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What World After The Pandemic? – Analysis

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The unpredictable crisis of Covid-19 raises fundamental questions at several levels. It questions the current form of globalization, and the neo-liberal ideology that has accompanied it until now. It questions a broken global governance, overwhelmed by national egoism and the temptations of closure. It calls for the mobilization of the instruments of resilience of democracies, particularly in what concerns the trust of the people.

Initially a health shock, Covid-19 very quickly became a totally new economic and social shock. No economist could have imagined that this health concern, which confined several billion people to their homes, would have been unimaginable. Its consequences will therefore go far beyond what was experienced in 2008.

While it is premature to formulate definitive answers, it is not too early to look forward. A virus has tipped the global economy into the throes of paralysis. For a time, everything is dormant and the decline exceeds all the wishes of environmental advocates.

Crises reveal the architecture, the flaws and the fault lines of systems. The current pandemic is a seismic shock. It remains to be seen whether the after will resemble the before or not, return to the status quo ante or move on?

The globalized economy in the hot seat

Neo-liberal globalization is a need of capitalism. The exhaustion of the Keynesian model leaves little hope for profits in developed countries. Industries are being relocated to low labor cost countries, conceived as subcontractors. Deindustrialized industrial countries concentrate on services, while keeping military industries, high-tech sectors and agriculture. The emigration of industrial jobs and the precarious nature of other jobs reduces purchasing power, which must be supported by credit. The prosperous financial sphere and the consumerism that buys social peace are saved.

The building resembles a house of cards. The system runs on credit and goes from bubble to bubble at the whim of the clever scaffolding of financial magicians. The crisis of 2008 rings the hour of truth. We get out of it by a massive injection of liquidity to recapitalize the banks by which the evil happened and everything continues as before, albeit with stunted growth. States, companies and individuals are riddled with debt. The way out of the crisis suggests that the next one will come, because the debt is unsustainable in the long term. Covid-19 precedes it. Rather than banks, it is businesses and individuals that urgently need to be saved in 2020.

Will the post-crisis period be the same? In Europe, leaders who are champions of happy globalization are now talking about corporate relocation, reindustrialization, industrial redeployment and nationalization. Trump was elected to repatriate companies. The outcome could only be meagre, because the precondition was a devaluation of the price of labor and a drop in the standard of living, triggering social unrest. The renationalization of economies would require the nationalization of companies, private properties obeying the law of profit, thus inclined to globalize. “New Deals” are possible, reviving economies by building public infrastructure under the leadership of the states. In both cases, a questioning of the liberal “paradigm” would be necessary. Otherwise, once the shock has passed, we would return to pre-Covid-19 globalization.

Epiphany of the State: A geopolitics in recomposition

Despite a common misconception, neo-liberal globalization does not evacuate the state. It bends it to its needs. Domesticated and provincialized, it acts as a relay for supranational powers that are better able to support globalization. Its sovereignty is being amputated in the name of interdependence and global “governance”. That said, the state is always called upon in times of crisis. It was back in 2008.

What is new in 2020 is that it is reclaiming parcels of sovereignty. In Europe, it has pushed aside community limits on budget deficits and public debt, so that doubt surrounds the future of European integration and the euro. The “every man for himself” approach before the Covid-19 sweeps away the discourse of cooperation. States will not fall into line until the pandemic is overcome. What happens next will depend on international rebalancing.

The Covid-19 crisis is a moment in the struggle for global hegemony between the United States and China. Against all odds, U.S.-centered globalization is turning to China’s advantage as it retains its independence, becomes the world’s workshop and moves up the value chain and technological spectrum. While Western economies stagnate, China’s economy is growing, bringing its GDP to the U.S. level. Now perceived as a rival, China is under pressure that begins in 2011 and which Trump is intensifying. His anti-globalization rhetoric is, in fact, a desire to reassert American dominance in globalization.

In the face of the pandemic, China’s effectiveness contrasts with the carelessness and amateurism at the head of the American state. Those who set themselves up as models reveal flagrant inadequacies. Far from helping its allies, the United States is a source of concern to them. If nothing changes, the crisis will have brought closer the date of the transfer of primacy in the world. States that relearn the rudiments of sovereignty will be less likely to remain in the American fold. A period of international realignments could be one of the side effects of Covid-19.

The future of globalization and neo-liberalism

This pandemic will not mark the end of globalization. But it will call into question a certain number of its modalities and ideological presuppositions, including the famous neo-liberal triptych: open markets, the retreat of the State, and privatizations. This questioning was already under way before the crisis began. It will be accentuated afterwards.

