- By Jamie Shea
Giles Merritt warns of the pandemic’s dramatic impact on longstanding political and business models and argues that the coming changes must be harnessed positively.
Geopolitics – meaning not just Great Power rivalry, but political conditions everywhere – is entering a new phase. Government and business policymakers must sharply adjust their thinking.
In recent years – well before the Wuhan outbreak of an unidentified new zoonotic disease – it had become apparent that the Phase 2 structure of international relations is riddled with inconsistencies and fault-lines. Multilateralism’s institutions are buckling, demographic strains and resource competitions point to a darker rather than brighter future, and all this with no sign of global cooperation, solidarity, and acceptable leadership.
The post-World War 2 era is over. Its first phase was from 1945 to 1989, when the fall of the Berlin Wall ended the Cold War. Phase 2, characterised chiefly by the twin forces of de-industrialisation and globalisation, ended this year with Covid-19. Now we’re on the threshold of Phase 3.
Nobody can know what this new chapter will look like, but an essential first step is to identify and discard long-held assumptions on anything from economic management to concepts of social fairness. We in the industrialised West will certainly have to overhaul our policies towards the developing world, where the coronavirus will be compounding endemic yet neglected crises ranging from climate change to unsustainable indebtedness.
The coming shift to a larger role for the state clashes with demands we’ve seen across Europe for less government
Let’s begin, though, with what we do know. It is already plain that despite all the criticisms of ‘Big Government’, those of most developed countries will soon be bigger than ever. State spending in EU countries averages around 50 per cent of the economy, and when corona’s true costs start to kick in the result will be even heavier tax bites.
On-Off lockdowns to combat the pandemic are beginning to threaten welfare arrangements and safety nets. With government-funded job furlough schemes giving way to outright redundancies, growing job losses look set to cascade into bankruptcies of employers large and small.
We don’t know how labour markets will respond, or what business models will emerge to accommodate social distancing, a rush towards robotics and AI, greater reliance on public services, and fractured education and training systems. Inevitably, these will all demand much higher levels of taxation from voters who will be unwilling, and often unable, to pay.
The coming shift to a larger role for the state clashes with demands we’ve seen across Europe for less government. Populist politicians have successfully challenged the policies of ‘the elite’ and pushed for greater empowerment of regions and even cities.
The rivalry between America and China may be eclipsed by Covid-19’s pressures or enflamed
Adapting Europe’s political economy to the ravages of Covid-19 is hard enough, and the tensions that are already apparent risk being dangerously exacerbated by populists during the spate of national and local elections scheduled for 2021 and 2022.
Although effective vaccines are on the horizon, the reality is a Stop-Go world for at least the next two or three years. In that time, the global economy will change radically. Marked slowdowns in international trade and air travel will devastate all but the most resilient emerging markets.
The rivalry between America and China may be eclipsed by Covid-19’s pressures or enflamed. Perhaps the need to defend Africa, the Middle East, Central Asia, and Latin America against the pandemic – and to enlist most of mankind more effectively in the global warming struggle – will usher in a new era of North-South collaboration.
If the shock waves of the coronavirus can be harnessed to a geopolitical re-set, then its misery and grief will not have been for nothing. The question is whether Phase 3 can be shaped in ways that yield adequate answers.
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