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Project Syndicate / Res Publica
2021
2021
01.
Board Member’s 6.
Note The Quiet
Financial Crisis
CARMEN M. REINHART
02.
Pandemic of Fear
IVAN KRASTEV
11. 14.
Europe’s Watershed Year A Fragile
JOSEP BORRELL Recovery in 2021
NOURIEL ROUBINI
Pandemic of Fear
23.
There Will Be No
Quick COVID Fix
WILLIAM A. HASELTINE
18.
How Might
COVID-19 Change
the World? 27.
JARED DIAMOND Learning to Live
with COVID-19
ERIK BERGLÖF
30. 32.
Towards 2021 and May 2021 be the year
thereafter - Major for vaccination -
Restructuring authoritarianism
NIKOLA POPOVSKI KAROLINA RISTOVA - ASTERUD
Pandemic of Fear
2021
35. 38.
The Post-Truth Pandemic The Cure for
TRISH GREENHALGH Demagogic Populism
MICHAEL LIND
Pandemic of Fear
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© Project Syndicate 2020
Project Syndicate /
Res Publica
The Pandemic of Fear Pandemic of Fear
Board Member’s Note
In 2020, the COVID-19 pandemic delivered the greatest shock to the global economy
since World War II. Entire societies have been locked down, and people everywhere
have had to adjust to new ways of working, studying, socializing, and entertaining
themselves. Notwithstanding these measures, more than 1.5 million people have
died, and unemployment, inequality, and poverty have soared to new heights.
t h e g l o b a l i z e d e c o n o m y, a l i f e l i n e will depend largely on how quickly We should take all of these lessons
to billions of people in recent vaccines are distributed worldwide. with us into 2021. We all heard the
decades, has suddenly become a That effort could reinvigorate global wake-up call in 2020. Now we
source of vulnerability, owing to existing institutions of international must start building a more resilient
the disruption of far-flung supply cooperation and catalyze the society – one built on the principles
chains and governments’ efforts establishment of new ones, and one of sustainability and social justice.
to protect national markets. The hopes that the new US administration In The Pandemic of Fear, political
pandemic thus has accelerated a under President Joe Biden will leaders, senior policymakers, and
process of deglobalization that was push things in that direction. renowned scholars provide original
already underway (as reflected Whatever form it takes, robust and sharp insights into the challenges
in plummeting world trade), multilateralism will be necessary that lie ahead, both at the national and
and exposed deep disparities in both to mitigate the sharp increase international levels. The pandemic
the quality of governance across in poverty and inequality caused by has given us a chance to reconsider,
different countries and locales. the pandemic, and to address longer- rethink, and reform. Most important,
term challenges, particularly the it has renewed the demand for honest,
Brazil, India, the United Kingdom,
existential and increasingly urgent fact-based, expert analysis in a world
and the United States – all countries
threat posed by climate change. beset by anxiety and uncertainty.
with populist leaders – have
performed far worse than countries The pandemic has shown how Let 2021 mark a new dawn of
like Germany, the Nordics, Japan, dangerous it is to ignore the warnings reason, progress, and hope.
South Korea, and even developing from science. Failing to prepare for
countries such as Rwanda and known risks can all too easily lead
Vietnam. By disparaging scientists to untold and unnecessary costs in
and politicizing expertise, leaders human lives and livelihoods. But the
like US President Donald Trump,
crisis has also illustrated the value
Brazilian President Jair Bolsonaro,
of working together across borders
and Indian Prime Minister Narendra
and sectors, just as it has shown us Connie Hedegaard served as
Modi have left their countries deeply
that radical changes in “business as European Commissioner for
polarized and tragically ill-equipped
usual” are still possible. Surprisingly Climate Action from 2010 to 2014,
to manage a major public-health
for some, we have learned that and as Denmark’s Minister for
crisis and its economic fallout.
leaders who dare to lead and make the Environment from 2004 to
Given the pandemic’s persistence, difficult yet responsible choices 2007 and Minister for Climate
the prospects for recovery in 2021 actually gain citizens’ respect. and Energy from 2007 to 2009.
The Pandemic of Fear 01
Pandemic
IVAN KRASTEV
Chairman of the Center
for Liberal Strategies
“The first thing that plague
brought to our town was exile,”
notes the narrator in Albert
Camus’s The Plague. These
days, we have an acute sense
of what he meant. A society in
quarantine is literally a “closed
society” in which everyone but
essential workers puts his or
her life on hold. When people
are isolated in their homes
and haunted by fear, boredom,
and paranoia, one of the few
activities that does not cease
is discussion of the virus and
how it might transform the
world of tomorrow.
The
2 The Pandemic of Fear
of Fear The Pandemic of Fear 3
epidemics are like Netflix series
where the end of one season merely
serves as a hiatus before the start of
the next. The pandemic experience
is one in which everything changes
but nothing happens. We are asked
to preserve human civilization
by staying home and washing our
hands. As in a modernist novel,
all of the action occurs in the
mind of the narrator. In my own
account of the COVID-19 era, the
only memorable physical objects
will be the plane tickets that were
never used and the face masks that
were used over and over again.
