As I just walked past the living room, I caught one sentence from the evening news. “This could go on for another six months.”
Up until now I have been enjoying the coronavirus. I can stay up watching Netflix, sleep in, and wear my pjs all day. Thanks to my computer and phone, I’m not feeling isolated, but it is starting to feel a little bit like Groundhog Day.
I doubt we’ll be back in church for Easter, as the president predicted a week or so ago. And I doubt our economy or mental health could stand another month or two of lockdown. I can’t imagine another six.
It’s still too early to predict the virus’ lasting effect, but I believe the post-COVID-19 world will look different. People will be much the same. They’ll probably keep a respectful distance for a while and wash their hands more often, but they won’t be nicer or kinder. Unlike war and natural disasters, which bring people together in their fight for survival, the coronavirus is isolating us. I sense that many people are more scared for themselves than concerned about their neighbors’ well-being.
While human nature will remain unchanged, we may see some major changes in the arena of global economics and politics.
Following the fall of the Iron Curtain and the disintegration of the Soviet Union, it was generally agreed that the West won the Cold War and that capitalism won over communism. Today there are two clashing versions of capitalism: Western-style (decentralized market-driven) and Communist-style (centralized government-controlled). With China’s growing wealth and influence, the balance of global economic and political power is shifting from West to East. Let’s consider how the coronavirus could impact this balancing act.
Could Coronavirus End China’s Role as the World’s Leading Manufacturer?
Long before the coronavirus, businesses were concerned about their overreliance on Chinese suppliers. Last year, more than fifty major multinational firms started to shift production to other locations because of rising labor and environmental costs, tricky regulations, and trade wars that led to higher tariffs.
When the coronavirus hit, it crippled global manufacturing supply chains, especially automotive. Wuhan, where the outbreak first emerged, is home to a dozen or more automakers and part suppliers. When China locked down Wuhan and surrounding Hubei Province, supply shortages threatened auto production worldwide. Hyundai and Kia suspended several assembly lines in Korea, while Nissan suspended auto production in Japan.
The virus also disrupted electronics and pharmaceutical supply chains. As a result, many industries are rethinking “just-in-time” manufacturing, which shaves costs by reducing inventory. Rather than stockpiling expensive parts, factories receive components from their suppliers just as they’re needed for assembly. While “zero inventory” saves money, it leaves companies vulnerable to interruptions in the supply chain resulting from natural disaster, war or pandemic.
In the wake of COVID-19, many companies will make their operations more resilient by holding extra inventory or using multiple suppliers for each part. Many others are seeking to leave China or reduce their footprint in an effort to localize or bring supply chains closer to home. 160 executives who participated in Foley & Lardner LLP’s 2020 International Trade and Trends in Mexico survey, released on February 25, said they intend to move business to Mexico within the next one to five years.
Will China Stay Ahead of the Virus While the Rest of the World Suffers?
Within several months of identifying the virus, it appears that China has effectively stopped its spread. At the end of March, Wuhan started to lift a two-month lockdown by restarting public services and reopening borders. At the same time, much of the rest of the world is shutting down as infection rates and fatalities continue to climb.
As some experts suggest, we are not learning the right lessons from China. While many governors and mayors are instructing their citizens to shelter at home to slow the spread of the virus, we haven’t instituted the methods that have proved most effective in stopping it:
- Randomized testing of sick and symptom-free individuals to determine how far and fast the virus spread.
- Contact tracing
- Enforced quarantines of everyone who tested positive in isolation facilities away from home and family.
Even though most westerns consider these measures draconian and invasive, they’ve proved effective not only in China, but in South Korea and Singapore without large-scale quarantine.
Bill Gates, who has pledged over $1 billion to fight malaria, said that nothing short of an enforced federal shutdown of the entire country for at least a month will stop the virus. Anything less could mean that we face another two, three, four or more months of quasi-lockdown and the ensuing financial devastation to millions of Americans without getting ahead of the virus.
Even though China is getting back to work, it won’t experience a meaningful recovery until the U.S. gets back on its feet, which could take months or longer, because their economies are so intertwined.
Will the Coronavirus Kill Populism?
Long before the coronavirus, countries from the United States to the Philippines have embraced populist movements, sometimes under authoritarian leaders, who are challenging the post-Cold War status quo of international cooperation. In response to the forces of globalization and mass migration, they are turning inward.
Under Trump, the United States has (partially) turned its back on European allies and withdrawn from international treaties including the Trans Pacific Partnership, the Paris climate agreement, and the Iran nuclear deal. At the same time, Trump has greeted strongmen – like Vladimir Putin, Kim Jong Un and Rodrigo Duterte of the Philippines — with open arms.
While America is leaving an empty seat at the table, China is eager to fill it. Through its belt and road initiative, China is extending its political and economic influence by investing a $1 trillion in overland and maritime infrastructure projects that connects it to the rest of Asia, Africa, and Europe.
Some think that the upcoming U.S. presidential election will be a good barometer of the corona effect. Will the American people, in recognition of the need for a coordinated international strategy to effectively combat the virus, vote for an old-school politician who is eager to re-engage our allies and restore the pre-Trump world order? Or will they vote again for a populist president who is hellbent on defending our shores against the storms and dangers arising from foreign parts?
A Trump defeat could signal to politicians around the world that it’s time to return to more consensus-based centrist politics. A win, on the other hand, could signal that the politics of disruption has yet to run its course. Mr. Trump’s 2016 election was a shock to the international system. Victory in 2020 could be earth shattering.
Either way, the power balance between East and West will continue to shift eastward. According to Peter Frankopan, author of The Silk Roads, the last 400 years of western domination is a historic anomoly. Today, India and China are reclaiming their role on center stage as the dominant force in global politics, commerce and culture.