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COVID-19 AND THE WORLD ECONOMY

IN THE LONDON Review of Books, April 16, 2020, historian Adam Tooze’s “Shockwave” offers insights on the Covid-19 pandemic’s consequences for the world’s economy. Here are tidbits selected from his thoughtful 4897 words.

Adam J. Tooze, London-born 1967, British historian, Professor at Columbia University, Director of the European Institute. Previous posts include those at Jesus College, Cambridge, and Yale University. Photo from libraire mollat.

Tooze is the author of Crashed: How a Decade of Financial Crises Changed the World, Penguin, 2019. He’s also a frequent contributor to the London Review of Books.

Three Economic Hubs. When writing about the world economy, Tooze observes, “The three great centres of production, exchange, and corporate activity are the US, China, and the Eurozone…. These economic hubs are tied together through flows of trade, organised through complex supply chains that span the globe.”

Their Weaknesses. Tooze continues, “Each of the three hubs has characteristic weaknesses. The worry about China is the sustainability of its debt-fuelled economic growth. The basic weaknesses of the Eurozone are that it still doesn’t have a backstop for its rickety banking system and it lacks a shared fiscal capacity; what’s more, Italy’s finances are so weak that they continually threaten to upset European solidarity.”

He says, “In the US, the national institutions of economic policy actually work: they demonstrated this in 2008 and are doing so again. The Fed and the Treasury exert a huge influence not only over the US economy but the entire global system.”

However, Tooze notes, “The question is how they stand in relation to a profoundly divided American society and how their technocratic style of policymaking is received by the know-nothing nationalistic wing of the Republican Party and its champion in the White House.”

Globalization and Covid-19. Last month’s world economic panic, Tooze says, “was the realisation that Covid-19 has exposed all three weaknesses simultaneously. From the point of view of a bewildered EU, both Trump’s America and Xi’s China looked like they were putting the priority of globalisation in question.”

An Analog to Climate Change. Even as the coronavirus news trickled out of China with the new year, Tooze says, “… Trump and his adherents had no more time for the ‘Wohan virus’ than they did for climate change.” Even at the G20 meeting in Riyadh, Saudi Arabia, February 22–23, 2020, “All Trump’s minions wanted to talk about were the lessons in entrepreneurialism that Europe’s laggards might learn from America”

“That same weekend, however,” Tooze recalls, “the news from Europe hit home. Beijing might be winning its war against Covid-19, but in Italy the containment strategy had failed.… It was set to be a typical Eurozone fiasco.”

And, in the U.S., “Trump remained obstinately unconcerned.”

Forecasting? Tooze advises, “Forecasting at this point is little more than a guessing game. What is clear is that the virus has become a brutal test of the ability to formulate, design, and implement a coherent response to crisis.”

Tooze writes, “What we are witnessing in the American response to the crisis, more than the flare-out of Trump, is the gulf between the competence of the American government machine in managing global finance and the Punch and Judy show of its politics.”

And once the crisis is over?

Tooze says, “We will somehow have to patch together China’s one-party authoritarianism, Europe’s national welfarism, and whatever it is the United States will be in the wake of this disaster.”

And, once more, the London Review of Books provides provocative insights. ds

© Dennis Simanaitis, SimanaitisSays.com, 2020

4 comments on “COVID-19 AND THE WORLD ECONOMY

  1. Mark W
    April 15, 2020

    Another accurate (and profoundly distressing) summary. Also a new nickname for republicans (“know nothing nationalists”).

    “…know-nothing nationalistic wing of the Republican Party and its champion in the White House.”

  2. carmacarcounselor
    April 15, 2020

    And that “champion” continues his trademark combination of denial of responsibility, blame-shifting, and praise currying; cutting funding to the WHO, and directing that stimulus checks have his name on them, so that the gullible no-nothing sheep who idolize him think it was he who gave them the money.

    • simanaitissays
      April 15, 2020

      Agreed. A vignette in this regard: Earlier today I posted a tweet of protest over the WHO matter, citing my “I am embarrassed” (http://wp.me/p2ETap-6QP). At last check, two people commended my tweet by retweeting. Two others (car guys as well) said we should get out of the UN.
      Geez. November can’t come soon enough.

  3. Grey McGow
    April 15, 2020

    I’m betting on Trump not the internationalists.

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