In the last decade, globalization has intensified thanks to the implementation of more and more numerous and extended value chains. These chains make it possible to break down the manufacture of a good in different places to minimize production costs. All this without great difficulty, given the collapse of transport costs and the development of telecommunications. The digitalization of the economy has amplified this movement, which has benefited many emerging countries, particularly China, which has captured a large part of textile production, consumer electronics, but also India in other industries such as pharmaceuticals. 

In Wuhan, the birthplace of pandemic, more than 300 of the world’s 500 largest firms had set up shop. This extension of value chains, and the extreme ease with which they could be set up, naturally fueled the idea that there was no longer a problem of supply, as supply was so abundant worldwide. As a result, just-in-time flows replaced stocks. The recourse to stockpiling almost became an uneconomic practice. Even the states that had best prepared for the risk of a pandemic ended up, over the years, lowering their guard. After the crisis, the chains.

What will the world of work look like after the pandemic?

As a whole, the international community is grappling with the health, humanitarian and socio-economic difficulties caused by the Covid-19 crisis. As the pandemic continues, strategic responses will need to be effectively implemented as they will be the necessary prerequisite for a safe and gradual return to work. “However, this return to work is not synonymous with a return to work as before – at least during this period when we will have to continue to live and work with the virus and until a vaccine or treatment is universally available,” warns the International Labour Organization -ILO-.

So the question that comes to mind is: what will the world of work look like after the pandemic? A debate increasingly dominated by the idea of a “new normal” at work. Indeed, whatever the restrictions in force today, the future of work can, and must, be what we want it to be. Needless to say, the pandemic has had catastrophic effects on the world of work, causing countless suffering and exposing the extreme vulnerability of millions of workers and businesses. According to the latest ILO estimates, the increased number of workplace closures around the world due to Covid-19 has led to a 10.7% reduction in the number of hours worked worldwide in the second quarter of 2020. This represents 305 million jobs lost (based on a 48-hour work week). While the Asia-Pacific region was initially the most affected, it is now the turn of the Americas region, followed by Europe and Central Asia, as the epicenter of the pandemic moves from east to west across the globe. However, its future trajectory remains uncertain. “This is precisely why the ILO’s Centennial Declaration on the Future of Work, with its human-centered agenda, is so important at a time when we are faced with the task of building back better,” explains the ILO.

The pandemic has also highlighted, with surprising brutality, that it is absolutely imperative to act without delay to defend the principles and objectives of the Centennial Declaration and has demonstrated what the human cost would be if we fail to do so.

The process of building back better will have to provide answers to the following pressing questions and issues:

  • How will it promote sustained, shared and sustainable growth, full and productive employment and decent work for all? 
  • How will it design responses to Covid-19 that enable the global economy to emerge quickly from the recession and overcome the challenges that will arise on the road to a just digital, demographic and environmental transition?
  • What needs to be done to address the immense vulnerabilities in the world of work that the pandemic has exposed? 
  • How can we intensify the formalization of the informal economy and move decisively towards universal social coverage? 
  • Which sectors of the economy and which categories of workers require special attention and support.
  • At a time when multilateral cooperation is more essential than ever but faces unprecedented challenges, how can the international community come together in true common cause and rededicate itself to the implementation of the 2030 Agenda?

Limiting the widening of inequalities, a vital issue for the world after Covid-19

Since the beginning of the pandemic, doctors and epidemiologists have noted that the coronavirus has had a greater impact on people suffering from chronic diseases (obesity, diabetes, cardiovascular diseases), which are proportionally more prevalent among poor populations in developed countries.

And it was mainly people in low-skilled occupations who had to continue working to keep food stores, the warehouses of e-commerce giants or health services running. “All these people who have continued to work despite the risks […] are people from the lower classes, finally,” said Mark Stabile, a researcher at Insead (L’Institut européen d’administration des affaires (based in france)), specialist in inequalities.In developed countries, austerity policies in the wake of the 2008 crisis “reduced the quality of public services, in the health sector, for example, and support for people in need, without jobs“, making them more vulnerable today, he also noted.

It is clear that there will be an increase in inequalities” as a result of this crisis, also warned the president of the European Central Bank, Christine Lagarde.

The Egyptian Nobel Peace Prize winner, Mohamed el-Baradei, pointed out “the number of poor people who … die simply because they have no access to the health system”, “because they cannot ensure physical distance, because the places where they live are too dense, and they must return to work to survive“, especially in emerging countries.

Burden for young people

But there is another inequality created by Covid-19 that we will have to be wary of, and that is “the inequality between generations,” said Italian economist Elsa Fornero, a former Minister of Labour in her country between 2011 and 2013. If “the older generations have paid the heaviest price in terms of human lives […] on the economic consequences, the containment measures – for example with the closure of schools […] – have left children, adolescents, outside the education system,” which “may have long-term consequences […] on their integration into the economy,” she pointed out.

