Uncategorized, Development, Economics and finance, Government and governance, Trade and industry, Law, Social policy | Australia, The World

22 April 2020

While COVID-19’s economic impact is more dramatic than any other shock in recent history, its consequences for the world order could be far more significant, Deepanshu Mohan writes.

It is almost certain that after the COVID-19 pandemic is over, the world will see a radical shift in the global political economy. The nature of the post-pandemic world will depend on two things.

First will be the relative degree of economic recovery seen in nations who are badly hit by the pandemic outbreak, when compared with others who might have been able to partially protect their economies.

Second, and this is crucial but understated, will be the inevitable shifts in the domestic political scenarios of affected nations.

Before the pandemic, majoritarian populist sentiment in many countries was electing strongmen political leaders, who combine brash public personalities with increasingly authoritarian tendencies. Even outside these countries, a general desire to strengthen nation-states – often in a backlash against the multilateral ‘globalist’ world order – was on the rise.

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The outbreak has caused many problems, but it has also thrown the world an opportunity for increasing multilateral cooperation amongst G20 actors and the rest of the world. Alternatively, the pandemic may trigger an acceleration effect, even further restraining populist and authoritarian governments from participating in cooperative multilateral solutions.

Thus far, the role of the G20 in handling the crisis, along with the Bretton Woods financial institutions, like the International Monetary Fund and the World Bank, have rung hollow, and the world has mostly seen nations opting to fend for themselves.

The nationalist government in Hungary – a member of the European Union – for instance, passed a law granting sweeping emergency powers to Prime Minister Viktor Orban in fighting the pandemic.

The law grants almost absolute discretionary authority to the prime minister, side-lining all parliamentary due process, allowing him the power to rule by decree indefinitely. Under the law, he also has the power to punish anyone who spreads ‘false information’, by the government’s own determination, with a sentence up to five years in prison.

China too, is now commanding even greater authoritarian control and surveillance on its citizens under President Xi. Britain’s Prime Minister Boris Johnson has seen a rise in his approval ratings, and American President Donald Trump has used this opportunity to get more national attention in an election year, attempting to project himself as a ‘war-time president’.

President Trump has also utilised the moment to pursue his personal political agenda, justifying xenophobic tendencies. The President has been using the crisis to cite how useful it is to have borders, restrict the mobility of immigrants, and attack China.

Since the outbreak began, there has been less evidence of multilateral cooperation than some might have hoped for. The pandemic has only widened the gap between the United States and China, and the credibility of the World Health Organization (WHO) has been majorly damaged.

Steps such as excluding Taiwan from emergency meetings and praising China’s response to the virus have made the World Health Organization look like ‘a mouthpiece for Beijing’ to some onlookers. It is certainly true, regardless of opinion on these organisations, that it has become national, and even regional, governments and organisations, not international institutions, that have been the face of political responses to the pandemic.

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The choices people and governments make now will define the world we will all inhabit after the storm passes. In making these choices, governments need to be wary of their long-term ramifications.

One key pattern in the most affected nation-states so far is how the fight against the coronavirus has fostered support for leaders who appear strong, but this will have its drawbacks.

Hyper-nationalist sentiments that were earlier finding their voice in concerns for immigration and national security are doing so now in begetting urgent social security in response to the pandemic.

These patterns in world re-ordering are not totally new, and can be seen in the historical example of the 1930s. How economies recovered, and the shape of domestic politics that came along with this, in the decade after the Great Depression triggered the rise of fascism and the economic supremacy of the United States. This undoubtedly influenced the future of world politics for many decades following,

As Barry Eichengreen explains in his recent book The Populist Temptation, in the 1930s “There was economic nationalism all over [the United States]” in the form of trade wars.

These trade wars were accompanied by a rise in xenophobic sentiment, including antisemitism and the harassment and deportation of Mexican Americans, even those who were hospital patients. It is simple to see the parallels that could be drawn with today’s United States.

These are the same realisations, as Eichengreen argues, that gave rise to the New Deal in the 1930s and the Beveridge Report in 1942, which combined to create a very different social, economic, and political order than existed before.

In the financial world, more banking regulation kicked in after the Great Depression and the international monetary system of the gold standard collapsed, which lead to the establishment of a new order. The world may now be facing a crisis of similar proportions and it could see a re-ordering this severe again.

That said, this is not the 1930s.

While parallel insinuations might be appealing and tempting to make, post-coronavirus politics will be different. Perhaps, it will lead to a general public preference of more commanding, controlling, and coercive authoritarian governance in different nations.

A plea for national security may go hand in hand with the need for greater social security (say, in healthcare, employment). In some nations, where authoritarianism is deeply entrenched, and change in this sphere is very difficult to achieve, there might be a centrifugal effect induced by the rejection of these policies in the wake of the pandemic, pulling public-sentiment away from authoritarian governments towards a need for greater freedom and transparency.

Whether populations double down on their strongman leaders, most likely leading to a transition in nation-states’ economic preferences in the post-pandemic world, is yet to be seen. What is clear, however, is that when this is all over, the world will be very different, and a new normal, whatever that may be, will set in.

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