by Dr Stephen Fletcher
The survival of humanity as we know it is being challenged by the Covid-19.
The current global state of our public health MUST take centre stage in our development. This is the time to fundamentally re-engineer our social, economic and health systems/infrastructure. This period requires critical visionary and people-centred leadership at all levels of society. While recognising our fundamental responsibility for self-protection and guaranteeing our very lives, of equal importance is the sovereign role of governments to protect our peoples and societies. Governments were formed to take collective actions, to undertake to do the collective important things which need to be done for our collective survival; things which we cannot or unable to do as individuals. So, while acknowledging our solo responsibilities, our governments, must do, what we elect them to do, inter alia, the protection of the people, in all forms, in this globalised world.
The outbreak of the Covid-19 is proving to be disruptive not only to the Chinese economy but to the global economy. Just look outside of China, in the UK, there have been reports of numerous flight cancellations; leading to the collapse of Flybe (a subsidiary of British Airways), in New York, the financial markets suffered a meltdown, of a type not experienced since 2007/08, some experts are arguing. Bespoke Investment Group told clients, “Barring the financial crisis, these sorts of swings haven’t happened in the past 30 years.” The Democratic debates have changed the format – no audience. Sporting games are being played with empty stadiums.
Italy is on lockdown, as the number of persons infected and dying increase. In fact, it is reported that Italy is the most infected and affected country only second to China. The number of countries and persons affected by the virus is increasing at an alarming rate. As a consequence, in most countries the response has been swift and decisive; airlines are cancelling flights, cruise ships are staying in ports, or sailing the oceans bypassing ports, with signs, exclaiming “No Entry – you are Not Welcome.”
A few countries in the Caribbean region are reporting single digits infection, to date. This is expected to worsen, by the time this article is published. The advent and “migration” of coronavirus, are some fundamentals of culture, economy, social gathering, learning, etc.
The world has become so globalised, so integrated, that what happens in one country, affects not only the bordering countries, but countries far and wide. We are all networked. The pace of change is swifter, deeper, and wider, than ever before. At this time the global and national economic impacts are uncertain, making it difficult for economic policymakers to provide appropriate public policy responses. However, what is certain is that Covid-19 represents a significant external economic shock, of earth-shattering proportions; impacts as we have not experienced in decades. Such shocks include shocks to demand, government expenditure, supply chain, costs, sectors, whole economies. At some point, in this unfolding health shock, the epidemiological scenarios would have to be modelled into an economic model, in order to evaluate the real economic impact of Covid-19 on the globalised world, in the short, medium and longer-term.
It’s not Anti-Globalisation; it’s a call to recognise one of the downsides of an ever globalising world.
The impact of Covid-19, in such a short period of time, reminds us all of the inter-relatedness of our countries and peoples.
Up to December 2019, the dominant global narrative, among “globalisers” was that globalisation had produced significant material and financial benefits for all of mankind. The economic growth mantra emanates from the “North” directed to the “South”, suggests that we (developing countries), join the global value-chains, in order to reap the benefits of; economic growth and prosperity or continue to exist in poverty. In fact, globalisation was put-forward, as the panacea for economic growth, poverty alleviation, prosperity and development.
In the same tone, spirit and fervour, we were “sign-posted” to The People’s Republic of China, as the shining example of the benefits to be had from a globalised economy and a globalised world, while North Korea is held up as poster-child of economic and technological failure.
On 29 December 2019, the globalised world awakened to a sneeze of the roaring lion, with the most urgent, significant and life-threatening issue of our times; the outbreak of Novel Coronavirus Disease, now rebranded, Covid-19, which occurred in the Chinese city of Wuhan. In short order some 11 million persons were quarantine; stadiums, exhibition halls, etc., begun to resemble, hospitals or military barracks. Between the global notification of the outbreak of the virus, by Beijing and on March 9, the virus migrated to over 110 countries, with over 114,448 (over the estimated population of Grenada) infected persons, 4,026 dead and 64,156 persons have recovered, thus far. On 9 March, the Italian Prime Minister (Conte) announced that as of 10 March all of Italy would be under total lockdown, affecting some 60 million people. World health experts are beginning to consider a world, in which many more countries would be forced to implement, this biblical measure of quarantine.
The rate of acceleration and migration of the Covid-19 is like no other technological or trade, virus or any other form of the elements of globalisation, that have experienced thus far. The global economic impact has been swift with dire health and economic consequences. Up to 1 December 2019, when one looks at Hubei Province, it was a province, bustling epicentre of economic vibrancy. It is now a “sleepy” rural looking town of insignificant proportions, as factory after factory closed their humming plants, transportation came to a screeching halt and the police became border patrol agents around the province – a city quarantine. The Covid-19 has created major economic disruptions to the global supply chains and much human deaths and suffering. This is possible because the People’s Republic of China is the global economic centre.
