End of International Cooperation? How Coronavirus Has Changed the World Permanently

March 31, 2020 Topic: Politics Region: World Blog Brand: The Buzz Tags: CoronavirusCOVID-19PandemicInstitutionsCoalition

End of International Cooperation? How Coronavirus Has Changed the World Permanently

No one can say we weren't warned. 

With COVID-19 infections now evident in 176 countries, the pandemic is the most significant threat to humanity since the second world war. Then, as now, confidence in international cooperation and institutions plumbed new lows.

While the onset of the second world war took many people by surprise, the outbreak of the coronavirus in December 2019 was a crisis foretold. Infectious disease specialists have been raising the alarm about the accelerated pace of outbreaks for decades. Dengue, Ebola, SARS, H1N1, and Zika are just the tip of the iceberg. Since 1980, more than 12,000 documented outbreaks have infected and killed tens of millions of people around the world, many of them the poorest of the poor. In 2018, the World Health Organisation (WHO) detected outbreaks of six of its eight “priority diseases” for the very first time.

No one can say we weren’t warned.

Even as we attend to the countless emergencies generated by COVID-19, we need to think deeply about why the international community was so unprepared for an outbreak that was so inevitable. This is hardly the first time we’ve faced global catastrophes.

The second world war reflected the catastrophic failure of leaders to learn the lessons of the 1914-1918 war. The creation of the United Nations and Bretton Woods institutions in the late 1940s and early 1950s provided some grounds for optimism, but these were overshadowed by the Cold War. Moreover, the Reagan and Thatcher revolutions of the 1980s rolled back the capacity of governments to address inequality through taxation and redistribution and governments’ ability to deliver health and essential services.

The capacity of international institutions to regulate globalisation was undermined precisely at a time when they were most needed. The 1980s, 1990s and 2000s were a period of rapidly rising cross-border movements of trade, finance and people. The accelerated flow of goods, services and skills is one of the principal reasons for the most rapid reduction of global poverty in history. Since the late 1990s, more than 2 billion people have climbed out of extreme poverty. Improved access to employment, nutrition, sanitation and public health, including vaccine availability, added over a decade in average life expectancy to the world’s population.

But international institutions failed to manage the downside risks generated by globalisation.

Far from empowering the United Nations, the world is governed by divided nations, who prefer to go it alone, starving the institutions designed to safeguard our future of the necessary resources and authority. The WHO shareholders, not its personnel, have failed dismally to ensure it can exercise its vital mandate to protect global health.

Butterfly defect

As the world becomes more connected, it also necessarily becomes more interdependent. This is the dark underbelly, the butterfly defect of globalisation, that if left unmanaged inevitably means that we will suffer escalating, increasingly dangerous systemic risks.

One of the most graphic demonstrations was the 2008 financial crisis. The economic meltdown reflected a dangerous negligence by public authorities and experts in managing the growing complexities of the global financial system. Not surprisingly, the carelessness of the world’s political and economic elite cost them dearly at the ballot box. Campaigning on an explicitly anti-globalisation and anti-expert ticket, populists stormed to power.

Emboldened by public outrage, they have followed an ancient tradition, blaming foreigners and turning their backs on the outside world. The US president, in particular, spurned scientific thinking, spawned fake news, and shunned traditional allies and international institutions.

With evidence of infections rising fast, most national politicians now recognise the traumatic human and economic costs of COVID-19. The Centers for Disease Control’s worst-case scenario is that about 160 million to 210 million Americans will be infected by December 2020. As many as 21 million will need hospitalisation and between 200,000 and 1.7 million people could die within a year. Harvard University researchers believe that 20% to 60% of the global population could be infected, and conservatively estimate that 14 million to 42 million people might lose their lives.

The extent to which direct and excess mortality is prevented depends on how quickly societies can reduce new infections, isolate the sick and mobilise health services, and on how long relapses can be prevented and contained. Without a vaccine, COVID-19 will be a hugely disruptive force for years.

