A major shock

The current pandemic crisis is a major global disruptor. It will have a complex cluster of impacts in many areas, from the political one up to the behavioural. Some of the consequences might end up by being positive transformations. When I say that I have in mind an increase in the work from home, which saves time and keeps fewer people in crowded and long commutes. I also think of greater investments in preventive health and more equal access to basic health services. On the other hand, it will have dramatic consequences on jobs, on poverty and despair, and on the performance of major economic sectors, including the banking one. The longer this crisis lasts the more complicated the recovery will be. And we have a prolonged period in front of us. This should mean that we must do whatever we can to prevent the transmission of disease.  

We need an action framework of a new type

On this Independence Day in the US, it is obvious the country and the world have a big problem to confront and resolve. The Covid-19 pandemic. This is still the first wave of contagion and the virus remains out of control, in many parts of America and elsewhere. To deny it is to deny reality. It can only be explained as sheer ignorance or a political farce.

If we look at the problem with objectivity, we can only conclude that it might take another 12 to 18 months before we see an effective response. The timeframe can be shorter, the optimists say, but it can also be much longer, as many scientists keep telling us. In any case, a global crisis as the current one, if it goes on up to mid-to-end of 2021, will have global negative consequences. In simple words, I would say that we will become poorer and more self-centred. That will impact the world economy, trade, international cooperation, the multilateral systems, and, in summary, will change the game of global politics. Looking at it from the stability and security angles, I see us moving towards increased extremism, short-minded nationalism, and new dangerous confrontations. We will certainly reach new levels of instability and insecurity as well as the contraction of the democratic space.

Not easy to find a balance between public health and politics, including the economy. And that complexity augments as we move from the domestic scene to the wider arenas, where States act and clash. That is the reason why I think that reflecting on such a necessary balance is one of the key tasks the global institutions and the big-picture thinkers should focus on. We must design an action framework that keeps lives and livelihoods. Such a framework must obtain wide support – the support could even come from the UN Security Council – and give people clarity and hope.

Times of change

We all agree the economic recovery is pressing. Truly, we are confronted with extreme urgency. There are too many people without income, or with a reduced one, too many companies close to insolvency, plenty of sectors working below capacity. The economy is seriously disrupted, in many countries, including in the EU states. Speed is, therefore, the key concern, in the minds of the politicians as well as in the private sector.

Then, a number of intellectuals have come forward and said this post-pandemic time is the big opportunity to change direction and make the economy greener and people-friendly. I agree with their proposals. They are not all of them entirely realistic, but they are well-meaning and the right type of utopia we need to make this world a better place. It would be a mistake not to give attention to them.

There will be some changes, for sure. More people will be working from home, there might be less commuting, and we will witness a lot of pressure from the politicians for the entrepreneurs to bring home some of the investments made far away. There will be a new impetus to move on to a greater share of renewable sources of energy.

But the urgency might upset some of these proposals. Jobs, investments, and revenue generation will be the key criteria for decision-making. And they might not coincide with the new economy we would like to see. But there will be progress in that direction. People are coming out of this crisis with a different approach to life and their own priorities. That is why I think it is important to keep insisting on progressive modifications to the way we produce and trade goods, and a new approach to the worth of some services the pandemic has shown to be of essential importance to our daily lives. 

  

There will be a process of change. Not as much as we would like, but we should not give up. This is an appropriate time to talk about a more balanced world.

Without borders

My point is that the borders should re-open shortly. First, the borders between European states, the Schengen area. To keep them closed for longer has a tremendous impact on the economy of the countries concerned and feeds the prejudiced views that the nationalist extremists try to propagate. Europe is about freedom of movement and accepting the others as fellow Europeans. To erect borders and obstacles between the countries undermines that critical dimension of the European Union. It sends an extremely negative message about the other. It makes us go back to the old suspicions and narrow views.

Second, it is necessary to resume international travel, well beyond the European space. Most of the progress that has been achieved during the last decades is linked to international contacts, to a global view of trade and tourism. Our world, the world we built during the last decades is based on mobility.

We have, of course, to ensure the safety of those who will be travelling as well as protect the health of those providing the services to this economic sector. That is possible. It does not require we keep each nation behind thick walls.

May Day 2020

It is International Workers' Day. That is an important date for many in Europe and in other regions of the world. We celebrate the working people’s rights. And I add to that my deep appreciation for those who keep struggling to survive. Particularly currently when most of the economic system is upside down. At the same time, as I look ahead, I see continued disruption and new levels of hardship. And I do not see the collective political will that a situation like the present one would require. Each leader is hiding behind national border walls. That is the wrong approach. We need regional and international joint efforts. As we need to promote cooperation between the big economies, including the US and China. Harsh words, bellicose statements, at this stage, do take us in the wrong direction. Leaders that follow that path will be severely assessed by future generations.

The balance that must be found

There is fear and growing poverty, in most corners of the world. We witness uncertainty and despair. The pandemic is killing people and destroying livelihoods. These are the two critical dimensions that must be tackled as a matter of great priority. Both are very urgent matters. The wise leader is the one that can strike the right balance between them. And who knows how the balance should evolve. That means, among other things, that an absolute and prolonged lockdown, with no economy, is not a balanced approach. It is not even necessary if there are enough masks to go around and the appropriate human behaviours are followed.

I just learned, for instance, that Argentina has decided to close its commercial airspace up to September. That is too long and certainly not a sage decision. A country like Argentina, which is already in an awfully bad economic shape, should approach any drastic decision with lots of prudence. The same, elsewhere. I mention Argentina as just an example.

