Listening to the Pandemic
The COVID-19 crisis is an opportunity to call some of the political mistakes of recent years by their name and adjust our trajectory according to the compass of reality. Seizing it will require people around the world – starting with institutional and political leaders, but, ultimately, all of us – to put reality first.
COVID-19 Trumps Nationalism
Like climate change, the COVID-19 pandemic is a perfect example of why we need multilateralism in a globalized world. Rather than resorting to thinly veiled racism and isolationist policies, global leaders – particularly the United States – should have started organizing a collective response weeks ago.
NEW YORK – I was recently walking along East 29th Street in Manhattan, after visiting a friend at Bellevue Hospital, when I was roused from my thoughts by a middle-aged white male screaming at an old Chinese man, “Get the fuck out of my country, you piece of Chinese shit!” The old man was stunned. So was I, before I bellowed back (deploying the full range of my native Australian vocabulary), “Fuck off and leave him alone, you white racist piece of shit!”
The pedestrian traffic stopped. A young white guy with dark hair came storming toward me. As a non-pugilist by instinct and training, I braced for what was coming. He stopped just short of me and said, “Thank you for standing up for him. That’s why I fought in Iraq; so that people like him could be free.”
Leaving aside the troubled history of the Iraq War, COVID-19 is a stark reminder that global pandemics, like climate change, do not respect political borders. China’s experience with the virus in January and February is likely to be repeated in much of the rest of the world in March and April. There will be variations on the numbers of infections, depending on imponderable factors such as the temperature, the relative robustness of public-health testing and treatment systems, and differing levels of financial and economic resilience. We should be preparing intelligently for these contingencies, not succumbing to irrational panic – let alone pandering to racist stereotypes.
This virus reminds us afresh that no person or country is an island unto itself. Yet political leaders have often failed to rein in the thinly veiled racism inherent in some of the popular response to the outbreak so far. In buses, trains, and on streets around the world, Asians, particularly Chinese, have been subjected to the kind of abuse I witnessed. Now that the virus has struck Italy, are Italians next?
It has been stunning to witness the general absence of solidarity, empathy, and compassion for the Chinese people, particularly those in Wuhan, who have stoically endured a living hell. How would (or will) Manhattan, London, Sydney, Toronto, Berlin, Paris, or Delhi fare under the same circumstances? Indifference to the suffering of others gets us absolutely nowhere in marshalling an effective global response to what is demonstrably a global crisis.
The United States could easily have reached out to the Chinese leadership to establish a top-level joint coronavirus taskforce early on, underpinned with a very public expression of human solidarity above politics. Instead, the administration has issued statements attacking China’s authoritarian political system, and urging American investors and supply chain managers to take refuge in the US. Yes, over the last three years the US and China have been on a strategic collision course, and normal political hostilities will be resumed once the immediate crisis is over. But right now, belligerence is not a policy. It’s just an attitude, and it doesn’t help fix the problem.
On a more positive note, institutional and professional collaboration is underway beneath the surface. Whatever failings the World Health Organization may have, it is the formal instrument of global governance on pandemics. Those who have attacked WHO Director-General Tedros Adhanom Ghebreyesus over his organization’s effectiveness should look long at the international statutes that determine its powers. The WHO is limited to providing international advisory notices on the movement of the virus, clinical and technical advice to national governments on how to deal with it, and emergency triage in places where no health infrastructure exists. That last duty may become necessary if the virus reaches the poorest parts of the world, as with the 2013-16 Ebola crisis in West Africa.
The WHO is also constrained by collapsing funding levels. In its attack on “globalism,” the political right sees defunding United Nations humanitarian institutions as a badge of honor, a potent symbol of smashing the “lefties.” But when essential institutions are defunded, their effectiveness is undermined. Just ask the World Food Programme, UNICEF, and the UN Refugee Agency, all of which are scrambling to make ends meet. In the WHO’s case, it’s become reliant on contributions from philanthropies like the Gates Foundation and voluntary pledges. Meanwhile, in the midst of the current crisis, the Trump administration has proposed slashing the US government’s core contribution to the WHO from $123 million now to just $58 million next year.
In addition to the WHO, we must be thankful for the US Centers for Disease Control and Prevention and its network of sister institutions around the world (including in China). Health professionals in these organizations have been collaborating to analyze the virus, anticipate possible mutations, and develop a vaccine – all despite the toxic political environment. We also should be thankful for the international (including American) medical, pharmaceutical, and other companies that have been quietly sourcing masks, gloves, gowns, ventilators and other critical supplies for China.