On 9 March, Wall Street was forced to halt trading as the financial markets collapsed around the world. The OECD, in its 2 March 2020, interim economic assessment, declared, that the world economy is at risk, because of coronavirus. But, most importantly, because it is, affecting the global economic epicentre (my emphasis).
How Did it Happen?
Within weeks of the quarantine of Wuhan, the world began to feel the real power of China. The People’s Republic of China, and to a lesser extent India, was the recipient of massive amounts of Western Capital Investment, seeking mass growing markets, cheaper products and an intelligent but cheap workforce, led by the United States. This enormous transfer of investments, which occurred, was driven by the economic philosophy, labelled as “Out-Sourcing, Foreign Direct Investment – FDI”. By “out-sourcing (the buzz word of western development experts and economists of the 1990s), western capital, has inadvertently provided the mush needed economic catalysts, for spurring growth of the world’s largest and most efficient workspace. It is estimated that Foreign Direct Investment from the United States to China from 2000 to 2018 was valued at approximately US$117 billion.
Examples of the economic power-house call “China” are as follows;
- 2019, the PRC, consumed 80% of global increase in oil supply,
- From the 1990s China began to experience double-digit growth, while lifting other economies along with it, as it opened up to global trade
- By 2000, over 80% of the world traded with the United States of America, in 2018, the number dropped to 30%, during the same period the PRC took the top global trade position to 129 of the 190 or 70% of the trading world
- It is estimated that in 2019, Chinese Companies signed contracts totalling US$128 billion as part of its “One Belt, One Road Global Project”. No doubt this global policy represents significant export potential for the PRC.
- The PRC is the world-leading exporter of broadcasting equipment, computers, integrated circuits, telephones. While its major imports include crude petroleum, gold, iron ore, integrated circuits and cars
The PRC is a net exporter, compared to the USA
Table 1. China, USA and Germany Position in World Trade
|Countries||Import (Millions $)||% of Global Imports||Export (Millions $)||% of Global Exports|
|Source: UN Comtrade|
As the novel coronavirus took hold on the People’s Republic of China, the global supply chain for all types of products, begun to grind to a halt. The above table certainly explains why this was inevitable. It therefore means that the over 129 countries that currently conduct trade with China, would be severely affected. The entire global value chain would be grinding to a halt.
The significant power-house position which the PRC occupies in the global trade value chain means that even if many of the Small Island Developing States (SIDS) which are not too integrated into the PRC value chain, would experience the full force of the negative impact of the screeching PRC and recessionary global economy. This is so, because the economies to which we trade, such as the USA, United Kingdom, Canada, Germany, etc. are heavily dependent on imports and exports from the PRC, as well as the health of the economy of the PRC. As one of Grenada’s former Prime Minister, Maurice Bishop (1979–83), while referring to the interlinkages between our economy and that of the developed world, stated on numerous occasions, “When the developed world sneezes, we (developing countries) catch the flu. It is now said that when China sneezes, we catch Covid-19.”
What are the likely public health policy reactions to Covid-19?
According to Robin Wright of the New Yorker, 2 March 2020 citing Lauren Sauer, of the Johns Hopkins Office of Critical Event Preparedness and Response There are three distinct responses to health emergencies that have been misused interchangeably amid the coronavirus crisis. They are
- Social distancing, a term that has just entered the modern lexicon, is voluntarily keeping a few feet away from other people or opting not to go to mass gatherings based on the recommendation of public-health officials. It is the least restrictive.
- Quarantine, a practice first recorded in the Book of Leviticus in the Old Testament, is invoked because of probable exposure to illness. People are removed from the general public for a period of time—voluntarily or by legal order—to see if the disease develops. The word quarantine dates to the Black Death plague’s spread along the Mediterranean in the 14th century, when governments imposed isolation for 40 days—or quarantine in Italian. The Black Death killed some 25 million people, about a third of the European population at that time.
- Isolation is the most restrictive of the three practices. Isolation occurs after a person has symptoms or is confirmed to have a disease by a lab test. “In quarantine, you’re waiting to see if you develop the sickness,” Sauer said. “If you’re in isolation, you are sick and waiting until the illness resolves.”
What to expect
- More countries are likely to quarantine
By 23 January, the entire Huwan province of an estimated 11 million people was placed under total lockdown. An estimated 60 million persons in Italy were placed under quarantine. In the USA over 5,000 persons are under self-quarantine and thousands more are under compulsory quarantine.
