How the Economy Will Look After the Coronavirus Pandemic

Пандемия навсегда изменит экономический и финансовый порядок. Foreign Policy попросили 9 ведущих мировых мыслителей дать свой прогноз. Делимся лучшим в рамках спецпроекта «CoronaWorldImpact»

After many weeks of lockdowns, tragic loss of life, and the shuttering of much of the global economy, radical uncertainty is still the best way to describe this historical moment. Will businesses reopen and jobs come back? Will we travel again? Will the flood of money from central banks and governments be enough to prevent a deep and lasting recession, or worse?

This much is certain: The pandemic will lead to permanent shifts in political and economic power in ways that will become apparent only later.

To help us make sense of the ground shifting beneath our feet, Foreign Policy asked nine leading thinkers, including two Nobel-Prize-winning economists, to weigh in with their predictions for the economic and financial order after the pandemic.

We Need a Better Balance Between Globalization and Self-Reliance

by Joseph E. Stiglitz, a professor of economics at Columbia University, winner of the 2001 Nobel Memorial Prize in economics, and the author of People, Power, and Profits: Progressive Capitalism for an Age of Discontent, published in paperback in April 2020.

Economists used to scoff at calls for countries to pursue food or energy security policies. In a globalized world where borders don’t matter, they argued, we could always turn to other countries if something happened in our own. Now, borders suddenly do matter, as countries hold on tightly to face masks and medical equipment, and struggle to source supplies. The coronavirus crisis has been a powerful reminder that the basic political and economic unit is still the nation-state.

To build our seemingly efficient supply chains, we searched the world over for the lowest-cost producer of every link in the chain. But we were short-sighted, constructing a system that is plainly not resilient, insufficiently diversified, and vulnerable to interruptions. Just-in-time production and distribution, with low or no inventories, may be capable enough of absorbing small problems, but we have now seen the system crushed by an unexpected disturbance.

We should have learned the lesson of resilience from the 2008 financial crisis. We had created an interconnected financial system that seemed efficient and was perhaps good at absorbing small shocks, but it was systemically fragile. If not for massive government bailouts, the system would have collapsed as the real estate bubble popped. Evidently, that lesson went right over our heads.

The economic system we construct after this pandemic will have to be less shortsighted, more resilient, and more sensitive to the fact that economic globalization has far outpaced political globalization. So long as this is the case, countries will have to strive for a better balance between taking advantage of globalization and a necessary degree of self-reliance.

This Wartime Atmosphere Has Opened a Window for Change

by Robert J. Shiller, a professor of economics at Yale University, winner of the 2013 Nobel Memorial Prize in economics, and the author of Narrative Economics: How Stories Go Viral and Drive Major Economic Events.

There are fundamental changes that happen from time to time—often during times of war. Though the enemy is now a virus and not a foreign power, the COVID-19 pandemic has created a wartime atmosphere in which such changes suddenly seem possible.

This atmosphere, with narratives of both suffering and heroism, is spreading with the disease. Wartime brings people together not only within a country, but also between countries, as they share a common enemy like the virus. Those who live in advanced countries can feel more sympathy with those suffering in poor countries because they are sharing a similar experience. The epidemic is also bringing us together in countless Zoom get-togethers. Suddenly the world seems smaller and more intimate.

There is also reason to hope that the pandemic has opened a window to creating new ways and institutions to deal with the suffering, including more effective measures to stop the trend toward greater inequality. Perhaps the emergency payments to individuals that many governments have made are a path to a universal basic income. In the United States, better and more universal health insurance might just have been given new impetus. Since we are all on the same side in this war, we may now find the motivation to build new international institutions allowing better risk-sharing among countries. The wartime atmosphere will fade again, but these new institutions would persist.

The Real Risk Is Politicians Exploiting Our Fears

by Gita Gopinath, the chief economist of the International Monetary Fund.

Over only a few weeks, a dramatic chain of events—tragic loss of life, paralyzed global supply chains, interrupted shipments of medical supplies between allies, and the deepest global economic contraction since the 1930s—has laid bare the vulnerabilities of open borders.

If support for an integrated global economy was already declining before COVID-19 struck, the pandemic will likely hasten the reassessment of globalization’s costs and benefits. Firms that are part of global supply chains have witnessed firsthand the risks inherent in their interdependencies and the large losses caused by disruption. In future, these firms are likely to take greater account of tail risks, resulting in supply chains that are more local and robust—but less global. In emerging markets, whose embrace of globalization included a steady opening to capital flows, we risk seeing capital controls being reimposed as these countries scramble to shield themselves from the destabilizing forces of the sudden economic stop. And even as containment measures gradually come off worldwide, people may self-assess their individual risks and decide to curtail travel indefinitely, reversing half a century of rising international mobility.

The real risk, however, is that this organic and self-interested shift away from globalization by people and firms will be compounded by some policymakers who exploit fears over open borders. They could impose protectionist restrictions on trade under the guise of self-sufficiency and restrict the movement of people under the pretext of public health. It is now in the hands of global leaders to avert this outcome and to retain the spirit of international unity that has collectively sustained us for more than 50 years.

Another Nail in the Coffin of Globalization

by Carmen M. Reinhart, a professor of international finance at the Harvard Kennedy School and the author, with Kenneth S. Rogoff, of This Time Is Different: Eight Centuries of Financial Folly.

World War I and the global economic depression in the early 1930s ushered in the demise of a previous era of globalization. Apart from a resurgence of trade barriers and capital controls, an important explanation for this demise is the fact that more than 40 percent of all countries at the time entered default, cutting many of them off from the global capital markets until the 1950s or much later. By the time World War II ended, the new Bretton Woods system combined domestic financial repression with extensive controls of capital flows, with little resemblance to the preceding era of global trade and finance.

The modern globalization cycle has faced a series of blows since the financial crisis of 2008-2009: a European debt crisis, Brexit, and the U.S.-China trade war. The rise of populism in many countries further tilts the balance toward home bias.

The coronavirus pandemic is the first crisis since the 1930s to engulf both advanced and developing economies. Their recessions may be deep and long. As in the 1930s, sovereign defaults will likely spike. Calls to restrict trade and capital flows find fertile soil in bad times.

Doubts about pre-coronavirus global supply chains, the safety of international travel, and, at the national level, concerns about self-sufficiency in necessities and resilience are all likely to persist—even after the pandemic is brought under control (which may itself prove a lengthy process). The post-coronavirus financial architecture may not take us all the way back to the preglobalization era of Bretton Woods, but the damage to international trade and finance is likely to be extensive and lasting.

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Иллюстрация Brian Stauffer. Источник

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