The world after COVID-19


The world after COVID-19

Sunday, April 05, 2020

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Understandably , the urgency of today's race to control the COVID-19 pandemic is consuming humanity. However, it would be extremely foolhardy to ignore the need to prepare for the post-coronavirus world, because it is going to be very different from the one we know.

The virus is already changing the way people live and has severely impacted the global economy because of the requirement to maintain social distance, shutdown normal human activity, and increase public health expenditure.

The speed of the economic collapse is unprecedented. The global economy has already experienced the sharpest downturn since the Great Depression, prompting the managing director of the International Monetary Fund to declare that the economic impact would be worse than the 2008 financial crisis.

The US economy has already seen unemployment numbers reach nearly 800,000. The most credible forecast is for a three to five per cent contraction in global economic activity, much worse than the 2008-09 recession.

Goldman Sachs is expecting US gross domestic product to decline by 24 per cent in the second quarter of 2020 due to COVID-19. Deutsche Bank predicts a 12.9 per cent contraction and Bank of America's forecast is 12 per cent.

Previous crises have either been caused or made worse by selfish, nationalistic policy actions. Once governments agreed to cooperate they were collectively able to reflate the global economy, to the good of all.

The current wave of globalisation has been halted and in many respects the world will, for a long time, be in a post-globalisation phase. Many of the prominent features of the global economy will be changed, as happened when the first wave of globalisation from 1890-1914 was halted by the Great Depression of the late 1920s and 1930s.

After World War II there was a long period of recovery fuelled by the internationalism of the United States. Globalisation picked up pace and scope in the 1980s and accelerated, except for the brief episodes of 9/11 and the global financial crisis of 2008.

It is already widely accepted that the global economy will be substantially different after COVID-19. In the near future there will be less international trade and investment, with the possible closure of the World Trade Organization.

The more pessimistic predictions suggest that the global economy will not be a seamless economic space but an atomistic one that is less connected and more self-contained, as countries resume national production of many products they used to import. Forecasters also feel that while there will be tourism, the world will see reductions in business travel and cruise shipping as health precautions become requirements for travel.

Some analysts are resigning themselves to the view, ironically, that the reflation of the global capitalist economy is going to come from a socialist economy without electoral democracy — the People's Republic of China, and Asia in general.

China seems to have brought the COVID-19 virus under control and its production system has started to ramp up to resume its massive pre-coronavirus role of filling the needs of global supply chains.

It is not too soon for the Government of Jamaica to establish a group of economists to work on how Jamaica will proactively and strategically adjust to the global economic crisis authored by COVID-19.

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