And yet, the moment one goes out into
the street, one realizes how much has
changed. Like many of my favorite
coffee shops in Vienna and Sofia, my
favorite bookstore in Washington,
DC, has closed. Like a neutron bomb,
COVID-19 is destroying our way of
life without actually damaging our
material world. For much of 2020,
airports were some of the saddest
places on Earth – empty, silent,
with only a few passengers roaming
the terminals like ghosts. The
increased freedom of movement
over the last three decades – the
ease with which people from
different social classes intermingled –
i n t h i s n e w wo r l d , m a n y In her marvelous book Pale Rider, EOPLE WAIT FOR
P had become a powerful symbol of
FOOD DISTRIBUTION
governments (benevolent or the science writer Laura Spinney D U R I N G I N D I A’ S
globalization. Now, that freedom
otherwise) closely follow where shows that the 1918-20 Spanish flu N AT I O N W I D E LO C K D O W N . has been consigned to history – or
we go and whom we meet, out of a pandemic was the most tragic event at least put on hold indefinitely.
determination to protect us from of the twentieth century, at least in
Meanwhile, all of the public messages
our own recklessness and the that terms of loss of life from a single cause.
The death toll surpassed that of both urging people to stay at home have
of our fellow citizens. Contact
World War I and World War II, prompted metaphysical reflection.
with other people has become a
and may even have killed as many Home is where one wants to be when
threat to one’s existence. In many
people as both of them combined. confronted with a grave danger. When
countries, unsanctioned walks
in the park can elicit fines or even Yet, as Spinney notes, “When asked my family and I realized that we were
jail time, and unsolicited physical what was the biggest disaster of facing a prolonged period of social
contact has become tantamount the twentieth century, almost distancing, we surprised ourselves
to a kind of societal betrayal. nobody answers the Spanish flu.” by deciding to return to Bulgaria.
As Camus observed, a plague erases More surprisingly, even historians This was not exactly a rational
the “uniqueness of each man’s life” seem to have forgotten the tragedy. decision. We have lived and worked in
as it heightens each person’s In 2017, WorldCat, the world’s largest Vienna for a decade, we love the city,
awareness of his vulnerability and library catalogue, listed roughly and the Austrian health-care system
powerlessness to plan for the future. 80,000 books on WWI (in more than is far more reliable than Bulgaria’s.
It is as if Death has moved in next 40 languages), but barely 400 on the What brought us back to Bulgaria was
door. After an epidemic, everyone Spanish flu (in five languages). How the understanding that we should
living can claim the title of “survivor.” can it be that an epidemic that killed “stay at home.” Home, for us, means
at least five times as many people as Bulgaria. In a time of crisis, we wanted
But for how long will the memory of WWI has resulted in 200 times fewer to be closer to the people and places
our own plague last? Could it be that books? Why do we remember wars that we have known all our lives. We
in just few years we will remember and revolutions but forget pandemics, weren’t alone: 200,000 Bulgarians
it as a kind of mass hallucination which affect our economies, politics, living abroad did the same thing.
caused by “a shortage of space and societies just as fundamentally?
made up for by a surplus of time,” Just as many people have sought
as the poet Joseph Brodsky once Spinney’s answer is that it is difficult shelter in their home countries, so
described a prisoner’s existence? to turn a pandemic into a compelling have they found solace in their native
story between good and evil. Lacking languages. In moments of great peril,
a plot or an overarching moral, we almost unconsciously speak
4 The Pandemic of Fear
V I R T U A L LY E M P T Y J F K A I R P O R T
A in our mother tongue. In my own communications technology, the
D U R I N G T H E C O V I D -1 9 PA N D E M I C .
childhood in Bulgaria, I learned a pandemic has ushered in not de-
valuable lesson from watching Soviet globalization but de-localization.
films about WWII. One of the most It might be Our geographical neighbors are
dangerous moments for Soviet female a passing effectively no closer than our friends
spies in Hitler’s Reich was childbirth, and colleagues abroad; we feel
because they would involuntarily historical closer to the TV announcers than
cry out in their native Russian. moment, but to the people down the street.
Staying home meant staying in your we cannot For perhaps the first time in
mother tongue – and staying safe.
deny that we history, people have been having
It is one of the great optical illusions the same conversations about the
of twenty-first-century globalization
have come to same topics. We have all shared the
that only mobile, jet-set people are understand same fear. By staying at home and
truly cosmopolitan, and that only what it feels spending countless hours in front
those who feel at home in different of screens, people have witnessed
places can maintain a universalist
like to live in the similarities between their own
perspective. After all, the canonical one world.” experiences and those of everyone
cosmopolitan, Immanuel Kant, never else. It might be a passing historical
left his hometown of Königsberg, moment, but we cannot deny that
which itself belonged to different we have come to understand what
empires at different times. Kant it feels like to live in one world.
embodied the same paradox as
COVID-19, which has made the world
more global even as it has turned
nation-states against globalization.
