Arvind Subramanian
The Covid-19 crisis augurs three watersheds: the end of Europe’s integration project, the end of a united and functional America, and the end of the implicit social compact between the Chinese state and its citizens. As a result, all three powers will emerge from the pandemic internally weakened, undermining their ability to provide global leadership.
Start with Europe. As with the 2010-12 eurozone crisis, the bloc’s fault line today runs through Italy. Drained over decades of dynamism, and fiscally fragile, it is too big for Europe to save and too big to let fail. During the pandemic, Italians have felt abandoned by their European partners at a moment of existential crisis, creating a fertile ground for populist politicians to exploit. The images of Bergamo’s Covid-19 victims being carried in body bags by military convoy to their anonymous, unaccompanied burials, will long remain etched in the Italian collective psyche.
Meanwhile, when addressing how to help pandemic-stricken member states, the European Union’s technocratic, ostrich-like elites lapse into the institutional alphabet soup – ECB, ESM, OMT, MFF, and PEPP – that has become their default language. The continent’s leaders have faltered and dithered, from European Central Bank President Christine Lagarde’s apparent gaffe in March – when she said that the ECB was “not here to close spreads” between member states’ borrowing costs – to the bickering over debt mutualization and Covid-19 rescue funds and the reluctant, grudging incrementalism of the latest agreement.
Suppose, as seems likely, that the successful economies of the EU core recover from the crisis while those on the bloc’s periphery falter. No political integration project can survive a narrative featuring a permanent underclass of countries that do not share their neighbors’ prosperity in good times and are left to their own devices when calamity strikes.
The United States’ decline, meanwhile, is over-predicted and under-believed. Even before the Covid-19 crisis, key US institutions signaled decay: the incontinent presidency of Donald Trump, a gerrymandered Congress, a politicized Supreme Court, fractured federalism, and captured regulatory institutions. Deep down, however, many of those Americans who see the decay reject the thesis of decline. They remain convinced that the country’s thick web of non-state institutions and underlying strengths – including its universities, media, entrepreneurial spirit, and technological prowess, as well as the global supremacy of the dollar – provide the resilience America needs to maintain its pre-eminence. But so far, the world’s richest country has by far been the worst at coping with the pandemic. In rapid succession, therefore, America’s credibility and global leadership have been buffeted by imperial overreach (the Iraq war), a rigged economic system (the global financial crisis), political dysfunction (the Trump presidency), and now staggering incompetence in tackling Covid-19. The cumulative blow is devastating. Many of these pathologies in turn stem from the deep and poisonous polarization in US society.
Finally, there is China. Since the time of Deng Xiaoping, the country has thrived on a simple, implicit agreement: citizens remain politically quiescent, accepting curbs on freedom and liberties, and the state – firmly under the control of the Communist Party of China – guarantees order and rising prosperity. But the Covid-19 crisis threatens that grand bargain in two ways. First, the Chinese authorities’ terrible initial handling of the pandemic, and in particular their catastrophic suppression of the truth about the Covid-19 outbreak in Wuhan, have called the regime’s legitimacy and competence into question. After all, the social contract looks less attractive if the state cannot guarantee citizens’ basic wellbeing, including life itself.
Second, the pandemic could lead to an external squeeze on trade, investment, and finance. If the world deglobalizes as a result of Covid-19, other countries will almost certainly look to reduce their reliance on China, thus shrinking the country’s trading opportunities. And China’s Belt and Road Initiative is at risk of unraveling as its pandemic-ravaged poorer participants start defaulting on onerous loans.
By further weakening the internal cohesion of the world’s leading powers, the Covid-19 crisis threatens to leave the world even more rudderless, unstable, and conflict-prone. The sense of three endings in Europe, America, and China is pregnant with such grim geopolitical possibilities.
©Project Syndicate, 2020. Arvind Subramanian is a former chief economic adviser to the Union Government.