Elections are not currently won by promising less debt and a more resilient society and economy. The Coronavirus crisis is a warning that this will have to change
It is now apparent that the rapid spread of COVID-19 could turn into a serious global disaster, potentially costing hundreds of thousands of elderly lives and millions of jobs and livelihoods. Alternatively, in a few months, we might be sighing with relief that some combination of spring weather and containment measures averted such a calamity. Happy though that second scenario might be, it is vital for us to learn from what is happening.
Three obvious lessons stand out. The first is that in the extraordinarily interdependent world that trade, technology and travel have created, much of what goes on in other countries is our business. Not only can a physical virus spread around the world with unprecedented speed but so can a computer virus, complete misinformation, an economic recession, a nuclear accident or disregard for the environment. A fresh approach to foreign and security policy has to be based on much more than national sovereignty and must include the promotion of global welfare and high standards.
The second lesson is that a crisis is handled less honestly, openly and successfully by corrupt or authoritarian systems. In Iran, rumours abound that officials are being told not to report cases of the virus, while the number of deaths suggests that far more people are infected than has been officially admitted. As on Tuesday, it reported 77 deaths from COVID-19 and 2,336 confirmed cases of infection.
The original suppression of news of the outbreak in China was a grave error, notwithstanding the subsequent use of colossal State power to bring down the infection rates. All this is clear evidence that in the crises yet to come in the 21st century, the free flow of information, the sharing of warnings and the airing of disagreement will be characteristics of the political systems that are best at protecting their citizens.
The third lesson is one I outlined for The Telegraph earlier — that it is time for the abuse, consumption and trafficking of the world’s endangered wildlife to stop. In recent days, China has given some indication that the sickening markets in which all kinds of wild animals are sold, dead and alive, will be banned permanently. That will be very welcome and it is to be hoped that such an example will be followed by other nations such as Vietnam and Laos. The rise of Coronavirus is a clear indication that the degrading of nature will come back to hit humans very hard.
These three lessons are straightforward enough and conveniently fit the way in which most Westerners — with the major exception of US President Donald Trump — see the world: We need outward-looking countries, promoting the global good through strong cooperation, with a huge concern for the environment. They do not require us to revise the way we see the world but rather to promote it more effectively and persuade others that we are right.
Yet, there is an emerging fourth lesson as stock markets tumble and serious economic consequences loom, which is much harder for us in the West to accept — that, since the end of the Cold War, we have conducted much of our daily lives and business affairs without resilience in the forefront of our minds.
From the 1990s onwards, our economic growth has been best promoted by building very complex global supply chains and taking on high levels of debt in households and businesses alike. We must acknowledge that there are many ways in which a country like Britain is more resilient than in the past.
Yet in other crucial ways, Britain and other developed nations have steadily become more fragile when faced with an unexpected global downturn, particularly one in which millions of people might suddenly stop work, factories cease production and entire towns and cities be isolated.
Within days, an interruption of the production of parts in a factory in China can lead to the lay-off of workers. Even giant American corporations such as Boeing and Apple are finding that production of aircraft and iPhones is rapidly affected by a slowdown of activity in China. Many businesses have opted for fewer, larger component suppliers, with the result that the eggs they need come from surprisingly few baskets.
Even more striking, if the world sinks into recession in the coming weeks, will be the consequences of the remorseless build-up of debt by many companies. Central banks have done much since the crash of 2008 to remove weaknesses in the financial system, insisting that banks carry far more capital and that risks are better monitored. But at the same time, they have presided over ultra-low interest rates for far too long, balking at opportunities to raise them for fear of jeopardising growth and the buoyancy of stock markets.
As a result, much of the corporate world is now awash with debt. American companies owe around $10 trillion — at around 50 per cent of the US’ gross domestic product (GDP), an all-time record. That means that if there is a sudden loss of turnover, they will go bust at a very fast pace, with interest rates already so low that there is minimal scope for reductions that will help them.
Admittedly, this is not just a Western problem — Chinese companies are arguably even more indebted and, even before the Coronavirus crisis began, they were starting to default at a record rate. But the building up of historically unprecedented levels of debt, along with ever more fragile supply chains, have been results of our constant search for growth and low prices at the same time over the last 30 years.
Adjusting to a world in which we give resilience greater weight will be a huge and difficult effort for everyone who enjoys mass consumption and easy money. Elections are not currently won by promising less debt and a more resilient society and economy. The Coronavirus crisis is a major warning signal that this will have to change.
(Courtesy: The Telegraph)
