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The Financial Express

Stubborn coronavirus spillover

Pop goes the weasel

Imtiaz A. Hussain | Published: February 13, 2020 20:35:21


Pop goes the weasel

Just as the 2008-11 Great Recession inflicted a mortal blow on neo-liberalism (the philosophy of preaching a market economy, pumped by deregulation and favouring unbridled private sector domination), Wuhan's coronavirus pandemic may end up smashing the Chinese state-controlled manipulation of the global economy. If such a script plays out, we must all fasten our seat-belt for a rough 2020 ride into an even more unpredictable future economic turbulence. February has barely begun, but bankers and investors, led by the peripatetic World Bank, have already begun clipping forecasted 2020 growth rates. The last time they did so was less than a year ago, making 2019 a lacklustre year. With 2020 going the same way, more countries than not will be popping into the frying-pan, some from there to the proverbial fire.

Clearly in one respect, the Wuhan spillover already echoes the neo-liberal post-Great Recession ten year ago: China's pre-eminent global supply-chain being threatened in the way Wall Street bankers were then. It was hard to fully understand then, but the growth of China's global supply-chain seriously undermined Wall Street bankers then. Today, China's global supply-chain is being threatened, not by surprise, one might add, by both economic forces emanating in other countries and a string of fissiparous causes.

Foremost among them would be the secular cyclical retreat from rampant world-leading growth-rate, such as China's from about 5-years ago, as the country began to slip from double-digit figures towards a lower single-digit plateau: the Wuhan crisis seems set to push that plummeting force below 5.0 per cent this year. Behind this dynamic, the Chinese government has had to mask rising domestic wages and foreign competitiveness losses with one kind of control or another, amid spiralling off-shore Chinese production. In other words, global production networks were already coughing from China-based developments. Will they catch the Chinese flu remains the critical current question.

Then came the simmering China-US trade relations taking its sharpest turn during the Trump presidency: a tariff war has been hitting and hurting China more than a resistant US economy, at least for now. Shifting from thorny bilateral relations to the more global political economy, those tariffs have had the effect of closing more than opening markets, that too before a full recovery from the Great Recession and some of its unique features: the whittling away of interest rates and elevating exchange-rate politics, both empowering state-management not far different from China's own explicitly conducted variety.

A third causal factor was how a secular global development (for which a neo-liberal policy approach has been most instrumental), which couched China's economic ascent within an Asian surge, was essentially hijacked by China. This Asian surge involved as much of India embracing neo-liberalism as Bangladesh's upward spiral with its low-wage resource: new Southeast Asian countries, like Cambodia, Myanmar, and Vietnam, joined veteran pacesetters, like Malaysia, Singapore, and Thailand, among others. The more the players in this upward surge, the more the claim could be made they built a momentum culminating in 'Asian Century' mindset, spurring the entire global economy. China's Belt and Road Initiative (BRI) hijacked that by promising vitally-needed infrastructures, but leaving recipient countries indebted, some too badly to remain viable 21st century entities.

The focus here is not on the indebtedness, grave though the infliction is, but on China's BRI network may now disseminate the corornavirus. Unlike the SARS (severe acute respiratory syndrome) outbreak in 2003, the coronavirus outburst is eliciting very racist, nationalistic reactions, with ugly incidents further marring an already cataclysmic condition. In essence, it is building walls of a different kind than their economic counterpart, such as the Trump tariffs. Unlike the Trump tariffs, which can easily be remedied with policy manipulation should President Donald J. Trump so desire, the coronavirus involves barriers that alter the mindset, thus becoming harder to control. International exchanges, as through trade and investment, rely as much on the mindset as on policies and transaction capabilities: whether a consumer wants to purchase a Chinese commodity, which can also be produced by another country, say, the United States, can be influenced by that mindset. By placating China for the Cornoavirus, US policymakers are out to make hay while the sun shines, something not just China, but also Russia have sternly reprimanded.

What is worse is if this mindset stoops towards racism, nationalism, as is emerging a western bug against everything China and everyone Chinese. When this spreads to countries that have been encouraging market forces more racism and nationalism as economic catalysts, for example, the BRI recipient countries, then another virus unleashes itself. It would be a sign of the populist times we have plunged into to exploit circumstances unfavourable to China to push our own causes, but that may be just the slant demented politicians may seek even in hitherto democratic countries. We may see that sentiment heading for its crescent over the year, dooming the fragile recovery, made here and there, from the Great Recession. Prospects do not look too promising since villain-identifying is growing as a contemporary indulgence.

Against that background of both growing economic barriers and more intensifying mental degradation, the single-most contributing and expository factor may very well be tourism. It is not just that Chinese tourists constitute a whopping proportion of global tourism: for an industry accounting for 10 per cent of global gross domestic product (GDP), 10 per cent of the global work force, and increasingly dependent on Chinese tourists, for example, notching 10 million at the start of this century but climbing to near 280 million today, which almost doubles the current US tally. It is not just the sudden collapse of tourists for many hotels and airlines worldwide, but the accompanying anti-Chinese taunts and taints becoming incrementally institutionalised, and thereby, gnawing away the guts of tourism in the near future, that worries economists. What looked like a temporary blip seems to be growing into a long-term malaise. Piecemeal retreats from this setting may be a case of too little and too late to tilt the net dynamics in the right direction, thus exposing another economic dilemma: our shift from the neo-liberal advocacy of comparative advantage (without ever fully consummating it), towards second-best market outcomes, highlighted by snapshots at best, and the outright failure to build continuity at worst.

Several countries in the BRI network will be directly hit: the more the Chinese investments and project-related personnel-transfer have been, the greater the coronavirus exposure and impact. Bangladesh, for instance, may come out on the short-end, but Myanmar or Thailand may not as already becoming evident in stray street-level reactions. That does not camouflage Bangladesh from public coronavirus vilification since the sudden growth of Chinese residents in and around Dhaka has already become street-side conversation; but this may not degenerate in Dhaka and its surroundings into other more truly shameless reaction elsewhere across Asia.

A bad genie is out of the bottle; tame collective reactions may prove more useful than instinctual/guttural reactions.

 

Dr. Imtiaz A. Hussain is Dean (Acting), School of Liberal Arts and Social Sciences (SLASS) and Head, Global Studies & Governance Program Independent University, Bangladesh

imtiaz.hussain@iub.edu.bd

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