Chi-Com Wuhan Corona Virus Crisis Manfred Gerstenfeld

Dr.Manfred Gerstenfeld: FROM THE CORONA EXIT TO LONGTERM SOCIETAL CHANGE……?


 

Dr.Gerstenfeld’s article was originally published at The Begin-Sadat Center for Strategic Studies (BESA) and republished here with the author’s consent.

 

FROM THE CORONA EXIT TO LONGTERM SOCIETAL CHANGE?

Manfred Gerstenfeld

With the easing of anti-Corona measures, Western governments are confronted with a huge set of complex problems. Many of these cannot be assessed or even foreseen. Most government leaders in Western countries have benefited in popularity during the Corona crisis.1 Yet now they will face unprecedented challenges.

 

From a policy point of view, it makes sense to try to return as much as possible to the pre-Corona reality. We know that society functioned in a reasonable manner for the most part. Western economies were growing, albeit slowly. Unemployment varied between low and not very high in the major countries. The pre-Corona situation was certainly much better than the untried pseudo-realities promoted by various ideologues.

 

The return to the way it was can never succeed totally. The governments’ first priority is the revival of the economy. There will be a battle about available resources, irrespective how they will be distributed. Words such as “optimal”, “fair” and “solidarity” have limited meaning in this context. Furthermore, future generations will have to carry some of the costs resulting from the economic upheaval caused by the pandemic. We do not yet know what the overall financial impact will be.

 

Unemployment has reached huge percentages in several countries. This has to be brought down rapidly. The general picture hides many personal tragedies. This also speaks in favor of an attempt to return as close as possible to the previous reality. Simultaneously an attempt has to be made to separate out the structural unemployment created by the pandemic. Some businesses will go bankrupt. Others were marginal even before the Corona outbreak. They are unlikely to reopen. The New York Times published an article titled “The Death of the Department Store.”2 Friction unemployment will also present a challenge. If airlines will have to wait to fly for a few more months, returning employees will only then be called to work again.

 

There are other reasons why returning to the pre-Corona reality is impossible. A number of corporations have already announced that they will not pay dividends to strengthen their balance sheets. In the UK this has not happened voluntarily. Banks were told by the Bank of England to do so. This will influence pension funds, stock markets and individual investors.3

 

The International Monetary Fund (IMF) has claimed that the world is facing its worst downturn since the Great Depression. The IMF stated that the global economy will contract by 3% in 2020. Before the outbreak of the virus, the forecast for the world’s economy was 3.3% growth. In comparison, during the crisis of 2008, the world economy contracted by less than 1%.4

 

There is merit in more concrete predictions. Even if a substantial part is wrong forecasts enable the beginning of a discussion on various issues related to the pandemic. One person who has made several specific predictions is David Folkerts-Landau, the Chief Economist of Germany’s largest bank, the Deutsche Bank.

 

He maintains that one of the key factors in the future is that we have to learn to keep distance from others in order to control pandemics. This means that for a long time there will be no mass concerts or sport events with a large number of people. Restaurants will have to move tables further away from each other. Planes and local public transport will have to leave some seats free. This will lead to increased prices. Folkerts-Landau also thinks that people will move away from the sharing economy. They may, for instance, be more reluctant to rent their home to Airbnb.5

 

In the post-Corona reality there will also be people who can pick up their business again with timely financial help from the government, but have been overlooked in the disorder. For this reason, it is important to have a functioning non-bureaucratic hardship organization. During the Corona crisis it became clear that in France there were shortages of medical oxygen bottles and related products for people sick with other illnesses. The only EU factory, Luxfer, located in France, was closed a few months ago. Parliamentarians now ask for the government to nationalize and reopen it.6

 

Whatever measures governments take, there will be dissatisfaction initially or perhaps even long-term. That may turn into protests, which may have unforeseen impacts. For that reason alone, governments should make an extra effort to identify those who have been overlooked, and who can be helped with relatively little support.

 

There are those who believe that the time has come for a radical restructuring of the economy and society. Many of them already held those ideas before the pandemic and now believe there is an opportunity to realize some of their goals. Environmentalists may think it is a good time not to reopen polluting businesses. The more so as energy demand is down. More important however is to make sure that such measures will not negatively impact employment.

 

There are also many other ideologues, including supporters of a neo-Marxist revival. It would be unwise to listen to them. Current governments were not elected to enact radical changes. Adding to the uncertainties of the revival will only create further problems.

 

In the longer run, future change will be unavoidable in many areas. This is a different issue than what is currently needed. Some areas for change are already clear. One is geopolitics. The West will — as many knew already before — have to take a thorough look at its relationship with China. This will go far beyond the purchase of materials.7

 

De-globalization may become a fashionable word. Unless the agenda for such change is detailed, it doesn’t mean much. Supranational bodies have taken a beating during the Corona crisis. They mainly talked, national governments acted. The European Union is creaking along more than before, yet unlikely to collapse. The indicator that best reveals these changes are the speeches of French President Emanuel Macron. In the past three years, he frequently mentioned the concept of European sovereignty. Now he is also covering his back by speaking about France being self-supporting in several major areas.

 

After German Chancellor Angela Merkel announced that she would not be a candidate in the next national elections, Macron was building himself up as potentially the dominant EU personality. That might have been a pipe dream in any case because France is economically much weaker than Germany.

 

In the meantime, concrete proposals are coming forward for the EU’s financial problems. George Soros and others have presented plans for perennial bonds to be issued by the EU to solve part of its financial solidarity problems. Again, while these plans may not have merit, they are good tools for better discussing the problem.

 

Many studies in a variety of areas will be done. One of the most fundamental questions is why Germany had so many less deaths than Italy, Spain, France, and the U.K. Other studies will deal with which measures taken by individual countries worked best to deal with the crisis and which exit strategies were best. Sooner or later people will ask what value specific countries gave to the preservation of individual human lives. The Belgian weekly, Knack, has already put forward figures for the value of the lives spared in the crisis due to government measures.8

 

There are many other issues. What has the mental health impact been on those in lockdown? How does it compare with earlier periods of stress? This may lead to a deeper question: Is the current Western generation mentally weaker than those of the past because it has never struggled with huge problems as the wartime generation had to? Another question: How much anxiety is there about a second wave of Coronavirus?

 

An issue which should be looked at the macro level is the overall vulnerability of modern societies. One easily forgets that there was already a situation of somewhat similar fear for a very different disaster, the 2000 Y2K computer challenge. Had it materialized, it would have greatly perturbed the economies of the countries which are the main victims of the Coronavirus.

 

Footnotes:

 

1 //besacenter.org/perspectives-papers/political-leadership-during-the-coronavirus-crisis/

4 www.nytimes.com/2020/04/14/us/politics/coronavirus-economy-recession-depression.html

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