Despite these efforts, at present there is a palpable crisis of confidence around the world, in part because of a loss of confidence in national and global leadership. This is reflected in public panic and financial markets’ heightened volatility. Why doesn’t the US convene an emergency G20 meeting of health and finance ministers and heads of government? Such a gathering wouldn’t have to be held in person; it could be conducted virtually, in partnership with the UN and the WHO.
This could rapidly produce an agreed policy framework – and serious financial commitments – for responding to the unfolding pandemic. Representing 20 of the world’s largest economies (and many of the countries with more than 100 COVID-19 cases), the G20 is also best positioned to devise a financial and economic strategy for preventing global recession.
Global confidence will recover only when both the public and markets see that governments collectively have stepped into the breach. That is what happened in April 2009, when the London G20 summit arrested the panic from the 2008 financial crisis, established a basis for coordination, and created a policy and fiscal framework for eventual recovery. Without multilateral efforts, individual countries will simply continue to forge their own paths, thereby prolonging the recovery.
In times of international crisis, playing the nationalist card is the easiest and crudest form of domestic politics. But in the cold light of day, it doesn’t fix a single problem. Only effective global coordination can do that.
What COVID-19 Means for International Aid
The COVID-19 pandemic highlights the need for a radical revamp of the international aid architecture, so that massive amounts of money can be devoted to global public goods. And some of this will have to be financed by reducing existing country lending.
CAMBRIDGE – We are still in the early stages of dealing with COVID-19. Yet, it is already clear that this new coronavirus will have long-lasting effects on the global economy, how we deal with pandemics, and perhaps even the architecture of international aid. This is because the COVID-19 pandemic is putting the spotlight on one of the less-noticed distortions of the international aid system: it does exactly the opposite of what the evidence requires.
To understand why, we need to distinguish between two kinds of aid. Traditional country lending seeks to improve outcomes in individual developing countries, while financing of global public goods (GPGs) aims to improve global welfare. The latter includes the development of technologies to promote agricultural productivity, actions to prevent climate change and mitigate its impact, knowledge creation, information provision, and, of course, preventing and dealing with pandemics.
Donors therefore need to decide how to allocate their funds between these two types of aid. Clearly, this decision should be informed by research regarding the relative effectiveness of country lending and financing of GPGs.
The evidence concerning country lending is highly contested, with diehard aid skeptics in the tradition of Lord Peter Bauer, Milton Friedman, Angus Deaton, and Bill Easterly opposed by equally strong advocates such as Jeffrey D. Sachs, Bill Gates, and Bono. A fair reading of the evidence would be that even if aid skepticism is overdone, it is hard to find compelling evidence that country lending has substantial long-term benefits. (This is also the conclusion that Raghuram G. Rajan and I reached in a series of papers on the impact of aid).
On the other hand, financing GPGs is incontrovertibly beneficial. For example, the activities that led to the green revolution – not only the initial discoveries but also their subsequent adaptation by a network of publicly funded agricultural research institutes around the world – yielded substantial global returns. So did the eradication of smallpox. The financing of advance market commitments that guarantee returns for pharmaceutical companies making important medical discoveries – an idea associated with the Nobel laureate economist Michael Kremer – is another example of an invaluable GPG.
But despite the clear balance of evidence, an overwhelming proportion of aid is devoted to country lending, with only a fraction allocated to financing GPGs. Although there are no definitive estimates, Scott Morris at the Center for Global Development says that only 15-25% of the World Bank’s overall lending portfolio is devoted to GPGs. And even on a generous interpretation of what constitutes a GPG, that share would rise to only 35%. Moreover, this proportion is even smaller in the case of the world’s poorest countries: The International Development Association, the World Bank’s concessional-lending arm, directs only 11% of its funding to regional and global public goods.
What about other major donors? We do not know the share of funding that private philanthropies such as the Bill & Melinda Gates Foundation, which have become important international players, allocate to GPGs. But we do know that the most significant recent entrant to the aid-giving club – China – is devoting almost all its resources under the Belt and Road initiative to financing infrastructure in borrowing countries, and not to GPGs.
It is not difficult to understand why the allocation of international aid is so skewed in favor of country lending. This is a conspiracy in which there are perpetrators but no apparent crime.
For starters, donors love to wield the power that comes with lending directly to developing countries and dictating priorities aligned with their own preferences. And recipient governments are equally complicit; after all, more cheap financing means more spending, which is always helpful to political incumbents.
