This crisis may be the worst since 1929, said the director of the International Monetary Fund (IMF), Kristalina Georgieva: “A few months ago we thought that 160 countries of the 189 members would grow, and now we believe that 170 will be in recession, “he concluded.
The health crisis is something never seen for most of the world’s inhabitants and something similar could happen with the economic situation.
Many international experts, such as the Israeli Yuval Noah Harari, believe that the situation forces leaders to make important decisions in a very short time.
“Perhaps the two most important options are whether we face this crisis through nationalist isolation or if we face it through cooperation and solidarity,” said Harari.
The first measures of the countries was to close themselves, prohibiting the export of sensitive or priority goods.
Others let the prices of some goods rise and ended up redirecting the goods to the highest bidders.
In this unleashed battle, those countries without industry and without money could lack the essential goods, such as respirators, beds or masks.
How to act
Most of today’s big problems are global and are tackled with national or at least regional solutions, and thus the lack of coordination and overall strategy makes success less likely.
Climate change, coronavirus, pollution, migrations, hunger, are global problems that will need a global solution.
The Group of 20, known as the G-20, is a relatively formal attempt by a world government. Will we go towards that, towards a form of global government?
Current experiences at the regional level are not very good to think about regionalization.
The European Union did not work in a coordinated way and the idea – rejected by Germany – of issuing “coronabonos” to finance the extra expenses that the fight against the pandemic consumes may strike the European spirit of solidarity.
Harari points out that such rejection may also encourage some countries to leave a “selfish” bloc.
In our region, Mercosur was absent in terms of coordination and the two largest countries (Brazil and Argentina) followed their own policies, while Uruguay shows interesting numbers of low infections and deaths.
As Harari says, if the triumphant model is solidarity, it will be possible to establish how it was, after the great crises, that new organisms were born to generate world governance.
On the other hand, if the triumph is of nationalisms, some deviations may arise in governments that deepen cybercontrol and restrict some individual freedoms.
And the economy?
After 1929, the years that came were bad for the world at large. Argentina suffered the coup d’état against Hipólito Yrigoyen and the “infamous decade” ensued, a mixture of de facto governments, fraud and impoverishment of the country.
Latin America did not fare much better. Our country was disengaged from world international trade and never again played an important role.
It was a crisis of great changes on the world stage that culminated in its reflection after the end of the Second World War.
After 1929, the United States applied the new deal, Keynesian policies implemented by the then President Theodore Roosevelt in 1933 and which were based on an increase in public spending – a great plan for public works -, financial reform and social aid for the poor and unemployed.
Now unemployment will grow and the recession will be tough. The duration of it will depend on the time that the “coronacrisis” remains active.
The differences of that crisis and the current one are:
- The United States took world leadership and today its president (Donald Trump) is managed with a slogan that says “America first”. In 2021 there could be another president in the White House.
- Europe was in crisis and had no money to spend. Today the bloc has resources, but Germany could maintain the attitude of not intervening strongly.
- In that crisis, the role of Asia was not the protagonist and today it can be fundamental. China is undergoing changes to boost its internal market, although it is an exporting power and, with weak international trade, its economy could suffer. The China-Japan-South Korea trio may have a strategic role in the exit.
The Nobel Prize for Literature Doris Lessing maintains that this time will be remembered as that of the society that knew the most about itself, but that this knowledge had not served to make it better. “This is a time to create or break,” said another Nobel laureate, economist Joseph Stiglitz.
Hopefully we can create something new and better and that, as Lessing said, we can learn from past experiences.
* Professor at the National University of Córdoba and the Catholic University of Córdoba. International Trade Specialist