to the teeming urban centers on the western edges of Europe was thanks to a sophisticated network of trading routes that had developed over the preceding 1500 years.

Known today as the Silk Road, this network, stretching through China, across the middle-east and into Europe and North Africa, was responsible for much of the cultural and commercial wealth those regions enjoyed. While silk, spices and Buddhist philosophy travelled one way, wool, gold and Christianity travelled the other.

It’s an irony that should be particularly instructive to us today, that what made the Silk Road so successful also made it the ideal vector for the pandemic that destroyed the global trade it sought to create, leaving countries that had once been connected and cosmopolitan isolated and suspicious of outsiders.

It’s far too early to tell whether the Covid19 outbreak will have a similar impact on globalized trade, but US President Trump’s comments on 14 May that ‘the age of Globalization is over’, followed by UK PM Boris Johnson’s May 21 announcement that the UK would be ‘ending reliance on Chinese imports’ certainly point in that direction.

Even before the Coronavirus outbreak, China’s ‘Belt and Road’ initiative (dubbed by some as ‘the New Silk Road’) was being questioned in more quarters. Announced in 2013, the project was billed as a multi-trillion-dollar, decades-long process of investment across multiple countries, to stimulate a 21st-century version of commercial co-operation between Asia, Africa and Europe.

In the context of Covid19, a model of the world where production and manufacturing is concentrated in regional centers, relying on low cost/high volume on-demand shipping seems increasingly anachronistic.

As a mediator between technology service providers and businesses globally, we’re used to anticipating and responding to crises to ensure the global exchange of data keeps flowing. Usually these crises are local and specific – a natural disaster or cyber-attack, for example. Nevertheless, even in a crisis that is as globalized and generalized as this one, the complex, interconnected mesh of infrastructure and service providers that we call ‘the Internet’ has proved remarkably robust.

Its complexity and de-centralized structure is its strength. Services can be quickly re-routed. Compromised infrastructure can be substituted elsewhere. Not so the global supply chains on which we have all, unwittingly, come to depend.

Democratic leaders have long enjoyed the political dividend that has arisen from the (mostly hidden) process of globalization that has delivered consistent global economic growth; ever-cheaper goods and services and ever-greater consumer choice.

They’re now experiencing the political cost, as voters ask (not unreasonably) why it is so difficult for a wealthy, well-resourced country to lay its hands quickly on simple things like face masks and surgical gowns – or, to stay a little closer to our business, 5G networking equipment – and why we have lost the capability to make these things ourselves.

Subject to these pressures, it’s likely that the days of a continuing shift of manufacturing to wherever the cost of production is lowest – with the result that the world comes to rely for a bewildering range of complex products on a tiny number of suppliers – are maybe coming to an end or at the very least will make some big adaptations.

Instead, we will have to design a system of supply that is closer in structure to the digital economy, which has proved itself indispensable in this crisis. This includes dispersed, decentralized production, in-built flexibility, the capacity for once-specialist organizations to diversify, and a more intelligent, networked and demand-led system of supply.

This is bound to accelerate the transition to digital maturity across the board in industry — characterized by the shift from closed networks and proprietary infrastructure, to cloud-based operation across the open web. I’ve written recently about how the Covid crisis has thrown a light on the importance of this shift to future-proof business in the service sector. The impending revolution on the supply side for goods will do the same, at an even greater scale.

Modern manufacturing relies on just-in-time production processes that keep on-site inventory, and hence costs, at an acceptable level. Designing new systems that maintain or adapt these models based on a more dispersed and flexible supply chain is possible — but only when supported by a smart, digital infrastructure that is globally connected.

History teaches us that crisis begets innovation. While in the 14th century the Black Death ushered in a period of isolationism, from it flowered the renaissance, the enlightenment and ultimately the industrial revolution that has bequeathed the technology-driven world of increasing prosperity and falling poverty we live in today.

We can afford to hope that in these accelerated times we will not have to wait as long for the renaissance that follows the already-infamous summer of 2020. Unlike our 14th Century counterparts, we know what hit us and why – and we are equipped to learn from it, grow from it, and protect ourselves in the future. Let’s skip the dark ages, this time around.

(The author is chief executive officer of Globalinternet, an Amsterdam-based company that provides internet connectivity to global enterprises)

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