By contrast, the gains from financing GPGs are nebulous, distant, and not clearly traceable to donor actions. For borrowing governments, too, the choice between cheap cash today and uncertain benefits down the line is a no-brainer.
These distortions have always been a problem. But as the COVID-19 pandemic has made abundantly clear, the need for GPGs is proliferating, and private markets will by definition not finance them. To get a sense of the magnitude of resources required, consider the recent estimate by Princeton University’s Ashoka Mody that Italy will need about $600-800 billion in external assistance to help it respond to its coronavirus calamity. And this is just the amount needed to combat one global public “bad” at one point in time in one relatively rich country.
In a world of infinite resources and unbridled goodwill and generosity, donors could always ramp up financing of GPGs without reducing country lending. But in the real world, the envelope for giving is shrinking – meaning that distorted allocation incentives will have serious consequences.
The message for the international donor community – not just traditional lenders such as the World Bank, but also emerging actors such as private foundations and China – is clear. The aid architecture needs a radical revamp so that massive amounts of money, possibly hundreds of billions of dollars annually, can be devoted to global public goods. And some of this will have to be financed by reducing existing country lending.
By bringing practice into line with the evidence, the world could start addressing the massive challenges of the future in a serious way. Like today’s COVID-19 pandemic, these challenges will be devastatingly contemptuous of national borders and nativist governments.
What COVID-19 Means for International Cooperation
A clear parallel between the growing COVID-19 pandemic and climate change is emerging. In particular, both phenomena highlight the need for much closer forward-looking international cooperation to reduce and manage global threats.
WASHINGTON, DC – Throughout history, crisis and human progress have often gone hand in hand. While the growing COVID-19 pandemic could strengthen nationalism and isolationism and accelerate the retreat from globalization, the outbreak also could spur a new wave of international cooperation of the sort that emerged after World War II.
COVID-19 may become not only a huge health crisis, but also a crisis of globalization and global governance. Most obviously, it raises the question of how the world should organize itself against the threat of pandemics. But it also has implications for how globalization is perceived and what that perception means for the future of international cooperation.
Five decades of increasing interconnectedness have opened up the world to massive cross-border flows of goods, services, money, ideas, data, and people. While globalization itself is not new, the sheer scale and scope of the current version has made the world unprecedentedly interdependent – and thus fragile.
Today’s global socioeconomic infrastructure looks and works like a hub-and-spoke network in which all nodes are separated by very short distances and essential functions are centralized in large hubs. Financial activity is concentrated in the United States, for example, while China is the world’s manufacturing center. This structure is geared toward maximizing efficiency by capturing the benefits of economies of scale and specialization. Indeed, it has helped to lift millions of people out of poverty (although it also has led to greater income inequality and related social malaise in many countries).
However, connectivity also creates an enormous – but often hidden – risk of catastrophe. This is because connectivity increases what statisticians call “fat-tailedness,” or the likelihood of inherently unquantifiable extreme events such as financial crises, a nuclear holocaust, hostile artificial intelligence, global warming, destructive biotechnology, and pandemics.
Because critical functional roles are hyper-concentrated and the entire network is so tightly linked, shocks to a central hub such as the US or China can very quickly become systemic and paralyzing. The very reliance on central hubs generates systemic risk, because hubs constitute single points of failure, and the tight interconnectedness between and among hubs and nodes amplifies the potential for cascading failures. That is why the 2008 financial meltdown that originated in the US was so destructive, and why the COVID-19 outbreak that began in China quickly became a global health and economic crisis.
Two different political trends are likely to emerge from this unfolding disaster.
First, the crisis may prompt moves to reduce global connectedness, including in terms of travel, trade, and financial, digital, and data flows. People may instinctively demand more isolation in many domains. Seeking protection through blanket isolationism would be misguided and counterproductive. But in this case, communities can indeed help to contain the COVID-19 threat by adaptively reducing their connectivity through mitigation measures that increase social distance such as school and business closures, bans on public gatherings, and limitations on public transport while the crisis lasts.
Such draconian steps will have high short-term economic and social costs, and they entail undeniable practical and ethical challenges. In hindsight, they may turn out to be unnecessary. But it’s precisely because we can’t predict the spread of COVID-19 that the crisis demands aggressive action early on. As mathematician and risk expert Nassim Nicholas Taleb points out, because exponential growth initially looks deceptively linear, overreaction on the part of policymakers is not only warranted, but required.
