The Paper's senior reporter Liu Dong
【Editor's Note】
In 2020, the world suffered an unprecedented catastrophe - the new crown pneumonia. 70 million people were diagnosed, 1.7 million died of illness, people movements stagnated, and the global economy fell into the worst recession since World War II...
Life is slowly recovering, but the new crown has undoubtedly been deeply imprinted in everyone's memory. What will this memory leave behind for humanity? blockade? Social distancing? Or is it a better response to a new outbreak in the future?
The Paper international launched a series of reports on the "Global Epidemic", reviewing the joys and sorrows experienced by people in many countries in the past year, outlining an unprecedented picture of the world under the epidemic, and looking forward to where mankind and the earth will go.
As of December 23, the number of covid-19 infections worldwide has exceeded an astronomical figure of 78 million, and the death toll has exceeded 1.71 million, and these terrible numbers are still rising at an alarming rate every day.
Such a severe COVID-19 pandemic has had a huge impact on the global economy in 2020. In mid-April 2020, Chen Zhiwu, a well-known economist and director of the Global Institute for Asia at the University of Hong Kong, made his judgment on the near- and long-term impact of the epidemic on the global economy in an exclusive interview with The Paper.
Professor Chen Zhiwu
Now that we are approaching the end of the year, what is the impact of the COVID-19 pandemic on the global economy? Looking back on this year, how should the strategies adopted by governments around the world to save their economies be evaluated?
Recently, the surging news paid a return visit to Chen Zhiwu. He admits that the strength of government response strategies after the outbreak has surprised the academic community. With the recent use of vaccines, although many industries may gradually return to normal in 2021, the large-scale fiscal and monetary stimulus policies of various countries without upper limits will lay huge debt hidden dangers for the post-epidemic world.
Although the dawn of victory in containing the epidemic is about to appear, Chen Zhiwu reminds that the new crisis in the distance cannot be ignored and is already fermenting.
The following is his dictation.
[Narrator]: Chen Zhiwu
【Coordinates】:Hong Kong
There are hidden dangers in the post-epidemic economic recovery
In this epidemic, the world's most affected and affected is the ordinary people, especially the self-employed people in the service industry, such as family-run restaurants, small workshops and some small shops, because relatively speaking, they usually do not rely on government subsidies to help, and their daily income is directly linked to how many customers consume. Usually, as long as there is a flow business, their lives are no problem, but because they may not have a lot of surplus wealth, once most people are locked up at home and cannot go out due to the impact of the epidemic prevention and lockdown, the situation of these self-employed families engaged in the service industry is very difficult.
That's why, in April, I mentioned that the focus of economic work under the COVID-19 pandemic is to focus on the survival rate of small and medium-sized micro enterprises, and how to help the most affected ordinary people tide over unemployment.
Among the world's major economies in 2020, the United States, the European Union, Japan, Australia, etc. have declined more this year. Fortunately, data from the United States and European countries, including Germany, show that the number of corporate bankruptcies since May has been much less than since the 2008 financial crisis.
In addition, since the beginning of December, the COVID-19 vaccine has been introduced in the Uk, and the United States has also started soon (as of press time). By next spring, although vaccination coverage is largely limited to high-risk groups such as the elderly, it is estimated that by March to April, many industries should be able to gradually return to normal with mass vaccination, as China has experienced in the past few months.
In fact, it's interesting to note that from August to September, the number of new companies founded across countries continued to rise, more than in the same period before 2020. I think this in itself also shows that the policies introduced by various governments to save the economy and the stock market are too strong, laying certain hidden dangers, and in some ways this is also the negative impact of the epidemic.
The pros and cons of over-stimulating the post-pandemic economy
Now that we are still under the impact and impact of the new crown virus, looking back at the policy initiatives of governments in the past year, these actions have also had a great shock to the academic community, mainly because of some new phenomena in the response and intervention of various countries.
Through a quantitative analysis of some of the major outbreaks in human history, I found that one of the characteristics of this outbreak is that the large-scale involvement of the government is unprecedented in intensity and scale, and such functions have often been undertaken by civil society and religious organizations in the past (except in China).