Studies conducted after the 2008 crisis have shown that the generations that had difficulty entering the labor market during the crisis have never caught up in terms of career. For the experts, in addition to economic recovery to boost the rebound in growth, we must imagine solutions to the deepening of these inequalities.

Some economists, including Gabriel Zucman, advocate exceptional taxation for the richest, based on the model of the German experience after 1945. Germany “chose to impose temporary and very progressive taxes on the very wealthy“, unlike France and the United Kingdom, which had preferred to let inflation slide in order to reduce debt, he explained.

For her part, the Italian Elsa Fornero believes that the massive indebtedness of states to support economic recovery “risks creating another burden for these young generations” and should therefore also serve to “help young people to invest in their human capital“.

Investments to combat climate change will also have to be directed at the most disadvantaged, because “it is always the most fragile who will have difficulty in enduring the shock“, argued Kevin Sneader of the McKinsey law firm.

For the head of ING Bank France, Karien van Gennip, it is necessary to go beyond the economic field and “renew the social contract.” “It is the time to do it, it is what we must do in times of crisis, “he goes on to say.

Conclusion: The next world will have a taste of the old world

Will the “next world” really be different from today’s? To this question, economics professor Dani Rodrik answers in the negative. In an article published on the opinion and debate site Project Syndicate, he explains why there is every reason to believe that “Covid-19 might not change anything“.

According to this Turkish academic who teaches at Harvard, this crisis, rather than “setting the world on a significantly new trajectory, would actually intensify and consolidate existing trends“. This is evidenced by the responses made in an attempt to curb the pandemic, which, rather than heralding a turning point in the way the world sees itself, actually reflect the “dominant characteristics of the political regime of each of the states“. One need only look at the response of China, “typically Chinese“, which has applied “censorship of information on the prevalence of the virus” or “a high degree of social control”, says the professor, author of “Globalization in the hot seat: a plea for a healthy economy”.

So if the major trends seem to be confirmed today, will they still be confirmed in the near future? Dani Rodrik thinks so. According to him, “it is possible that in the debacle of Covid-19, everyone is observing a confirmation of their own vision of the world“. He cites, for example, “those who aspire to more global governance [and who] will argue that a stronger international health system could have mitigated the costs of the pandemic,” while advocates of a “stronger nation-state will point to the many examples where the WHO seems to have misorganized its response to the crisis. “In other words, in times of crisis, everyone sees through their own prism. And to sum up the thinking of this political economy expert, as the clock ticks, everyone seems in a hurry to get back to the old days.

It is a black scenario drawn by the economist specializing in inequality and poverty, Branko Milanovic. In an article published on the website of the magazine specializing in international relations Foreign Affairs, which was picked up by Courrier International, the professor explains that “the consequences of the epidemic risk leading to social disintegration“.

The economic impact of this pandemic, the extent of which is not yet precisely known, but which is already being felt in many countries, could encourage “those who will have no hope, no jobs, no resources” to “turn against those who are better off,” Branko Milanovic argues. In this regard, the Serbian-American economist recalls this statistic: “In the United States, nearly 30% of the population has nothing or only debts. “

If these same people fall “into despair and anger, then we may have to get used to the scenes of looting observed after Hurricane Katrina in New Orleans in 2005 or prisoner escapes as recently in Italy,” even anticipates Branko Milanovic. Moreover, if governments use “the army or paramilitary forces to contain riots or damage to property, it is possible that societies will begin to unravel. “To prevent such a risk, the objective of any economic policy must be to “maintain strong social ties,” according to this expert, who has published “Global Inequalities. The fate of the middle classes, the ultra-rich and equal opportunities, “Branko Milanovic further says.

Unlike the American author Zachary Karabell, who believes that the health crisis will probably lead to a second phase of globalization, Branko Milanovic believes that, if this same crisis were to last, it could signal the end of globalization. “The longer the crisis lasts, the more obstacles to the free circulation of goods, people and capital will be put in place and the more the situation will end up appearing normal,” the professor analyzes, again in his article published on the Foreign Affairs website. In the same vein, “the fear of a new epidemic could encourage states to focus on self-sufficiency. Because, as Branko Milanovic sums up, “the less you are dependent on others, the more you are protected“.

You can follow Professor Mohamed Chtatou on Twitter: @Ayurinu

Dr. Mohamed Chtatou

Dr. Mohamed Chtatou

Dr. Mohamed Chtatou is a Professor of education science at the university in Rabat. He is currently a political analyst with Moroccan, Gulf, French, Italian and British media on politics and culture in the Middle East, Islam and Islamism as well as terrorism. He is, also, a specialist on political Islam in the MENA region with interest in the roots of terrorism and religious extremism.

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