This is a tactical consideration, not a strategic one: The goal is not to promote deglobalization, but rather to build greater robustness. When risks are potentially ruinous, systemic survival must supersede efficiency considerations. That is why, for example, macroprudential buffers like higher capital requirements in the financial sector are desirable.
A clear parallel between the COVID-19 pandemic and climate change is becoming apparent. Both feature emergence, path dependence, feedback loops, tipping points, and non-linearity. Both entail catastrophic fat-tailed risks ruled by radical uncertainty and call for eschewing traditional cost-benefit analysis – which relies on known probability distributions – in favor of drastic mitigation to reduce exposure. And, importantly, both highlight the need for much closer forward-looking international cooperation to manage global threats.
Indeed, a demand for greater global cooperation is the second and more significant political trend that could emerge from the current crisis. While this might at first sound inconsistent with heightened suspicion of globalization, the necessary reforms can in fact synthesize both trends. Pandemic prevention and containment is a global public good, and providing it requires increased global coordination as well as adaptive, temporary, and coordinated decoupling.
For starters, there is both a need for and an opportunity to introduce global “circuit-breakers” that can isolate systemic risks early on and prevent them from spreading. These mechanisms will be most effective if they are clear, transparent, designed in advance, and embedded in a global governance system that legitimizes and continuously updates them. For example, governments could craft and adopt common protocols for temporary travel and trade restrictions in the event of a potential pandemic, supported by globally agreed-upon early-warning systems and thresholds for action.
In addition, the international community may wish to build functional redundancy into complex systems – including finance, value chains, food supply, and public health – in order to prevent central hubs from becoming choke points and to ensure that single failures do not cascade into systemic collapse. Although this would entail some reshoring and de-concentration at the expense of efficiency, economies of scale, and comparative advantage, the goal is not autarky but rather risk reduction through diversification.
Humanity must organize itself to mitigate the tail risks associated with climate change, pandemics, bioterror, and unmanaged AI. Although this will require a historic leap, major crises often open the political space for radical reforms. Precisely at a time when rules-based multilateralism is in retreat, perhaps the fear and losses arising from COVID-19 will encourage efforts to bring about a better model of globalization.
Compound Growth Could Kill Us – or Make Us Stronger
The power of compound growth has long been recognized as essential to economic development. But in both the COVID-19 pandemic and the slower-moving climate crisis, this same mathematical force is cutting the other way, revealing dangerous shortcomings in how we manage externalities.
NEW YORK – A good way to think about the coronavirus pandemic is that it is like climate change at warp speed. What takes decades and centuries for the climate takes days or weeks for a contagious disease. That speed focuses the mind and offers lessons in how to think about risk in an interconnected world.
With both climate change and COVID-19, the real problem is not absolute numbers (whether greenhouse-gas emissions or infections), but rather the rate of change. It is bad enough that average global temperatures have risen by 1°C (almost 2°F) above pre-industrial levels. But warming of 2°, 3°, or many more degrees would be profoundly worse.
In pandemics, too, even a very small difference in the growth trajectory has stark consequences down the line. Coronavirus infections have increased by around 33% per day in most European countries (and by only slightly less in the United States, possibly owing to a relative lack of testing). At that rate, a dozen cases today will become 500 cases within two weeks, and 20,000 two weeks after that.
Italy had to shut down much of its economy after reaching just 12,000 cases. And shut down we must, before more health-care systems come anywhere close to the breaking point. Again, the top priority is to slow the rate of growth. Hong Kong and Singapore closed schools and enforced quarantines long before things could spin out of control, and their daily coronavirus growth rates appear to be close to around 3.3%.
The critical point about compound growth is that a 3.3% infection rate isn’t merely ten times better than a 33% rate; over the course of three weeks, it is 150 times better. At the lower rate, 100 cases will not quite double in that space of time, whereas at the higher rate, 100 cases will become 30,000.
Now consider that, by one estimate, 10-15% of early COVID-19 cases in China were severe, which implies that just around 20 people would require intensive care in our low-growth scenario, whereas 3,000 people would require it in our high-growth scenario. That difference has significant implications for health systems. Italy is a case in point: its hospitals have had to triage patients or turn them away outright, and its COVID-19 death rate is significantly higher than in other countries.
