By Dr. Rajkumar Singh
The pre-Corona tightly connected systems of a globalized world has been totally transformed due to a global pandemic. Although, since the economic recession of 2007-08, governments have vastly upgraded – the G-20, from a somewhat obscure forum of finance ministers, to a new global decision-making bloc in order to steer the world to safety.
But the outbreak has hit at a time when the international order’s immune system is badly compromised. As a caution, some time earlier it was warned that global vulnerability to shocks was exacerbated by “our own tendency to weaken the systems on which we rely through folly, ignorance or neglect.”
The past decade has seen as significant of an erosion in our capacity for collective action. The Trump administration is actively hostile to global systems, while the European Union turned inward during the eurozone crisis and still lacks vision and unity. The United Kingdom has been fixated on Brexit for the past four years.
There are also not many glimmers of light beyond the G-7. The 2008 crash saw the rise of the BRICS—Brazil, Russia, India, China and subsequently South Africa—as a major forum of emerging powers. But now space must also be carved out to look beyond the acute phase of an emergency whose impacts seem certain to reverberate throughout the 2020s, and probably beyond. It is already time to begin thinking about what comes next.
Background of global economy in pre-Covid-19
The 2008 financial crisis had three of layers of change. The first layer—the immediate emergency—lasted for a couple of years. Initially, as liquidity vanished, there was much complacency which reminded the national and international leaders that the worst was over. But after a slow start, politicians sprang into action.
After all, leaders love a good crisis, for all the drama, media attention and sense of purpose that it brings. Ultimately the global economy was saved from collapse. The second layer of change emerged more gradually as a consequence of the slow-burning of eurozone debt crisis, and the international response to it was much less effective.
Global measures were fragmented, as eurozone governments squabbled among themselves and with the International Monetary Fund. The crisis was not brought under control until mid-2012. This apart, the ordinary people suffered greatly from the austerity cure imposed in response to the crisis, as did institutions and critical national infrastructure.
Greece, for example, saw “the gradual destruction of the public health system,” stripping the country of its resilience to the next shock. The country is intensely vulnerable now that COVID-19 has come to call. But it was the third and slowest layer of change following the 2008 crisis that caused the most insidious and most persistent damage, as trust in governments collapsed, politics became increasingly polarized and the basis for global collective action was undermined.
Here, there was almost zero global action, giving populists free rein as governments, traditional political parties and international institutions all stuck their heads deep into the sand. This wave was easy to see coming. In 2009, it was warned that collapsing trust was creating conditions in which “populist movements are certain to thrive.” But almost nothing was done to respond to a widespread and profound sense that the 1 percent had crashed the economy and the 99 percent had paid for saving it.
Global changes due to Covid-19
Likewise, there are three similar layers emerging as this pandemic closes the world down. The first is a public health emergency that is likely to last for two years. The virus will remain a threat until a vaccine is developed, so countries are struggling to “flatten the curve” of new infections and keep their health systems afloat.
With zero immunity to the new virus, 60 percent or more of any given population may eventually get the disease, so there’s still a long way to go. The big variables are obviously how quickly a vaccine can be tested, manufactured and widely distributed; how quickly a new generation of treatments can cut the lethality of the virus; and whether rigorous contact tracing and testing can be used to replace a blanket lockdown with more targeted—and less disruptive—restrictions. In the second layer of change, the pandemic that we have already seen how rapidly an infectious disease can devastate financial markets.
While British Prime Minister Boris Johnson told the media not to worry about systemic risks, it would come as no surprise if the eurozone again finds itself in trouble. Even China may suffer, as its export markets disappear and global supply chains fray. Further out, we will face unpredictable interactions between the COVID-19 outbreak and our response to other global issues like refugee flows, conflict hot spots or climate change.
In particular, there is a time bomb ticking in the world’s “forgotten places”—refugee camps, prisons, shanty towns and the like. When people are packed together, viruses spread fast and illness may be exacerbated by a host of preexisting health conditions. Help for the furthest-behind will be slow to come, with well-founded fears that the official response will exacerbate patterns of discrimination and, in the worst cases, lead to serious human rights abuses. Third, there is the slow-burning social emergency that will build over the coming years and against which we have few defenses.
Governments entered this crisis with trust levels already depleted and their societies polarized. They also have less money to invest in an effective response, as public finances are in much worse shape. High levels of corporate and household debt further exacerbate the vulnerability of many countries.
Need of the hour of International co-operation
International cooperation is needed for each of these layers, and we must make sure that the urgency of a public health emergency does not crowd out the need for slower-moving but still important priorities. A shared global response provides governments the cover they need to take and sustain painful public health decisions.
Only politicians will be much better able to stay the course if they can show they are acting in lockstep with a group of like-minded governments. Collective action is also needed to clear barriers to the development, manufacture and equitable distribution of a vaccine. International supply chains must be put on a wartime footing to produce the supplies needed, from masks to ventilators, to treat rapidly growing numbers of patients who need intensive care.
As in wartime, this is an opportunity for governments to call for equitable sacrifice and for people to rally behind the idea of “fair shares”—building a sense of collective responsibility and reinforcing a commitment to the common good. Governments have now launched the first of what will be many waves of fiscal stimulus.
This will be most effective if they act together and direct their resources toward those who need it most. The world faces a demand shock, not a liquidity or supply crisis, which can only be solved by helping working- and middle-class people, not the elites who benefited disproportionately from the quantitative easing that helped pull the world out of the global financial crisis. Many sectors of the global economy will demand—and need—a bailout, and a wave of nationalizations is now beginning.
Author: Dr. Rajkumar Singh, Professor and Head, University Department of Political Science, B.N.Mandal University, Madhepura, Madhepura-852113, Bihar, India.
(The opinions expressed in this article are solely those of the authors and do not necessarily reflect the views of World Geostrategic Insights)
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