By John Samuel
The Covid-19 Pandemic is a rupture in the history of humankind. It has affected the social dynamics, politics and economy in a way we haven’t witnessed in the last hundred years. While it may be too early to assess the changes it may cause, it is clear that 2020 will be a watershed year in history. Not many could have imagined that a virus could affect the entire world the way it did.
It is also a learning opportunity to understand how fear plays a role in human choices and behaviour. Fear of the virus has impacted all realms of human activity — people are driven by fear as well as an urge for freedom from fear. The pandemic has reminded people world over about the four freedoms — freedom from fear, freedom from want, freedom of belief /worship, and freedom of expression. Human beings often killed or restricted these freedoms through war and authoritarian rule. However, in 2020, a micro-organism, riding on the wings of globalization, managed to attack these freedoms with considerable success.
This author has written in detail about the economic impact of the pandemic (see link). The recession that has gripped the global economy may far surpass the early estimates by national governments and international organisations. The global economy will take several years to shake off the impact of the coronavirus-induced recession.
The crisis will have a deep impact on public finance as well as fiscal and monetary policies. Budgets will have to be reconfigured as most countries will resort to deficit financing to tide over the crisis. Most national governments will resort to monetising of budget deficits and printing of notes. Inflation along with slow economic growth could lead to a debilitating stagflation in most economies.
In the initial part of Covid response, most countries have become nationalistic in their approach. This could lead to the reversal of the globalisation process and many countries could resort to protectionist policies. A competitive sub-nationalist approach could emerge in many parts of the world due to the territorial /localised response towards the pandemic. The nationalistic protective approach will be accentuated by a newfound assertiveness of the state, with the civil society and markets playing no active role in the fight against the coronavirus outbreak.
The pervading sense of fear and insecurity has created a pandemic emergency where people look up to the state and the government for security. This in many countries will lead to valorisation of the government and deification of leaders.
Though it is essentially a public health emergency, the government and the state often use war metaphors to fight the virus. These war metaphors will add masculinity to the approach of the government where police and army will be in control. When it comes to security and freedom, large sections of the society will choose security. Hence, freedoms will be suspended in many counties as a trade-off for security.
The economic turmoil and political response will create a democratic deficit along with budget deficits. Given the unprecedented situation, those in the government may adopt a knee-jerk approach, based on protective policy paradigm. This will lead to raising tax rates and imposing more surcharges. This will further stifle economic growth and result in capital flight to countries that are more attractive to investors. Hence any economic policy response needs to be carefully calibrated to see the implications in the short, medium and long terms.
Reversal of globalisation
Though it is safe to assume that globalisation will come under attack, two months of lockdown is too short a period for a reversal of this process. The countries are more interdependent than ever in terms of technology, labour, trade and finance.
Almost all successful corporates are multinational in approach. Though in the immediate aftermath of lockdown the world may look more national than international, eventually the international and global approach will make a comeback.
Though the government and leaders will attain commanding heights in the early days, the impending economic crisis and loss of jobs will unsettle many of the deified leaders. The economic consequence may eclipse the fear of consequence because life and livelihood are deeply connected for ordinary people. When millions lose livelihood, politics too may be affected.
There will be unprecedented disruption of economy, society and politics. Hence in many countries all these will get transformed in an unprecedented way in the next three to four years. It is ironic that a microorganism could disrupt the mighty nations and the strongest of economies. Decades of war preparation and huge armies may prove to be futile in front of Covid-19. So, expect the world to undergo a life-changing transformation in the next few years.
(John Samuel is a policy and governance expert, social entrepreneur and development economist.)