This growing immobility of the global population is expected to slow economic growth in developed countries, which are affected by Covid-19, as already experienced in the USA. This slowdown, in turn, would migrate to other countries, like Grenada, that is heavily dependent on the US for tourism (2019, 47% of stopovers), United Kingdom (2019, 15.8%) and Canada (2019, 11.0%).
- Global recession is on the horizon
Whereas the PRC evolved as the global manufacturing hub, the United States (Wall Street) remains the global financial centre. On 9 March, trading on Wall Street was suspended as the stock market crashed, plummeted as much as 2000 points or over 20.0%. Bloomberg (https://www.bloomberg.com/graphics/2020-coronavirus-pandemic-global-economic-risk/) has estimated that the coronavirus could cost the global economy as much as US$2.7 trillion. The Covid-19 comes at a time when some large-developed economies were becoming very vulnerable to marginal economic downturns, after emerging from lacklustre and declining performance in 2019.
In Japan, the world’s 4th-largest economy, growth contracted at a 6.3% annual rate in the fourth quarter. Industrial output fell sharply in December in both Germany (-3.5%) and France (–2.6%), the world’s fifth- and tenth-largest economies respectively. The United States, the world’s second-largest economy, appeared relatively resilient by comparison, but 2.1% real (inflation-adjusted) GDP growth in the fourth quarter of 2019 hardly qualifies as a boom. And in China – now the world’s largest economy in purchasing-power-parity terms – growth slowed to a 27-year low of 6% in the last quarter of 2019 (Stephen Roach, https://www.channelnewsasia.com/news/commentary/covid-19-coronavirus-impact-china-supply-chains-manufacturing-12466386
- Grenada’s economic growth could be severely affected.
Grenada’s ill-fated economic development paradigm, which significantly reliant on tourism from, Europe, USA, Canada and Germany. As these source markets suffer negative economic shocks, this would be transferred to the Grenadian economy. This expected reduction in tourism arrivals (cruise and stayovers) are expected to create a drag on the local economy, which would combine, with other heavy head-winds that were already heading towards Grenada’s direction would exasperate an already “laggard economy”. Therefore, Grenadians, look out for a slowing economy.
- The catalyst for digitisation and eCommerce.
The current health scenario brought on by Covid-19 is expected to result in social distancing. The current pandemic trajectory, indicates, that as global warming heats-up, mankind would be subjected to the increasing prevalence of “killer-viruses”. As a consequence, social distancing would become the standard public health protective mechanism. Notwithstanding, the need for consumption of goods and services, will not cease. Therefore, the mode by which we socialise in order to acquire or satisfy our needs would change. Already, the advent of the internet and its corollary of services such as eCommerce, Etrade, etc., have provided alternative modes for conducting businesses. The rise of Amazon and other trading platforms are “proof of case” of how we can satisfy some of our wants, without leaving our desks, or houses or offices.
At the local level, The Food Fair has led the way in its launch of its eStore, where they provide a web store, linked to their supermarkets (Food Fair). Given the current global trajectory in retail businesses, one expects the holding company (Jonas Browne & Hubbard Ltd) to expand this service to cover all its departments.
Additionally, in the medium to long-term, restaurants would have to rapidly move up the digital food-chain and reorganise themselves to become service delivery operations.
This is a phrase which came to life in the early 2000s and especially following the devastation of the World Trade Centre. Currently, our concept of and culture as it relates to work, goes beyond, what we do but where we do it. For many of us, if we are not “dressing-up” and travelling to town”, we are not engaged in serious work. Real, work is associated with going into an air-conditioned building, with a security guard at the door, and tens of persons, like you, entering in the morning and leaving in the evening. This must of necessity change. There are many tasks which are currently conducted in “offices” can be accomplished at the comfort of our houses, as efficiently and effectively as going into the office, at an enormous cost.
- Genuine eLearning Plan.
This period, as unfortunate and unwelcome as it is, provides Grenada, with yet another opportunity to genuinely implement its eLearning programme. At this time a number of universities and colleges in the USA, are closing their “brick and mortar” doors and opting for online lectures. The St George’s University and The University of the West Indies have been using this tool for a number of years. Grenada can leverage their experiences in this regard.
- The future of money is now digital money
Social distancing is likely, in the short run, lead to consumers, adopting online trading, including purchasing of basic products. This growth in online businesses ought to be matched with the appropriate payment mechanisms, which is not necessarily using credit cards.
Additionally, consumers would be seeking to reduce their interactions and use of cash. The solution is to have digital currencies. This allows consumers to reduce their interactions with cash and handlers of cash
The spread of coronavirus represents the downside of globalisation.
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