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The world After Coronavirus

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Many believe the world after Coronavirus will be different. They hope there will be a more caring society, better social justice, fairer wealth distribution, and better climate control. Unfortunately, I do not believe any of these will materialise, the lock-down and sense of camaraderie which fighting Coronavirus has created around the world will dissipate as soon as the reality of life after the Coronavirus lock-down gets lifted.

The real economic pain that the world is going to face after Coronavirus is going to be a lot more severe, but unlike the Coronavirus which did not discriminate between, poor and rich, men and women, black and white,… this painful economic malaise does discriminate. It will hit the poor, women, minorities, children, generally the weakest members of society the hardest.

The millions of unemployed will not go back to work and it will take years for the economy to recover for the jobs to come back. Although governments are coming up with packages to help enterprises to keep them afloat, getting meaningful help to the SMEs is a lot more difficult and considering that they employ more than 48% of all employees in the USA and 60% in Britain and similar figures in the developed world, one can see what a mammoth task it will be to get the whole of the economy back on track.

Considering the massive economic and financial cost of Coronavirus plus the high level of unemployment that it will cause, unfortunately, instead of creating a global solidarity and cohesion, it will lead to more protectionism. Undoubtedly this will cause a more hostile trade environment and a reduction in world trade.

The US election is only a few months away and I expect the US and China trade relationship will become under more pressure than before. The two main drivers of this are; first the historic problem which was the cause of earlier trade disputes between them (the massive deficit in their balance of trade) and second is political due to the US up coming presidential election. The US incumbent president was banking on his economic performance to win the election and now that all the economic progress is gone, he will need a scapegoat and China is the best candidate.

The combination of reduced economic activity, high unemployment and protectionism will create the perfect recipe for a great depression and unfortunately the current political and economical wisdom (looking at how they dealt with the 2008 banking crises), which is austerity and taxation, will only make the future economic crisis more painful than it needs to be.

 

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