These public-health “breaking points” are to the COVID-19 pandemic what “tipping points” are to climate change. Where and when they will be reached might be uncertain; but they are all too real. Likewise, in both cases (and in most countries), it is already too late for containment. The priority now is mitigation, closely followed by adaptation to what’s already in store. In confronting COVID-19, the goal is to “flatten the curve,” just as we must “bend” the curve in greenhouse-gas emissions. Small, immediate reductions in the growth rate will increasingly pay off over time.
Of course, achieving such reductions isn’t easy. Closing schools blocks one channel of disease transmission, but it also places a significant additional burden on households where parents must stay home and begin home schooling overnight. Here, New York City’s decision to provide “grab-and-go meals” and supervision for the children of health-care providers, first responders, and public-transit employees represents an important step, given that school closures, by indisposing critical workers, can actually increase net mortality from COVID-19.
Such tradeoffs point to perhaps the most important commonality between COVID-19 and climate change: externalities. In both crises, an individual’s personal calculus may undermine the welfare of society as a whole. Healthy young people who face a significantly lower risk of dying from the coronavirus will see little reason not to continue commuting to work and putting in “face time” to advance their careers. That is why we need governments to step in proactively to change the individual calculus.
Imagine a scenario in which Italy had shut down completely in mid-February, when there were still fewer than 30 COVID-19 cases there. The costs of the disruption would have been large, and the public outcry loud. But thousands of deaths would have been averted, and the overall economic costs from a hasty, proactive shutdown would surely be lower than those of an even hastier, reactive one. Unlike Italy, Hong Kong is already slowly emerging from its proactive shutdown.
Fortunately, mitigating climate change doesn’t require anything close to an economic shutdown. But it does demand a fundamental rechanneling of market forces away from the current low-efficiency, high-carbon path toward a high-efficiency, low-carbon one. That will require proactive government policies, increased investment, and innovation. The results will be measured in years and decades, but they are highly dependent on what we do now.
In neither case can public policies operate in isolation. The COVID-19 crisis has underscored the need for paid sick leave and universal health care, just as the climate crisis has done for investments in green jobs and manufacturing and measures to address environmental inequities. Sitting back and waiting for a techno-fix is not the answer. Working toward a vaccine for COVID-19 is obviously important, as is research into clean-energy “moonshots” and even geoengineering technologies. But these all will take time and real investments in science.
The Chinese word for “crisis” famously consists of two characters: danger (危) and opportunity (机). In the case of COVID-19, the opportunity may well lie in demonstrating that rapid behavioral change is possible. Indeed, this April, the Intergovernmental Panel on Climate Change will hold its first-ever virtual Lead Author meeting. Running online-only meetings with 300 people on five continents is a challenge. But it is certainly easier than flying halfway around the world. Higher-energy physicists have done so for years.
Looking ahead, we all must ask ourselves whether we are taking sufficient steps to “flatten the curve” of transmissions, and to “bend the curve” of emissions. Yes, the coronavirus may have reduced China’s CO2 emissions this year, owing to the factory closures in Wuhan and general economic malaise. But in the end, it’s all about the trajectory. To confront today’s global crises, we must come to grips with the mathematical power of compound growth, which is both a curse and a blessing.
A Silent Hero of the Coronavirus Crisis
Sometimes, no matter how hard one tries, and no matter how selflessly one sacrifices, one stands no chance against a more powerful enemy. The new coronavirus, COVID-19, has proved to be such a foe, and were it not for technology, the battle against it would have been lost by now.
NEW HAVEN – Not to diminish the superhuman efforts of nurses, doctors, and health-care workers worldwide, but sometimes, no matter how hard one tries, and no matter how selflessly one sacrifices, one stands no chance against a more powerful enemy. The new coronavirus, COVID-19, has proved to be such a foe. Were it not for technology, the battle against it would have been lost by now.
Math and technology, to be more precise. I say math, because understanding a concept as basic as “exponential growth” proved crucial for attacking the enemy head-on.
The successful containment of the epidemic in China, South Korea, and Japan has been attributed to strong governments and cultures that put society’s good ahead of private convenience. I would add that these countries also stand out for their students’ high math literacy. In the 2019 PISA rankings, produced by the OECD, China ranks first in math with a score of 591 out of 600, Japan ranks 6th, and South Korea is 7th. By contrast, Italy is in 31st place, Spain places 34th, and the United States ranks 37th.
PISA scores may have their shortcomings, but they do provide a rough idea of the math literacy of the average citizen in the countries that take part. And the fact that the countries with the highest rankings seem to have adopted the most effective containment strategies serves as a reminder that, ultimately, the reason we want better training in math and logic is not to land more lucrative jobs, but to make better decisions regarding our lives.
