Introduction and Conclusions
How is this going to end? When will we be back to normal? What will the world look like? There are more questions than answers, and so far, there are only a few, incomplete answers. These do not ease anxieties caused by the Pandemic. In this piece, I will try to address what I believe are the main questions and elaborate on some possible answers.
My main conclusions are as follows. It seems that we will have to face COVID-19 for the rest of this year and probably part of the next. The spread of the virus may be somewhat contained by the end of the year. The world economy will decline substantially this year. A rapid recovery is expected once the pandemic is under control, but unemployment numbers will not drop as quickly. China will emerge relatively stronger. Trump’s foreign policy has dramatically damaged global confidence in the United States. The legitimacy of the state’s active role in the economy will likely be recognized. Environmental movements will probably gain strength. It is also feasible that states will face political pressure to expand public healthcare. Progressive political changes, however, are not guaranteed. This year we will witness important US elections, possible political changes in Brazil, civil disobedience around the world, and potential outbreaks of the Pandemic in some countries.
How is this going to end?
There are several possible scenarios[i]. They are all likely to involve: massive testing, quarantining of infected people; a combination of gradual lifting of restrictions and partial shutdowns as needed; and symptom alleviating treatments until the vaccine is discovered and produced. Nobody knows how long the Pandemic will last, but knowledgeable specialists estimate one to three years. The experience with the H1N1 pandemic flu of 2009 gives us grounds for more optimism: WHO declared it a pandemic in June of 2009. By the end of that year the vaccine was available to everybody[ii]. The predominant view seems to be that we will have to deal with the virus the rest of this year and probably part of the next. Its spread, however, may be somewhat contained by the end of this year[iii].
What will happen with the economy?
The world economy will of course decline in 2020. According to the IMF, western advanced economies will decline by around 6%. China and India may grow slightly. The rest of the economies are expected to drop by around 6% although the GDP in some African countries may drop less[iv]. The declines suffered by most countries since March have been substantial and these projections are probably optimistic as the IMF based them on the implicit assumption that a major recovery will take place later this year. This is unclear at this moment. In any case, economic decline will mean more unemployment, more poverty, and the widening gap of income distribution. Recessions tend to have a greater impact on the poor. Once the Pandemic is in one way or another under control, a rapid recovery could be expected in the US[v] and, I would say, in most countries. Employment, however, may lag behind growth, as is usually the case after a recession[vi]. Unemployment may last even longer because of the proliferation of Ecommerce in place of traditional retail that grew during the Pandemic. In addition, the automation of production in place of human labor is likely to accelerate, as businesses may fear future pandemics or disruptions.[vii].
Will there be geopolitical changes in the post-Pandemic world?
By all indications, China will emerge as a major international player, with a relatively stronger position. It is likely to be more assertive on international matters. The European Union appears debilitated with southern states (Spain, Italy) losing relative strength vis a vis Germany and other northern European countries. The US will then face China as a rapidly ascending power[viii]. Unlike with the (now dissolved) Soviet Union, the US competes with China as an economic powerhouse, not a military one. China gains influence all over the world through trade and financial involvement. It has a formidable military, but its ascendancy is not from its military power or actions. Trump’s withdrawal from the Paris Climate Agreement and the Iran Nuclear Deal, its crusade against WHO, and other international organizations has weakened the world’s trust in the US and led to strengthening China’s influence.
Will there be major sociopolitical change throughout the world?
The situation varies from country to country. A general trend, however, could be anticipated: societies in the west will become more appreciative, even more demanding, of an active role of the state in economic life[ix]. As such, environmental movements will be more relevant and public health services in all likelihood will be demanded. Income distribution is emerging as central issue in most societies, particularly in developed countries. Customs may tend to change: vegetarianism and veganism will grow. I envisage more civic activism to promote organic foods and family farming. Before the Pandemic, some of these trends were mostly confined to the more elite segments of urban population. The need for food security may mobilize support and exacerbate conflicts in countries/regions where monoculture has been intensively practiced to the detriment of the environment and food availability. In my view, all of these progressive trends, while more popular than before, will not necessarily dictate or participate in concomitant political changes. In this regard, history is very illustrative. After the World War I and the so-called Spanish flu (which actually originated in Kansas, USA) the world witnessed the ascendancy to power of Hitler and Mussolini and the consolidation of Stalin. Today, authoritarian regimes represent a threat in several countries where they appeal to part of the population. Finally, tensions arising from worsening poverty, unemployment and inequalities do constitute a major political challenge. Ignoring them could lead to sudden popular revolts even in countries where the macroeconomic situation looks very solid, as it happened in Chile before the Pandemic broke off.
