Too much punching, too little solidarity
Pedro Luiz Rodrigues
The pandemic of the new coronavirus is still running wild, terrorizing a good part of the planet, either because of the threat to people’s health or because of the damages it is beginning to inflict in the economy. The discovery of a vaccine and its mass production, to ensure people’s immunity, will take from six months to a year. The damage to the economy, on the other hand, promises to be much longer lasting.
If the international crisis of 2008 – which had its origins in financial difficulties – was disastrous, it represented nothing more than a recession, the final stage of an economic cycle. What is now in course is something much more serious: we are on the verge of depression.
The first signs of the disaster are already being felt, with greater intensity in western countries. The deactivation of the productive machine, high unemployment, the need to transfer a gigantic mass of public resources to ensure a minimum survival income for millions are only some of the immediate and most evident consequences.
Linked to these consequences comes accounts breakdown and debt accumulation – by governments, companies and individuals – and a tendency towards disorientation of relative prices. In Brazil, the immediate symptom was a drop in revenue – only at the federal level, the decline was 30% in April, compared to March. Globally, global trade and investment links are already being hit.
The lack of medical equipment and materials recently experienced by some countries, in the crucial emergency periods of Covid-19, alerted governments, companies and citizens to the insecurity represented by the fact that essential items are not being produced within their own national borders.
If this concern persists, it could become a trend and lead to the disruption of globalized production chains and, as a result, the abandonment of the greatest achievement of productive logistics in recent decades – the ‘just-in-time’.
Worst, the growing tensions between the United States and China hint no easy solution at view. Each day new irritants are agregate into the bilateral dialogue, widening the misunderstanding gap between the two countries. What started two years ago as a trade dispute, is heading towards a very serious arm wrestling between the two main economic powers in the world.
Last week, Robert E. Lighthizer, the US trade representative, wrote he realized that the risks are becoming greater than the incremental efficiency gained from global outsourcing. He threw sharp barbs, particularly towards China. It is the aspect of ‘beating’ that I wanted to refer to in the title of this article, where excesses of any kind, in particular verbal ones, are raw materials that are very much appreciated by the manipulators of social media. These adulterated and expanded inputs are uncritically absorbed by public opinion which, as Walter Lippman taught us, is much more guided by emotion than by logic.
There is no doubt that the big engine at work at the moment, in this machine of producing tensions on a global scale, is of a political-electoral nature, with a view to the mid-term elections that will take place in the USA in November next.
Interviewed a few days ago by Beijing’s Global Times in Stanley Roach – economist at Yale University and former president of Morgan Stanley Asia – expressed his concern at the adhesion of a significant portion of American public opinion to the orchestrated White House campaign against China. He mentioned “a leak in the Republican Party’s political strategy that was written by some consultants for the presidential campaign”, which he had read very carefully: Its basic guidance on the new coronavirus policy is: do not defend Trump, but attack China. The Republican strategy in the next presidential election campaign is very much focused on attacking China, he said.
Nobel Prize economist Paul Krugman also did not use half words. For him, President Trump is not finding an easy way out of the problems created in the area of health: his lack of patience with hard work to contain the pandemic may be precisely what makes the situation more serious. If nothing is done, warns Krugman, it will not be just a recession ahead of us, but a deep depression.
In addition, the spread of anti-China rhetoric is already fueling more extreme political reactions in third countries, hampering the indispensable global political collaboration to contain COVID-19.
Countries like Brazil should act with caution. We have concrete interests in maintaining a good relationship with China, not only our main trading partner, but also the partner with whom we have a trade surplus large enough to cover the deficit in the service account.
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