Technology has been the true champion in the fight against the spread of COVID-19. Here, I don’t mean the ICUs and respirators without which severely ill patients would not stand a chance. I mean the new data-driven technologies that enabled responsible governments to track the infected, contact them, and quarantine them early. These technologies have been the target of much criticism in recent years. Now, when they are helping us save lives, they deserve our praise.
South Korea’s achievement is truly impressive. As of March 17, the country has had 8,320 cases and 81 deaths, despite an early bad start. Contrast this with Italy, which at the same time reports 27,980 cases and 2,158 deaths.
Technology’s contribution to pandemic management goes beyond tracking and quarantines. As the US and countries in Europe move toward near-complete lockdown, with potentially disastrous consequences for the world economy, technology offers a glimmer of hope.
Many firms, especially in tech, have closed their offices, mandated that employees telecommute, and provided them with computing and video technology to work remotely. Not only does this keep an important part of the economy going, but it also has had unintended positive consequences. Vehicle congestion, for example, has vanished. The hours harried commuters previously lost in traffic can now be dedicated to work and family. Corporate travel is disappearing, and video conferences are the new norm, with associated reductions in airplane pollution and huge savings in time.
Likewise, educators at nearly every level are scrambling to find online alternatives to in-classroom instruction. Whereas in earlier times, school closings would have implied loss of instruction time, technology is allowing students to continue learning. And the current crisis will advance that process, as a relatively modest group of early adopters in producing online courses is joined by whole universities that have been forced to move to the web.
Obviously, there are challenges to adapting a curriculum intended to be taught in person to the online setting. But with entire faculties experimenting, we are certain to see innovation and rapid improvement in the effectiveness of distance learning. Once students finally return to the classroom, we should continue to leverage these innovations, not only in the developed world, where necessity has forced our hand, but also in developing countries hungry for cost-effective education.
In the retail sector, digital platforms can fill the gap when supermarket shelves empty or self-quarantine makes in-person shopping impossible. And film and music streaming, video chats, and social media have offered avenues to reduce isolation, stay connected, and preserve mental health while locked down.
In these and other ways, the pandemic is accelerating existing technological trends and revealing important benefits, which we should embrace, both now and after the crisis abates. But when normalcy returns, we are also likely to confront once again some tough questions about technological innovation.
The COVID-19 crisis has revived the tension between privacy and effective targeting. In recent years, we often encountered this debate with respect to major tech platforms using granular information about users to deliver micro-targeted news and advertising. But the same kinds of technology have been used to identify those infected by or most vulnerable to the coronavirus.
Of course, the tension between privacy and health outcomes is not new: the desire to protect individual histories prevents medical researchers and clinicians from mining the full set of health data to achieve better outcomes. COVID-19 reminds us that we may want to think carefully about the relative benefits of data sharing, as they may sometimes dominate the value of preserving privacy.
Absent intervention, technological trends will inevitably generate winners and losers. Brick-and-mortar stores that were already losing market share to digital platforms are likely to be decimated wherever self-quarantine and mandatory lockdowns are in effect. And though increased telecommuting, reduced business travel, and distance learning will increase productivity for some, they are significantly disrupting the livelihoods of others, and that disruption will accelerate in the next few months.
So, more than ever, it will be imperative to provide support and adjustment assistance to individuals, firms, or entire communities hit by the crisis. But we should resist the urge to resume our relentless, if fashionable, tech bashing. If there is a silver lining in the current crisis, it is the realization that knowledge – primarily math, science, and technology in this case – is our best weapon.
The Pandemic Stress Test
The COVID-19 crisis has exposed the underlying weaknesses in national economies, health systems, and even political ideologies. If there is any silver lining, it is that long-vilified experts and professionals have an opportunity to regain the public's trust.
CHICAGO – The coronavirus pandemic has taken the world by surprise and will now expose underlying economic weaknesses wherever they lie. But the crisis also reminds us that we live in a deeply interconnected world. If the pandemic has any silver lining, it is the possibility of a much-needed reset in public dialogue that focuses attention on the most vulnerable in society, on the need for global cooperation, and on the importance of professional leadership and expertise.
Apart from the direct impact on public health, a crisis of this magnitude can trigger at least two direct kinds of economic shock. The first is a shock to production, owing to disrupted global supply chains. Suspending the production of basic pharmaceutical chemicals in China disrupts the production of generic drugs in India, which in turn reduces drug shipments to the United States. The second shock is to demand: as people and governments take steps to slow the spread of the coronavirus, spending in restaurants, shopping malls, and tourist destinations collapses.
