A watershed moment
The brutal impact of COVID-19 on our interconnected globalised systems and the subsequent failures in response will likely force a complete rethink of how the global economy will function post-pandemic
In recent history, COVID-19 is arguably the worst global crisis that has brought life across the world to a grinding halt. What is more, the effect of the pandemic is so severe that the wheels of economic growth have also been arrested with no economist staking his neck in suggesting a way out. When economists remain quiet, one must accept that the crisis is too severe for a quick fix, off the cuff, comment.
The crisis started in China, the largest exporter, largest economy of the world in terms of PPP and leader in deploying internet and artificial intelligence. More importantly, administratively, China has a closely controlled one-party system where any citizen can be easily tracked and made to follow rules. COVID-19 required, as we have seen, social distancing to avoid person to person contact and transmission of the virus. China had failed initially to do so. It could eventually control its spread to its large cities but managed to export the virus to the rest of the world before that. The Chinese origin virus consumed the entire developed world.
Yuval Noah Harari wrote that the decisions taken now will shape the global economy, politics and culture, not merely health care. The Coronavirus pandemic came as a sudden brake to a fast-moving human life across the globe. Lives across busy centres are at a standstill. People are at home. Factories are shut, businesses are closed and leaders — at least some of them — are in quarantine. For the last few weeks, nothing is moving other than the number of virus affected persons. Human civilization had a dress rehearsal of sorts of a possible third World War. If this does not usher in new thinking and new economic policy, nothing ever will.
Economies are shrinking at a fast rate. People are losing or likely to lose jobs. Value of hard-earned savings has fallen into a bottomless pit. And as observed earlier, economists, who rarely keep quiet, are quiet of late. It is time now to ponder over what are the likely changes in human life post the Coronavirus crisis.
It has been seen that heavily controlled nations, China being a prime example, can control the spread of such a deadly virus while democracies have failed. USA and Europe are suffering badly. The primary tool for controlling the contagion is to ensure that people follow the guideline of social distancing and lockdown. Does it mean governments will try and intrude into the lives of citizens to prevent the catastrophe seen? Surveillance technology is spreading at a rapid rate. The Indian version of Aadhar, for instance, was debated hotly. Even now various state governments object to Aadhar linked one nation one ration card to stop leakages in the Public Distribution System. But Aadhar and linked Jan Dhan bank accounts are the best effective system for distribution of emergency succour to the needy. The social benefit schemes announced for the poor in the wake of the lockdown was farmed on that assumption. Digitisation of relevant data and digital tracking of people not only help administration or tax authorities but also comes handy for helping the poor. The other benefit of surveillance technology is compelling certain unruly sections of the population to observe the rules needed in health emergencies. Does it mean that surveillance economy will receive a boost in the post-Corona world?
Second and a very critical weakness of globalisation is lack of availability of certain basic needs as we saw in the crisis. Simple gears for healthcare workers, ordinary masks for people or ingredients to make lifesaving medicines are no longer available locally. Rest of the world looks to countries like China to supply these. When China caught the Coronavirus, the whole world suffered. Does it mean that globalisation will take a back seat post-Corona? The world cannot afford to have only one source of supply. Does it allow other countries, India for instance?
This brings us to a complex issue. Can competitive advantage alone be the guiding principle of trade? In other words, can there be free trade between countries having different socio-political systems? Such a question cannot be wished away since China kept the threat of the Coronavirus a closely guarded secret. It even admonished a certain doctor who raised an alarm regarding a potential epidemic and died while treating patients. President Trump, in his characteristic style, expressed doubt over the Chinese data on Coronavirus, especially death rate. It is time for the developed world to realise that only competitive advantage (that is cheap rate) cannot be the guiding principle for governing trade. Individual countries need safety that is a consistent supply which necessitates broad basing of the source of supply. Will global trade order see a new factor inserted in trade negotiation? Like transparency in the institutions with which trade ties are entered into? Competitive advantage may include competitive transparency factor henceforth. At least some countries will certainly walk that way.
Last but not least is whether we will move towards de-globalisation post-Corona. In the age of seamless global interactions, where the whole world has been interconnected physically and digitally and is going to be even more integrated with widespread of 5G and beyond, to reverse the clock of globalisation will be like switching over to a pre-Copernicus society. This may not be palatable even to the staunchest champion of autarky among the global leaders.
The conclusion is unavoidable. There will be many changes in economic thinking post-Corona and these will take care of many of the aberrations noticed in the world before the calamity hit all of us.