Poor leadership

Europe is again building borders and walls. The leaders decided this week that the external borders of the Union will remain closed for another month or so. I see this decision as an inept response to the problem. Airports and land passage points could be equipped to check travellers’ temperatures and identify the individuals that might require further health scrutiny. Worse, the internal borders between the Member States continue to be blocked for people’s travel. And the governments cannot agree on a timetable and a phased approach to deal with that. There is no news about the matter, besides the closure. That is the best way to feed the nationalistic feelings. It is also one of the direct roads towards a fragmented Europe. Populists must feel excited.

I am shocked by the lack of coordination within the EU. I am also amazed by the timidity of the European institutions’ leaders. They are silent and so afraid of proposing anything. They have become the obedient functionaries of the national leaders and little else.

The world’s recovery, as well as the European one, calls for renewed cooperation, complementary and strategic alliances. We should be debating that in the G20 or a similar forum. All that is yet to be seen. There is no international conference being prepared to agree on a framework for action. No leader speaks on behalf of a greater project, of a different future, of anything else but of his or her own national square mile. It is disappointing and more, it is the wrong approach to build the post-covid world.

Some national leaders and some published opinion have now concluded we cannot depend on China or elsewhere when it comes to medical items, including masks. They put the blame on the Chinese and on the corporations that have established their workshops in the Far East or in India. That is an excuse. I do not accept it. The fact of the matter is that we forgot the concept of strategic health reserves. The national health services were not given enough means and attention. They have been undersupplied; the emergency stores were depleted. It is so much so that in Belgium some of the initial health supplies came from a big bank, that had understood early enough what was going on and created a substantial reserve of masks and so on. That happened with other governments as well. Politicians forgot the old and wise adage that one of the key roles of the government is to foresee impending crises and be prepared for them. To govern is to predict.

Well, the new adage, the one that is now being applied, is different: to govern is to react, a day at a time.

Optimism

It requires an enormous effort to be positive in today’s situation. We see the number of victims, we read the stories of their suffering, we watch the unemployment figures shooting to the stars, the immense level of poverty that goes along, we think of people we have known in Africa and elsewhere in the least developed economies, and wonder how can they survive on daily basis, we are told of perfectly viable companies going to the rocks, and all the rest, and we get depressed. But we must convince ourselves that sooner we will be able to contain the pandemic – to contain, as a first stage, before we eliminate it – and that normalcy will be invited back. We do not really know what type of normality that will be, people talk about a changed society, but as soon as people feel free to take care of their lives we might see a big leap forward, a renewed level of energy. I think we have here an opportunity to come out of it wiser. And that makes me feel a bit optimist.

What lies ahead is simply unique

The economic dimension of the crisis is huge. That’s now obvious to everyone, as the figures about unemployment and temporary layoffs become known. And that explains the gigantic size of the recovery programmes that have been announced. The amounts are just mind-boggling, difficult to imagine, because of the large number of zeros that follow the initial figure. Hundreds of billions, many of them close to trillion figures, or even above, as it is the case in the US. We are talking about funds that are simply not available. They will have to be printed.

It is a dramatic situation to many families and a move to extraordinary levels of indebtment by the States, the corporations and firms, and the families. Large amounts of debt, both public and private, were already a key feature in many countries. Our economies have been in the red for several years. But the previous debt levels will look as small fish when compared with the numbers in the next phase, the recovery phase. Most of that debt will be untenable and will have to be write off, sooner or later. That will cause major changes in wealth ownership. The point will be to manage such transition in a way that would avoid the ruin of key sectors of the economy, including the pension mechanisms, the banking and insurance systems, the bond and the property markets.

It is indeed a completely new ball game. We will have to play it and keep defining the rules as we move on. It will require an extraordinary level of international cooperation. That means wise leadership, plenty of foresight and political courage. Unfortunately, wise leadership seems to be a dimension that is seriously absent in the current international relations scenario. In my opinion, that’s one of the key risks that can seriously disrupt the next stage of our life in this small planet. These will be exceptional times.

Fast and plenty of money

The key concern is to safe lives. All the efforts should take that as a priority. And make sure that the infection trend is bent and starts pointing down. The sooner we change the trend the better. It will send a message of hope. And that type of message is urgently needed.

The economy is the other dimension we must consider. We cannot find ourselves surviving the disease and dying of the treatment. The productive tissue must remain as intact as possible. Firms and jobs must be helped. They will require major injections of fresh capital. The leaders should keep sending the message that money will not be a problem.

Contain, contain, contain

Today’s word is containment. Every government should ask themselves what they can do to more efficiently contain the epidemic. That must be the priority. But containment is not just about the disease. It is a lot, a great deal, about the disease. Indeed. But is also about the panic and the epidemic’s impact on key sectors of the world’s economy.

A challenging March

As we get into March, we can be sure we will have major challenges in front of us. The coronavirus will probably be the most critical. It has all the key ingredients to confuse many of us. People will keep pressing the panic button and the political leaders will be jumping in all directions, just to show to the citizens that they are moving as required. Then, there will be the economic impact. On the economic side, the crisis can be multifaceted. There will be less demand, the supply chains will be disrupted, and many enterprises will face serious cash problems. In addition, the stocks will not be able to recover the immense value that has been lost during the past week and probably the week ahead.

Obviously, the health systems will be under serious stress. They will become distorted as much of the resources will be focused on the Covid-19 pandemic.

Adding to the above, we will see an escalation of the conflict between Turkey and Syria, supported by Russia, a new migratory crisis and a Brexit on the rocks.

This is a time that calls for a new type of leadership.