But there is also the potential for indirect aftershocks, such as the recent plunge in oil prices following Russia and Saudi Arabia’s failure to agree on coordinated output cuts. As these and other shocks propagate, already stressed small- and medium-size businesses could be forced to shut down, leading to layoffs, lost consumer confidence, and further reductions in consumption and aggregate demand.
Moreover, downgrades to, or defaults by, highly leveraged entities (shale-energy producers in the US; commodity-dependent developing countries) could lead to wider losses in the global financial system. That would curtail liquidity and credit, and trigger a dramatic tightening of the financial conditions that have hitherto been so supportive of growth.
The parade of horrible possibilities could go on. The more fundamental point to remember is that the world economy never fully recovered from the 2008 global financial crisis, nor were the underlying problems that produced that disaster ever fully addressed. On the contrary, governments, businesses, and households around the world have piled on more debt, and policymakers have undermined trust in the global trading and investment system.
But even though the world started with a weak hand, our response to the COVID-19 crisis could be far better than it has been. The immediate task is to limit the spread of the virus through widespread testing, rigorous quarantines, and social distancing. Most developed countries should be well-positioned to implement such measures; yet, Italy has been overwhelmed by the epidemic, and the US response has not exactly inspired confidence.
Looking ahead, unless the coronavirus is eradicated globally, it could always return, or even become a seasonal disruption. If an effective treatment is not discovered soon (Gilead’s antiviral drug remdesivir currently shows some promise), all countries will face a choice between walling themselves off entirely and pushing for a global effort to eradicate the virus. Given that the former is an impossibility, the latter seems the natural choice. But it would require a degree of global leadership and cooperation that is sorely lacking. The presidency of the G20 is currently held by Saudi Arabia, which is mired in internal and external disputes; and US President Donald Trump’s administration has repudiated multilateral action from the outset.
Still, some key countries could accomplish much if they stepped up to lead a global response, including by persuading more countries of the value of cooperation. For example, countries that have been relatively successful in managing the epidemic, such as China and South Korea, could share best practices. And as individual countries bring the coronavirus under control within their own borders, they could dispatch spare resources to countries that need more experienced medical personnel, respirators, testing kits, masks, and the like.
Moreover, China and the US might finally be cajoled into reversing recent tariff increases and dispensing with threats of new ones (such as on cars). While a temporary reduction in tariffs would do little to enhance cross-border investment, it would at least offer a slight boost to trade. Moreover, an accord could enhance business sentiment about the post-pandemic recovery.
Within countries, the immediate task – after implementing measures to contain the virus – is to support those in the informal or gig economy whose livelihoods will be disrupted by quarantines and social distancing. Those who are most vulnerable economically also tend to be those who lack access to medical care. Hence, at a minimum, governments should offer cash transfers to these individuals – or to everyone, if vulnerable populations are hard to identify – as well as coverage for virus-related medical expenses. Similarly, a moratorium on some tax payments may be necessary to help small- and medium-sized businesses, as would partial loan guarantees and other measures to keep credit flowing.
In developed countries, in particular, the pandemic will soon reveal just how many people have joined the ranks of the precariat in recent years. This cohort skews young and includes many of those living in “left-behind” places. By definition, the precariat’s members lack the skills or education needed to secure stable jobs with benefits, and thus have little stake in “the system.” Cash transfers would send a message that the system still cares. But, of course, far more will need to be done to expand the social safety net and extend new opportunities to the economically marginalized.
Populist parties and leaders have capitalized politically on the plight of the precariat, but they have failed to live up to their promises – even where they actually hold power. The pandemic may have a silver lining here, too. Governments that have undermined established disaster-preparedness agencies and early-warning protocols are now finding that they need the professionals and experts after all. COVID-19 has been quick to expose amateurism and incompetence. If the professionals are allowed to do their jobs, they can restore some of the public’s lost trust in the establishment.
In the political arena, a more credible professional establishment will have an opportunity to advance sensible policies that address the problems facing the precariat without ushering in class warfare. But these openings won’t last forever. If the professionals fail to capitalize on them, the pandemic will offer no silver linings – only more dread, division, chaos, and misery.
MILAN – As of a few weeks ago, no one would have disputed that the most relevant and evident trend in the global politics of our times is “go national.” Unilateralism and “zero-sum game” logic seemed to be the new normal: “For me to win, I need you to lose” and “Me first.”
