“The economic repercussions of the coronavirus pandemic must not be understood as an ordinary problem that macroeconomics can solve or alleviate. Rather, the world could be witnessing a fundamental shift in the very nature of the global economy,” writes Branko Milanovic, Senior Scholar at the Stone Center on Socio-Economic Inequality at the CUNY Graduate Center and a Professor at the London School of Economics, in his column for Foreign Affairs magazine.
He goes on to say that “the world faces the prospect of a profound shift: a return to natural- which is to say, self-sufficient – economy. That shift is the very opposite of globalization. While globalization entails a division of labour among disparate economies, a return to the natural economy means that nations would move toward self-sufficiency.”
Milanovic also argues that “if national governments can control or overcome the current crisis within the next six months or a year, the world would likely return to the path of globalization.”
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He further says that “the longer the crisis lasts, and the longer obstacles to the free flow of people, goods, and capital are in place, the more that state of affairs will come to seem normal. Special interests will form to sustain it, and the continuing fear of another epidemic may motivate calls for national self-sufficiency.”
“In the current crisis, people who have not become fully specialized enjoy an advantage. If you can produce your own food, if you do not depend on publicly provided electricity or water, you are not only safe from disruptions that may arise in food supply chains or the provision of electricity and water; you are also safer from getting infected, because you do not depend on food prepared by somebody else who may be infected, nor do you need repair people, who may also be infected, to come to fix anything at your home. The less you need others, the safer and better off you are,” Milanovic adds.
As for the consequences of the pandemic, Milanovic says that “the human toll of the disease will be the most important cost and the one that could lead to societal disintegration. Those who are left hopeless, jobless, and without assets could easily turn against those who are better off”, and adds:
“Already, some 30 per cent of Americans have zero or negative wealth. If more people emerge from the current crisis with neither money, nor jobs, nor access to health care, and if these people become desperate and angry, such scenes as the recent escape of prisoners in Italy or the looting that followed Hurricane Katrina in New Orleans in 2005 might become commonplace. If governments have to resort to using paramilitary or military forces to quell, for example, riots or attacks on property, societies could begin to disintegrate.
He concludes that “advanced societies must not allow economics, particularly the fortunes of financial markets, to blind them to the fact that the most important role economic policy can play now is to keep social bonds strong under this extraordinary pressure.”
(Novi Magazin, 27.04.2020)
This post is also available in: Italiano