Where the damage will be worst

The pandemic will be especially damaging to poorer and more vulnerable communities within many countries, highlighting the risks associated with rising inequality.

In the US, over 60% of the adult population suffers from a chronic disease. Around one in eight Americans live below the poverty line – more than three-quarters of them live from paycheque to paycheque and over 44 million people in the US have no health coverage at all.

The challenges are even more dramatic in Latin America, Africa and South Asia, where health systems are considerably weaker and governments less able to respond. These latent risks are compounded by the failure of leaders such as Jair Bolsonaro in Brazil or Narendra Modi in India to take the issue seriously enough.

The economic fallout from COVID-19 will be dramatic everywhere. The severity of the impacts depends on how long the pandemic lasts, and the national and international response of governments. But even in the best case it will far exceed that of the 2008 economic crisis in its scale and global impact, leading to losses which could exceed $9 trillion, or well over 10% of global GDP.

In poor communities where many individuals share a single room and depend on going to work to put food on the table, the call for social isolation will be very difficult if not impossible to adhere to. Around the world, as individuals lose their incomes, we should expect rapidly rising homelessness and hunger.

In the US a record 3.3 million people have already filed for unemployment benefit, and across Europe unemployment similarly is reaching record levels. But whereas in the richer countries some safety net exists, even though it is too often in tatters, poor countries simply do not have the capacity to ensure that no-one dies of hunger.

With supply chains broken as factories close and workers are quarantined, and consumers prevented from travelling, shopping, other than for food, or engaging in social activities, there is no scope for a fiscal stimulus. Meanwhile monetary policy has been stymied as interest rates are already close to zero. Governments therefore should focus on providing all in need with a basic income, to ensure that no-one starves as a result of the crisis. While the concept of basic income guarantees seemed utopian only a month ago, it now needs to be at the centre of every government’s agenda.

A global Marshall plan

The sheer scale and ferocity of the pandemic demands bold proposals. Some European governments have announced packages of measures to keep their economies from grinding to a halt. In the UK, the government has agreed to cover 80% of wages and self-employed income, up to £2,500 ($2,915) per month, and is providing a lifeline to firms. In the US, a previously unthinkable aid package of $2 trillion has been agreed, though this is likely just the beginning. A gathering of G20 leaders also resulted in a pledge of $5 trillion, though details are slim.

The COVID-19 pandemic provides a turning point in national and global affairs. It demonstrates our interdependence and that when risks arise we turn to governments, not the private sector, to save us.

The unprecedented economic and medical response in the rich countries is simply not available to many developing countries. As a result the tragic implication is the consequences will be far more severe and long lasting in poorer countries. Progress in development and democracy in many African, Latin American and Asian societies will be reversed. Like climate and other risks, this global pandemic will dramatically worsen inequality within and between countries.

A global Marshall plan, with massive injections of funding, is urgently needed to sustain governments and societies.

The COVID-19 pandemic is not the death knell of globalisation, as some commentators have suggested. While travel and trade are frozen during the pandemic, there will be a contraction or deglobalisation. In the longer term the continued growth in incomes in Asia, which is home to two-thirds of the world’s population, is likely to mean that travel, trade and financial flows will resume their upward trajectory.

But in terms of physical flows, 2019 will likely go down in history as the time of peak supply chain fragmentation. The pandemic will accelerate the reshoring of production, reinforcing a trend of bringing production closer to markets that was already under way. The growth of robotics, artificial intelligence and 3D printing, together with customers expecting quick delivery of increasingly customised products, politicians eager to bring production home, and businesses seeking to minimise the price of machines, removes the comparative advantages of low-income countries.

It is not only manufacturing which is being automated, but also services such as call centres and administrative processes that now can be more cheaply done by computers in the basement of a headquarters than by people at distant locations. This poses profound questions about the future of work everywhere. It is a particular challenge for low income countries with a young population of work seekers. Africa alone expects 100 million workers to enter the labour market over the next 10 years. Their prospects were unclear before the pandemic struck. Now they are even more precarious.