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The world will recover after this pandemic

Covid-19 is continuing in its almost unstoppable path. However, some positive signs come from some states in the world. The question is: after everything is over, will it be so easy to recover economically?

Donald Trump tells us that once Covid-19 is contained and it is safe to go back to work, the economy will be “great again”. Is the US president right?

Unfortunately, reality will not oblige Trump’s rosy scenario. Households newly aware that they lack the financial reserves to deal with unforeseen circumstances will increase their precautionary saving and continue to put off buying that new car.

Firms won’t invest in expanding capacity until they are confident that the virus won’t return. With the developing world entering and exiting the crisis later than the US, exports will be weak.

The good news is that public spending can replace the private spending that is lost. With interest rates at rock-bottom levels, the US still has fiscal space, despite its staggeringly large deficit. It is important to recognise that fiscal stimulus will be needed for an extended period, given that higher precautionary saving and weak investment will persist. The temptation to turn off the fiscal tap too early, as the US (and Europe) did in 2010, must be resisted.

The approach and management of the virus have been very different between states. A division is already underway: between countries convinced that the epidemic can only be defeated being united, and the others according to which isolation will remain the best future response. In this field, according to some analysts, the real winner of the global crisis stands out: Asia, led by China. If after the Second World War, the United States established itself as the leader of the new liberal order, now this role could cover by China, determined to overcome the stigma of a distant and unrepeatable model. The South Korean-German philosopher Byung-Chul Han spoke to the Spanish newspaper El Pais about the success of the “Asian states such as Korea, China, Hong Kong, Taiwan or Singapore”, attributing the result to an “authoritarian mentality that comes from the tradition of Confucianism “. People “less rebellious and more obedient than in Europe”, more believers in the state and led to an organized life, therefore more open to digital tracking, an instrument that has proved successful in containing the epidemic.

In Asia, the emergency was not only fought by virologists, but by computer scientists and big data specialists. According to the Korean philosopher, “China will be able to sell its police state as a winning model against the pandemic”, in contrast to the West’s inability to give a compact response.

After years, people have returned to speak of “statism” in the USA as a form of social protection. Former French ambassador Michel Duclos has openly accused Beijing of “shamelessly trying to capitalize on victory against the virus by promoting its political system.” If French President Emmanuel Macron claims that this period “will wipe out many certainties and beliefs”, many believe that we will face a less globalized world, in which, as we read on a graffiti appeared on a wall in Hong Kong, ” it will be a return to normal, because normality has been the problem. ”

A change appears inevitable: former Secretary of State Henry Kissinger is convinced that “rulers will have to prepare for the transition to a post-coronavirus world order”. It remains to be seen how much China and the east of the world will emerge strengthened by this global crisis, and how the United States will be able to reaffirm its leadership.

By: Domenico Greco

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