The global economy will not return to what it was until all countries have brought the pandemic under control – 09/02/2021 – Ian Bremmer

One year after the start of the pandemic, the health effects of Covid-19 speak for themselves: more than 105 million people worldwide are known to be infected and more than 2 million have died.

The good news is that effective vaccines are on the way. The bad news is that for the next 12 months, at least, what we see ahead is an unstable recovery that will start, stop and start over, with all the economic, social and political complications that it entails. .

It is clear that some countries – and certain segments of society in those countries – are better equipped to deal with whatever comes their way. And that is precisely the problem now, when we begin the slow path to the new normal. K-shaped recoveries are worrying for markets, but K-shaped recoveries for countries are likely to be much worse. See why.

To begin with, the uneven recovery process will accentuate the disparities within countries. In developed economies, the virus disproportionately affects the incomes of low-income workers and the service sector; in many cases it also means that it is women and non-whites who are most affected by the economic crisis.

Countries that have the financial means to help their citizens are in a privileged position, but even in the United States, the richest country in the world, several rounds of stimulus have been delayed by political games. And it’s far from certain that what President Joe Biden and Democrats end up passing in Congress will be enough to help the country’s most vulnerable for more than the next few months.

In Europe, while the pandemic relief package has been assembled in a short time, the money will not be distributed for real until the second half of this year. Europe and the United States have both struggled with populism in recent years, fueled both by frustration with establishment politics and fears of an increasingly uncertain future. Insufficient help to those who need it most now can prolong these problems for much longer.

A similar story is playing out in developing economies, with the most economically vulnerable sectors bearing the brunt of the economic impact – a reality that will intensify pre-existing class, ethnic and religious tensions in many countries.

One fact that compounds these challenges is that developing economies do not have the same resources to launch major stimulus efforts, nor strong social security networks, a problem that particularly affects countries in Latin America and the Middle East. and other regions.

Countries may be tempted to borrow to survive the immediate challenges posed by Covid, but this, in turn, can put them under pressure if these resources are not managed prudently or if the global economy takes longer than expected. . Something that is quite possible, given the new mutations in the virus that are spreading.

The unequal recovery between countries poses its own problems. Countries that do not have their own vaccine production capacity – nor the resources to purchase vaccines directly from suppliers – will take longer to receive vaccines.

The Covax distribution initiative is helping, but it will only gain strength after rich countries vaccinate a significant portion of their population. The delay in immunization means more restrictions on travel to poorer countries, preventing them from breaking out of the economic hole they find themselves in, especially in the case of countries that depend on remittances.

The inability to make much progress in immunizing its population also means that many of these countries will be less attractive as tourist destinations – a particular problem for countries like those in Southeast Asia, whose economy and the population depend on tourism.

Some may wish to downplay these concerns, seeing them as issues that affect more specific countries than the whole world. Anyone who makes this argument would do well to remember that, in a globalized world like ours, the difficulties of developing countries have real side effects on other countries. Our global economy will not return to what it was before until all countries are able to control the pandemic.

Bad as 2020 is, in terms of the global fight against the pandemic, the economic response has been almost universally robust. But as the recovery gains momentum and the health crisis becomes less acute, economic and political responses will become more uneven. This will complicate not only our domestic politics, but also our geopolitics. Policymakers would do well to start taking this into account.

Founder and Chairman of Eurasia Group, an American political risk consultancy firm, and columnist for Time magazine. Clara Allain

LINK PRESENT: Did you like this column? The subscriber can release five free accesses from any link per day. Just click on the blue F below.

Leave a Reply

Your email address will not be published. Required fields are marked *