CHANGE TO LIVE

“The storm will pass, humankind will survive, most of us will still be alive — but we will inhabit a different world,” prophesies author of the best-selling books Yuval Noah Harari, speaking about the consequences of the new type of COVID-19 coronavirus pandemic. The greatest revolution awaits us since the advent of life on Earth, he believes. Humanity must make two choices - between totalitarian surveillance and the empowerment of citizens, as well as between isolation on a national basis and global solidarity.

“For several years we have understood that in order to survive as a species and to keep the planet going we need to make draconian changes to the way we live, travel, consume and entertain. The coronavirus will noticeably accelerate this process and, possibly, will do what the mankind is not capable of doing for now willingly,” world-known trend hunter Li Edelkoort says.

In general, the demand for forecasts in this difficult time has grown significantly. But currently what we need the most is the qualified doctors and nurses, whose heroic efforts, often at the cost of their own lives, leave us hope that we have this very future.

Borders shut

The rapid spread of the new coronavirus has also become one of the biggest threats to the global economy and financial markets.

The sudden widespread halted economic activities, which turned out to be much more serious than the financial crisis of 2007-2008, as it simultaneously affected households, enterprises, financial institutions and markets - first in China, and now throughout the world. The only way to end the panic in 2008 was to reassure depositors and lenders that their money would be safe, for which it was only necessary to get governments to support the banks. Today's crisis is a public health disaster, and the only way to get cruise ships, hotels, and factories back into business is to stop the spread of the virus.

But as it turned out, no one is ready for this. Only three months ago, no one knew about the existence of COVID-19. Now the virus has spread to almost all countries, infecting about 1 million people that we know about, and many more that we do not yet know about. And this is not the limit.

The epidemic has destroyed modern society on a scale that most living people have never seen. The situation in Italy and Spain, which are considered prosperous in terms of living standards, is slipping into a humanitarian catastrophe - there are no empty seats in hospitals, there are not enough medications and medical staff. Doctors, because of the inability to save everyone, are forced to decide who lives and who dies. In the United States, which has taken a sad lead in the number of infected, hospital beds per capita are less than in Italy. It is hard to imagine what the situation may be in less economically developed countries.

In order to somehow stop the avalanche of infections, countries one after another began to close their external borders, stop the work of enterprises, organizations, transport and limit the movement of their citizens as much as possible. These measures can help fight the virus. But they are fatal to the economy.

Disappointing forecasts

Unlike the futurists with their entertaining prophecies, economists cannot use their imagination in this case. Their forecasts should be based on mathematically accurate calculations, verified algorithms and the experience of previous phenomena. But this is not all right just now. The situation in the global economy is deteriorating so rapidly that even the most reputable organisations have to rewrite macro forecasts almost every week.

For example, the Institute of International Finance (IIF) in early March already lowered its forecast for global growth for 2020 from 2.6 to 1.6%. This was due to a sharp decline in business activity in China in 1Q2020 due to aggressive quarantine measures. Assuming a recovery in subsequent quarters, IIF reduced its average annual growth from 5.9% to slightly less than 4.0%. The growth rate in the US was also lowered from 2.0 to 1.3%.

However, the situation changed dramatically soon. The initial shock in China, whose economy shrank more than a third in the first three months, grew into a much bigger shock for the rest of the world.

In addition, the price war with OPEC has contributed to growing stress in global loan markets. According to the results of 1H2020, the US (-0.4%), the Eurozone (-2.8%) and Japan (-, 5%) will be in a recession. China's annual growth, in turn, now expects a slowdown to 3.5%.

A drop in demand in China will be a disaster for many African countries, whose exports are highly China-oriented. Slowing trade, falling tourism and blocking borders also plunged Latin America's largest economies into recession.

As a result, in just two weeks, IIF lowered its global growth forecast to just 0.4%. And recovery can be very slow. Economists at Credit Suisse, Goldman Sachs, Bank of America, Morgan Stanley and other financial institutions have different forecasts when the global economy will begin to recover. The most optimistic one concerns the second quarter, the pessimistic one - the end of this year or the beginning of 2021.

G20 Summit and Interests

Despite the serious effect of the pandemic on all the countries of the world, until the last week there were practically no signs of a coordinated international response to this global problem. Countries have taken unilateral actions in the fields of health and monetary policy, sometimes competing, and often even harmful to others.

German leadership was furious to learn that Donald Trump was trying to acquire the German biopharmaceutical company CureVac in order to gain “exclusive access” for a potential coronavirus vaccine for the US. But it would be a mistake to assume that Germany does not put its internal interests above the global ones. EC had to threaten Germany with legal proceedings for violating the relevant EU law when Berlin tried to restrict the export of medical masks and other personal protective equipment to other European countries. France and The Czech Republic also had the same unpleasant events, which almost appropriated humanitarian aid from China to Italy.

The adverse actions of EU member states forced Ursula von der Leyen of EC to report the concerns publicly: “When Europe really needed an ‘all for one' spirit, too many initially gave an ‘only for me' response.” She had in mind not only a ban on the export of essential medical goods, but also the closure of borders, which led to delays in the transport of food and medical supplies, especially in Central Europe.

Finally, on March 26, G20 leaders (80% of global GDP) held an emergency video conference to work out a joint actions plan to combat the COVID-19 pandemic. The virtual summit was attended by the heads of countries representing different regions of the world, as well as the leaders of the World Health Organization, World Bank, International Monetary Fund and the International Labor Organization.

The external background for the summit was not favorable. Many feared that tensions between the US and China, as well as Russia and Saudi Arabia, could hamper consensus in the negotiations.

Before the summit, US President Donald Trump had repeatedly accused China of hiding information about the spread of the virus and insisted that it be officially called "Wuhan virus" or "Chinese virus". The day before the summit, Trump’s demand caused the G7 meeting of foreign ministers to fail.

In response, Chinese officials speculated that COVID-19 was brought into China by the US military. And a couple of days before the summit, the state-run newspaper China Daily accused Trump of xenophobic attacks on China, caused by the desire to "divert attention from his own inability to prepare the US for the inevitable spread of coronavirus."

There were rumors that the US president would demand the Saudi Arabia to stop flooding the world market with oil to meet the requests of American oil companies. However, the summit was held calmly, without recriminations, but also without any breakthrough decisions. G20 leaders exchanged mutual calls for cooperation and committed themselves to “respond promptly and take any further action that may be required” in order to minimise the social and economic damage from the coronavirus pandemic.

The leaders of the largest countries of the world pledged to work together to increase funding for research and development of vaccines and drugs, strengthen international scientific cooperation and the use of digital technologies.

Soon we will see what choice humanity makes for its future.