As an international conference speaker, I am often asked, “What keeps you awake at night?” My consistent reply over the years has been: Pandemics. History is littered with catastrophic examples.
In a recent speech to private investors about the coronavirus, I warned them not to underestimate the virus’ ability to spread havoc in global markets. It could be far worse than anything anticipated. The potential for extensive, long-term damage is not limited to global supply chains, but also includes business and consumer confidence, with a global recession on the horizon.
The most alarming factor in recent times is the high level of complacency by public and private leaders about the risks of Covid-19. Despite doubts engendered by the low fatality rate, the bottom line is that Covid-19 has killed over 7,500 people and infected more than 184,976, according to the World Health Organization. Deep concern is warranted and effective action indispensable.
March 2020 – and specifically March 11 – may mark the start of a new era. Firstly, on March 11, the market’s longest bull run in history ended, after almost exactly 11 years. According to economists, the Dow Jones average has officially entered bear market territory.
As the virus spreads, and global markets, trade contracts and international travel become more restricted, the forecast looks fairly dire for the immediate future, and potentially beyond. The Russia-Saudi Arabia oil spat that resulted in a historic drop in the oil prices further complicates the global forecast.
Secondly, on March 11, the WHO finally declared Covid-19 a global pandemic, after delaying doing so for mostly political reasons. In part due to excessive competing geopolitical interests in an increasingly fragmented world, a concerted international response to Covid-19 is still lacking. Consequently, the body count keeps mounting.
History may show that an earlier official warning could have catalyzed nations and societies to mobilize sooner and saved thousands of lives. Economies can recover but the dead cannot.
Thirdly, on March 11, US President Donald Trump announced a 30-day suspension of all travel from Europe, except from Britain [which days later was included in the suspension], subject to extension if needed. The suspension does not mark a formal breach in the transatlantic relationship despite years of growing divisions. However, one should not underestimate the considerable symbolism and costs implied by the flight suspension.
For many European leaders, it may strengthen the sense, and for some, the realization, that in an increasingly dangerous and fragmented world, Europe has to stand on its own. Whether Europe is able and/or willing to do so remains a subject of fierce debate. This will be particularly exposed after the crisis subsides and the numbers are tallied.
Italy remains on the front lines of Europe’s bloody struggle against the virus. Such dismal conditions have not been seen since World War II. Much of Europe is likely to follow suit but to what extent will soon be known as the race against time ensues.
In China, where Covid-19 emanated, the level of infections and deaths has decreased. China has been credited internationally for effective enforcement.
However, in the long term, China will also have to bear historical burden for the spread of Covid-19. When initial signs emerged last December of a disease similar to the severe acute respiratory syndrome (SARS), authorities reacted with a combination of gross misfeasance and wrongdoing. The failure to tackle the threat immediately resulted in catastrophe at home and pandemic abroad.
What is certain is that life will change forever, particularly for those hardest hit. The unnecessary and high loss of life resulting from reckless decision-making in China will result in drastic changes globally – in the economic, political, diplomatic, social and security spheres.
Despite attempts at damage control, the reputation of China’s Communist Party leadership has been clearly exposed – particularly for President Xi Jinping and his strict, top-down approach to power. Whether it will eventually change how ordinary Chinese citizens view their leaders remains an open question. Much will depend on China’s economic performance after the crisis subsides. After all, the legitimacy of the Communist Party leadership is largely based upon it.
Above all, it is important never to underestimate the determination of the Communist Party leadership to retain power at home and exert influence abroad. It is willing to counter any existential threat in any way possible to maintain order, prevent national fragmentation and promote prestige abroad, whether in dealing with Hong Kong, Xinjiang, Tibet, Taiwan or a virus.
Despite enormous economic advances over the past 40 years, China’s system remains brittle and vulnerable. China’s leaders know this but will not admit it publicly; it further strengthens their determination to remain in power at any expense.
Outside China, the credibility of President Xi and the Communist Party leadership has been affected, particularly in the West and, above all, in the US. One of the few issues, if not the only one, uniting Republicans and Democrats, even in a divisive election year, remains China. Politically, Covid-19 further strengthens those advocating that the US decouple from China economically. Their logic is, not only did China give us the virus but now we have to depend on Chinese masks to combat it.
In the US presidential elections, Covid-19 will be politicized for maximum gain in a highly partisan environment. Despite assurances, the White House is struggling to structure a coherent message due to conflicting signals from President Trump and administration officials.
As more Democrats rally behind a single candidate in a drastic reversal of fortune for Joe Biden, President Trump may be confronting a far more united Democratic opposition on November 3. A Democratic takeover of the White House and Senate cannot be ruled out if the Oval Office dissonance continues and the Covid-19 pandemic worsens exponentially in the absence of effective executive leadership.
Marco Vicenzino is director of the Global Strategy Project.