These phrases seemed to be the unequivocal and almost uncontested trademark of this century. Moreover, it was a trademark that had almost no limits in terms of geography and ideology: you found it in many different shades, but on each and every continent, in each and every political orientation (including many varieties of unlabelled political movements), across a wide range of institutional systems, and even within some international organizations. This trend seemed to consolidate by the day, with very few voices trying to argue for a cooperative international approach, multilateralism, win-win solutions and a search for common ground, and community-based policies rather than a purely individualistic vision of society.
Today, as the coronavirus pandemic spreads across the entire world, putting at risk so many of our lives and shaking the foundations of our everyday way of life, we need to ask if this paradigm is likely to remain the predominant one. Is the pandemic going to strengthen it, or are there lessons we will learn?
Can a virus challenge some of the assumptions on which the current global political landscape is based? Is it going to make us focus on what really counts, on what unites us as humanity, or is it going to fuel the sense of fear and suspicion among and within communities, dividing us even more, increasing the level of toxic rhetoric and behaviors that has already poisoned our societies, and partially paralyzed our collective capacity to act efficiently? Are we going to use this crisis as an opportunity to call some of the mistakes of recent years by their name, and adjust our trajectory at last to the compass of reality?
This pandemic is telling us a number of things loud and clear. If we are willing to listen, these are a few very simple ones.
First, the global community exists. What happens far away has an impact (even a vital one) here and now. A sneeze on one continent has direct repercussions on another. We are connected, we are one. All attempts to consider borders as dividing lines, and to classify people by nationality, ethnicity, gender, or religious belief – all of this loses meaning at once, as our bodies are all equally exposed to the virus, no matter who we are.
Second, I do have an interest in my neighbor’s wellbeing. If my neighbor has a problem, it is also my problem. So, if I do not care for the sake of my neighbor, I’d better care for my own sake. Because in an interconnected world like ours, the only effective way to take care of yourself is to take care of others. Solidarity is the new selfish.
Third, global coordinated solutions are needed, desperately needed, and this requires an investment in international multilateral organizations. If you think you can respond effectively to a crisis like this just by adopting national measures, you do what in Italian is referred to as “trying to empty the sea with a spoon”: a lot of work with no results.
In order to be effective, you need a systematic, coordinated effort at the global level, with adequate political and financial collective investments in the international multilateral setup that is required to monitor developments, respond to them, and prevent them from getting even worse. If you dismantle the credibility and capacity to act of international organizations, they will be less likely to be effective when you need them, and you will be the one paying the price.
Fourth, science-based political decisions are the only rational and useful way to go. Evidence is the only reliable point of reference we have. Luckily, we have been investing in science for thousands of years – across the world, no civilization excluded, and for very wise reasons. Any distortion from scientific evidence-based decisions, due to short-term political or economic considerations, is simply dangerous.
Fifth, health is a public good. It is not just a private issue. It is a matter of national – and even international – security, and of economic prosperity. As such, it requires both adequate and sustained public investments, and a collective sense of responsibility that each and every citizen is called to exercise. Avoiding contagion is not only a life-saving must for individuals, it is also a vital contribution to the survival of communities and the functioning of public health services, and ultimately, of the state.
Sixth, the global economy needs human beings to stay healthy. Investment in public health, science, and research is an investment in prosperous economies worldwide. Production, consumption, trade, and services – the basis of our economic system – need people to be healthy and safe. It’s the economy, stupid!
Seventh, well-functioning democratic institutions are literally vital to our lives. We take things for granted until we risk losing them. The way in which decisionmaking functions (or not) is the ultimate test in times of crisis. If democracy is perceived as a burden that slows or even impedes effective and fast measures, the argument in favor of more authoritarian systems of governance will grow stronger, with all the negative implications this would have on our rights and freedoms. Making democratic institutions work is an investment in our health, our security, and our freedoms and rights.
Last, but not least, nothing is more precious and valuable than life. We sometimes forget, especially when it’s our own life in question. This is sound common sense – maybe it’s time to go back to basics.
Every crisis can be used as an opportunity to learn lessons from the mistakes of the past, adjust policies, change course, and fix things that we were not even admitting were broken. It all depends on what individuals across the world decide to do, starting with those who have institutional and political responsibilities. But ultimately, all of us will need to decide. Will this crisis be used for short-term individual gains, with the usual scapegoat exercise, or will it be a wake-up call to reality? It’s not idealism, it’s pure realism.