Watch out in the coming months
- Elections in the USA. Any result will be very important for the country and the world. If Trump wins he will deepen his policies to unpredictable levels[x]. On the other hand, I believe that if Biden wins, the reversal of inherited policies will not necessarily be quick or deep, depending on the overall situation and the pressure he faces. It is anticipated that Trump could appeal to extreme measures to ensure his re-election… (invasion of Venezuela?).
- Political changes in Brazil. Bolsonaro’s erratic politics and decisions on the pandemic are pitting him against the military[xi]. The health crisis threatens to become uncontrollable. There could be an impeachment or forced institutional change. This would be, however, a strengthening of less erratic conservative sectors, not a shift to the left.
- Episodes of civil disobedience[xii]. These could erupt in many places where the quarantine is prolonged and the population is distressed. They would be led by the poorest sectors and the “lower middle” class but very much driven by powerful business interests (areas of the U.S., Argentina?)
- Pandemic outbreaks. In countries/places where the opening of the quarantine is chaotic, episodes of anarchy may occur (conservative areas of the US?). Demagogic governments sow doubts about quarantine and incite disorderly openings that may lead to uncontrollable outbreaks[xiii]. This is the case in the United States and Brazil where their presidents are pushing for a rapid normalization.
[i] The Corona virus could end in one of these four ways, Sidhar, D. The Guardian, April 8, 2020 https://www.theguardian.com/commentisfree/2020/apr/08/how-will-the-coronavirus-crisis-end-lockdown-pandemic
[ii] When will the Nobel Coronavirus Pandemic be Over? Krouse, L., Women Health, April 28, 2020 https://www.womenshealthmag.com/health/a31406983/when-will-coronavirus-end/
[iii] Corona virus spread could last into next year, but impact could be blunted, CDC Official says, Joseph, A. Stat News, March 9, 2020 https://www.statnews.com/2020/03/09/coronavirus-spread-could-last-into-next-year-but-impact-could-be-blunted-cdc-official-says/
[iv] World Economic Outlook, IMF, April 2020
[v] How to create a Pandemic Depression, Krugman, P, May 11, 2020 https://www.nytimes.com/2020/05/11/opinion/coronavirus-depression.html?action=click&module=Opinion&pgtype=Homepage
[vi] A post-Morten slump, Krugman, P., The New York Times, May 12, 2020
[vii] Will the Covid-19 accelerate automation? Muro, M., The Economist, 22 April 2020 https://eiuperspectives.economist.com/technology-innovation/will-covid-19-pandemic-accelerate-automation
[viii] Is China winning? The Economist, April 16, 2020 https://www.economist.com/leaders/2020/04/16/is-china-winning
[ix] Covid-19: remaking of the social contract, The Lancet, May 2, 2020 https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)30983-1/fulltext
[x] Trump’s Second Term, Starr, P. The Atlantic, May 2020 https://www.theatlantic.com/magazine/archive/2019/05/trump-2020-second-term/585994/
[xi] Los militares brasileños se acercan al vice presidente ante el agravamiento de la pandemia. El País, 28 de Marzo de 2020 https://elpais.com/internacional/2020-03-28/los-militares-brasilenos-se-acercan-al-vicepresidente-de-bolsonaro-ante-el-agravamiento-de-la-pandemia.html
[xii] Anti-Quarentine Protesters Open Discussion about Civil Disobedience, Hyda, J., WUWM, April 27, 2020 https://www.wuwm.com/post/anti-quarantine-protests-open-discussion-around-civil-disobedience-0#stream/0
[xiii] New COVID-19 Model Warns Relaxing the Rules may increase the Number of Deaths, NBC, May 5, 2020 https://www.nbclosangeles.com/news/local/new-covid-19-model-warns-relaxing-rules-may-increase-deaths/2357597/