The Political Implications of the Covid-19 Pandemic in China and Elsewhere

We will be brutally blunt right from the beginning: those who assume the COVID-19 crisis will not change the worldwide political landscape dramatically are deluding themselves. From causing problems directly to making already-existing ones crystal clear, a calamity such as the one which affected humanity in 2020 cannot simply go by consequence-free politically speaking.

Let us start by briefly addressing some of the problems with obvious political implications that the COVID-19 situation has caused directly:

1. Supply chain disruption, plain and simple. Simply put, as the spread of the virus progressed and epicenters changed, a chain reaction inevitably took place. From bottlenecks in China to bottlenecks in China and the European Union and so on… the virus most definitely caused an import/export nightmare
2. Widespread economic shutdown. The authorities found themselves in a bit of an economic predicament with respect to how to handle the situation. Do you try to keep the economy running and risk letting the virus spiral out of control, with it possibly crippling the medical system or do you implement strict “whatever it takes” quarantine measures, knowing that you are causing unprecedented economic shutdowns? As time passed, the science became clear, in that aggressive quarantine measures were the only way to go, with even initially “skeptical” nations such as the United Kingdom (that believed ultra-aggressive quarantine can be avoided) changing course
3. Unprecedentedly abrupt (temporary or even permanent) job loss. Millions upon millions (… upon millions) of individuals from all over the world found themselves in one form or another of unemployment. In some cases temporary/technical unemployment, in other cases permanent unemployment, with them no longer having a company to return to. Governments and central banks did indeed intervene so as to save as many jobs as possible but at the end of the day, it is difficult to do so when it comes to companies (for example tourism-related ones) which saw their income source dry out completely overnight
4. Dishonest competition among countries for medical equipment due to bottleneck issues in exporting nations such as China and India. From political pressure to secret government agency involvement so as to secure medical supplies, countries essentially outbid to the point of out-bribing one another, with the United States representing a textbook example to that effect, much to the frustration of even long-time allies such as European Union nations

The list could continue but we do not believe it is necessary, in light of the fact that it already paints an accurate enough picture of reality. As such, let us take things one step further and also focus on some of the most important indirect political implications involved, such as:

1. Increased pressure being placed on companies that rely on imports to a great degree to move as much as possible in terms of production back home. Few can deny the fact that the 2020 developments have made one aspect perfectly clear, the fact that at least as far as strategic products are concerned, over-optimization and increasingly complex supply chains (with components imported from a wide range of different countries and even the smallest of disruptions throwing a wrench into the entire endeavor to the point of making it impossible to deliver the final product) represent systemic risks. As such, politicians are being remarkably firm when asking for dramatic changes in this respect
2. It should come as no surprise that “selling” a generalized quarantine isn’t exactly a simple job for politicians and as such, they had to reach for their proverbial wallets (more specifically, taxpayer wallets or central bank “printers”, depending on how you choose to see it… arguably both) and essentially promise mass assistance in an effort to increase compliance
3. In an effort to save as many jobs as possible, entire industries have essentially been bailed out, with the general public however (skeptical after the bailouts which came after the Great Recession) demanding that there be strings attached. For example, again, that companies which have been saved by the proverbial taxpayer return the favor by moving as much in terms of production and adjacent services back home as possible so as to create jobs
4. When it comes to international relations, yes, the virus has caused problems directly (as mentioned in item #4 of the previous list) but also exposed existing vulnerabilities. For example, it made it clear that yes, Donald Trump was being more than serious with his “America First” agenda and the same principle was valid with respect to other geopolitical actors. Therefore, a more than valid case could be made that the COVID-19 crisis exposed serious flaws in international cooperation and, as if that was even necessary anymore, the fact that the world is in an undeniable isolationist trend

Did the start of 2020 only expose negative elements?

Most definitely not, there have of course also been success stories involving impressive cooperation but after drawing the line and trying to let’s say assess the net result, the scale tends to unfortunately be tilted rather aggressively toward the negatives. Again, many of them were hardly unknowns to the average geopolitical trend observer in a post-2016 framework (with the Brexit vote and 2016 US elections in the spotlight) but this much is certain: globalization is most definitely under attack.

Can it survive?

That remains to be seen. There are undoubtedly very strong forces which are working toward maintaining the current political status quo (companies and politicians who understand that even with its many imperfections, the benefits of globalization outweigh the cons) but on the other end of the spectrum, there are mounting negative ones determined to push humanity in the opposite direction, especially in light of the fact that 2020 is an election year in key jurisdictions such as the United States. Historically speaking, the ChinaFund.com team hopes the latter forces will prove to be unsuccessful because if there is one thing history books have taught us, it’s that widespread isolationist tendencies don’t exactly tend to lead to positive outcomes. Or, as a conclusion: hope for the best but prepare (hedge) for the worst.