In the past, the great plagues of history reduced a large number of people on the one hand, but also devalued the assets of many rich people, greatly reducing the wealth gap between different members of society.
On the other hand, even at the time of the Spanish flu in 1918, there was no central bank in the modern sense of the world, so countries did not provide benefits to individuals and families on a large scale in the same way that governments respond to the new crown epidemic today.
In this sense, the biggest difference between covid-19 and the previous one is the massive use of fiscal measures by governments to bail out individual households and small and medium-sized enterprises affected by the pandemic, while central banks have printed money on a large scale, and the result of the two-pronged approach is what we have seen in recent months – the US stock market continues to reach new highs.
However, this brings out a question that many ordinary people find very strange: on the one hand, although everyone is locked up at home because of the epidemic at present, and the real economy has been so affected so much, how can the stock market break new highs wave by wave?
In fact, these stock market bubbles and asset bubbles are directly related to the unlimited quantitative easing policies of governments after the epidemic, and these bubbles may not burst in the short term, because the Federal Reserve has continuously promised the market a month ago that it will not end the monetary policy of quantitative easing before the beginning of 2023, that is, 2021 and 2022 will be almost zero interest rates or even negative interest rates. The consequence of this extraordinary intervention is that the historical law that "the great plague will narrow the gap between the rich and the poor" will be rewritten.
Overall, the impact of covid-19 on human society will be quite different from similar outbreaks in history: who benefits from the drastic interventions of countries to such an unlimited extent that the prices of financial assets continue to rise? The answer, of course, is that people with financial assets benefit the most.
However, the wool is out of the sheep, so this unbridled quantitative easing and fiscal relief policy is actually a disguised redistribution of income and wealth. Printing so many banknotes essentially transfers the wealth of the middle-income group in society to the richest group with many financial assets, which is like a war without smoke, and the process of transfer is not something that everyone can see and touch.
In the past year, because of the epidemic lockdown, many people stay at home and cannot go outside to work, so people's online activities have greatly increased, which has accelerated the popularization of remote and automated technologies, and many job opportunities may disappear permanently in the future.
Google, Facebook, and other IT companies in Silicon Valley, San Francisco, or Seattle have told their employees that they can work from home forever in the future, and for the transportation industry, the impact of this decline in customer base will be permanent. As people's working and living habits continue to be changed by technology, the world may eat winners in the future, which will only continue the trend of widening wealth gaps.
In the just-concluded US election, some people may wonder why so many Americans voted for the current President Trump. At the same time, Brexit is still tossing and turning to this day. In addition, there are other countries that have chosen populist strongmen as political leaders and national leaders.
In fact, these "strange political phenomena" are manifestations of more public resentment after the gap between the rich and the poor in various societies is too high.
That's why I think the quantitative easing fiscal policies of governments over the past few months will make the gap between rich and poor even more pronounced, thereby greatly increasing the pressure on the world to throw geopolitics and international orders into chaos over the next 5 to 10 years. Because in the United States and some countries in Western Europe, people express their dissatisfaction through voting, so the political atmosphere in these countries is moving in the direction of populism, anti-immigration, anti-globalization and free trade.
Countries respond differently because of different values
Looking back at 2020, some Asian countries and Western countries have adopted different approaches to the management of this epidemic. How do you evaluate these different practices? I think it depends on what the core values of a society are.
On the one hand, the logic of both sides is that if they stay at home for a while and "lose their freedom" for two months, they can exchange it for greater freedom, more economic stability and growth in the next year or even two, and then when there is no better choice, some Asian nationals are willing to pay such a price.
On the other side is the one who would rather die, but can't bear to lose the freedom to drink in bars, eat at restaurants, and walk outside without wearing a mask. In Western societies, individuals value this right to freedom so much that they even prefer to take the risk of infection and exercise their freedom. In such a society, a person will feel that whether the economy can stabilize growth tomorrow is a matter of tomorrow and the day after tomorrow, and he wants to live well today.
These are two different value systems, different values and different preferences have brought different anti-epidemic measures, and as a result, the results of the response to the pandemic are naturally different.
Editor-in-charge: Hu Zhenqing
Proofreader: Yan Zhang