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The Financial Express

Global economic crash: Political ramifications

Imtiaz A. Hussain | Published: March 19, 2020 20:47:01 | Updated: March 24, 2020 22:14:50


Global economic crash: Political ramifications

Last week's largest single-day stock-market crash in several locations was caused directly and immediately by President Donald Trump's March 11 announcement of a month-long travel-ban upon European countries. Of the 26 European countries impacted, Great Britain was not one. Reaction was quick, those European countries charging the US president of unilateral action when COVID-19 necessitated collective responses, while Britain's exception raised so many domestic eyes, Trump had to quickly begin backtracking. If these were controversial enough issues, they still remain a small part of a far larger and more sordid story. That story is of creeping nationalism the world over, degenerating into populism in more countries simultaneously than perhaps at any time before, and with COVID-19 arriving as some sort of a blessing for both nationalists and populists, while simultaneously endangering recovery. At stake are the ramifications of this disease-populism coincidence, combination, or confluence, and why chances of a new 'normal' remain far higher than any since the Cold War ended.

To be sure, single-minded jingoistic US responses were the most dramatic to use in any argumentation, but other nationalistic responses were shifting in the same direction from before. Japan's reaction to Koreans after the Wuhan outbreak began firmly resurrected sentiments of a century ago, when Japan occupied the Korean peninsula to facilitate its China invasion (and we know how that partly set the stage for World War II alliances and conflicts). Heavily indebted BRI (China's Belt and Road Initiative) recipients, especially across Southeast Asia, found an opportunity to contain Chinese advisers, builders, and project workers, especially as the coincidental Chinese New Year took many of them to China to celebrate, only to be then trapped by travel restrictions. Likewise, Italy's emergence as the COVID-19 epicentre also prompted European Union (EU) members to draw down shutters among themselves.

Against such inevitability, Trump's United States crashed into two mindsets: one a philosophical belief promoting unilateral private enterprise as key to winning the November presidential election, especially against a disparate leftish-of-centre Democrat Party (Bernie Sanders' advocacy of social reforms and public sector growth were obvious Trump targets from much before); and that the United States was being taken advantage of by other countries, led particularly by China, and therefore if China was the source of the pandemic paying the maximum price for it, the United States was the solution, with its technologically superior innovative medical infrastructures to produce COVID-19 cures.

Shifting from a Europe-centred travel ban and British exception, thence to declaring an 'emergency', exposed how narrow-minded vested US responses to COVID-19 would not work. Still the populist trajectory and nationalistic responses prevailed over a pragmatic policy retreat. These sentiments constitute the strongest movement the world over today, even though pandemic control demands effective collective action.

Among the first consequences, being fed by yet other catalysts, will be a global recession: too many closures have thwarted trade and employment flows for too long to not expect this outcome, and indeed the longer it lasts, say beyond April, the damage could become too astronomical to reprieve. Almost as soon as the outbreak threatened to spread beyond Wuhan, global  2020 growth forecasts were already being trimmed, then trimmed from one level to another, as a prelude to further trimming later in the year. Public sector supports have already begun at a far higher level than ever before, making the eventual scale dwarf any taken before since the 1930s depression: as starters, the World Bank's pledged $20 billion and the International Monetary Fund's $50 billion, which will look like peanuts in this viral avalanche. Even  the $1.0 trillion New York Fed injected into the money market (by purchasing Treasury securities), may ultimately look trivial.

Related to such intervention is a second exposure: that this neo-liberal order cannot be left alone to push the global society up the prosperity staircase. Too many soft state interventionist clauses and provisions can be easily activated in addition to countries, like China, openly flouting neo-liberal principles of privatisation, free-trade, and deregulation. Indeed, China's interventionism may look more meritorious than other approaches to prosperity, particularly the multilateral approach, which has consistently hugged neo-liberalism (for obvious reasons, since the 1930s depression exposed flagrantly how self-centred policy-approaches and protectionism led straight to disaster), to other ascendant countries seeking economic fortunes in the global arena. We are close to such a rendezvous with history now as in the 1920s, only sporadically being salvaged by the multilateral instinct that was adopted to curb the excesses of private entrepreneurs in the 1920s.

In fact, the third consequence is the precise need to have a single multilateral framework in the world. With a framework encapsulating the World Bank, World Trade Organisation, and the International Monetary Fund, among other multilateral institutions being seriously eroded by China's BRI/Asian Infrastructure Investment Bank emergent system, competitive formulas spell disaster in resurrecting the world from a crisis as severe as the COVID-19 pandemic. For a start, it would help coordinate policy plans globally to stimulate the economy. For another, it is critical to enacting and enforcing rules facilitative of epidemic/pandemic remedy, and thereby supplying vitally needed relief where it is needed urgently. For a third, it would be even more indispensable against other forthcoming planetary crises related to ocean-rising, ozone depletion, cyber-security, and global warming, among others.

Fundamental to all of these is cooperation between countries, the clearly evaporating component of any global formula today. When charges like COVID-19 being a 'Wuhan virus' is made inside the United States, and the first case of the disease in Chinese interpretations is placated upon the US army, we can see the jingoistic instinct still behind the policy-making steering wheel and stirring national moods. We will next expect low-wage migrants, especially those who become expatriates, being discriminated against, almost to the point of concentration-camp isolation and treatment. We will expect that to spill over against refugee concentrations worldwide, fueling circumstances facilitative of jihadi or other extreme forms of perversion. And we have already seen how, even in civilized societies, caricatures demeaning Chinese people, and by extension, other foreigners, have already started. These will be increasingly harder to contain, then roll back since they will now be utilized to drive election campaigns. The fourth and most devastating consequence will be the silent but certain killer: politicians in so-called democracies particularly, of which there are more today than institutionally secure democracies, or of dictators, exploiting COVID-19 racially, nationalistically, and along other discriminatory lines.

That is the long-term view today, when COVID-19 has barely entered the pandemic domain. What will be such a view this summer, when the tourist industry usually peaks and many competitive sporting engagements climax, one shudders to think, but out pathway will need more sagacious globally-minded world leaders than we have today. As New Zealand's Prime Minister Jacinta Ardern observed on the coincidental first anniversary of the Christchurch massacre, that distant, decent, country now has its share of fringe-group fanatics, an admission virtually impossible to make last March when the massacre happened.

The third part explores recovery measures, with Bangladesh as a specified subject to instill hope against this foreboding political landscape.

 

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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