For example, “self-isolation” and
“social distancing” have opened the Ivan Krastev is Chairman of the
European mind. Closing the borders Center for Liberal Strategies and a
between EU member states and permanent fellow at the Institute for
locking people in their apartments Human Sciences. He is the author,
has made us more cosmopolitan most recently, of Is It Tomorrow
than ever. For those with access to Yet? Paradoxes of the Pandemic.
The Pandemic of Fear 5The Quiet Financial Crisis 6 The Pandemic of Fear
CARMEN M. REINHART
Chief Economist at the World Bank
The term “financial crisis” has long been associated with dramas such as bank
runs and asset-price crashes. Charles Kindleberger’s classic books The World
in Depression, 1929-1939 and Manias, Panics and Crashes, and my own work
with Kenneth Rogoff, This Time Is Different, document scores of these episodes.
In recent years, the term “Lehman moment” has stood out as a marker of the
2007-09 global financial crisis and even inspired a Broadway show.
bu t some fina nci a l cr ises do not momentum in the financial sector.
involve the drama of Lehman Even without a Lehman moment,
moments. Asset quality can it could jeopardize prospects for
deteriorate significantly as economic economic recovery for years to come. The COVID-19
downturns persist, especially when pandemic
Specifically, financial institutions
firms and households are highly
leveraged. Moreover, years of bank
around the world will continue to continues to
face a marked rise in non-performing
lending to unproductive private
loans (NPLs) for some time. The
deliver many
firms or state-owned enterprises
COVID-19 crisis is also regressive, moments of
(the latter is not uncommon in
some developing countries) take a disproportionately hitting low- unwanted
income households and smaller
cumulative toll on balance sheets. drama ….”
firms that have fewer assets to
Although these crises may not buffer them against insolvency.
always include panics and runs, they
still impose multiple costs. Bank Since the onset of the pandemic,
restructuring and recapitalization governments have relied on
to restore solvency can be expensive expansionary monetary and fiscal
for governments and taxpayers, and policies to offset the steep declines
new lending can remain depressed, in economic activity associated
slowing economic activity. The with broad-based shutdowns
credit crunch also has distributional and social-distancing measures.
effects, because it hits small and Wealthier countries have had a
medium-size businesses and lower- decided advantage in their ability
income households more acutely. to respond, although a surge in
lending by multilateral institutions
To be sure, the COVID-19 pandemic has also helped to finance emerging
continues to deliver many moments
and developing economies’
of unwanted drama, including
response to the health emergency.
soaring infection rates, widespread
lockdowns, record-shattering Unlike in the 2007-09 crisis
declines in output, and spiking (or most previous crises, for that
poverty. But, in addition to these matter), banks have supported
trends, a quieter crisis is gaining macroeconomic stimulus with a
The Pandemic of Fear 7variety of temporary loan moratoria, for many countries markedly so. In
as the International Monetary Fund many cases, financial institutions
has documented in its Policy Tracker. may be insufficiently prepared to
These measures have provided deal with the hit to their balance Even if one or more
some respite for households facing sheet. The less regulated non-bank effective vaccines
loss of employment and a decline financial sector, meanwhile, has
in income, as well as for businesses even greater exposure to risk promptly resolve
struggling to survive lockdowns (compounded by weaker disclosure). the pandemic, the
and general disruptions to normal COVID-19 crisis has
Adding to these private-sector
activity (tourism-linked sectors
stand out starkly in this regard).
developments, downgrades of significantly damaged
sovereign credit ratings reached a
Financial institutions in all regions record high in 2020 (see figure below).
the global economy and
have granted grace periods for Although advanced economies have financial institutions’
repayment of existing loans, and not been spared, the consequences balance sheets.”
many have re-contracted loans for banks are more acute in emerging
in favor of lower interest rates and developing economies where
and generally better terms. The governments’ credit ratings are
understandable rationale has been at or near junk grade. In more
that, because the health crisis is extreme cases of sovereign default
temporary, so is the financial distress or restructuring – and such crises
of firms and households. But as are on the rise, too – banks will
the pandemic has persisted, many also take losses on their holdings
countries have found it necessary to of government securities.
extend these measures until 2021.
As I argued in March 2020, even
Alongside the temporary moratoria, if one or more effective vaccines
many countries have relaxed their promptly resolve the pandemic, the
banking regulations regarding COVID-19 crisis has significantly
bad-loan provisioning and the damaged the global economy and
classification of loans as non- financial institutions’ balance
performing. The upshot of these sheets. Forbearance policies have
changes is that the extent of NPLs provided a valuable stimulus tool
may currently be understated, and beyond the conventional scope of
S H A R E O F S O V E R E I G N C R E D I T R AT I N G D O W N G R A D E S – 1 / 1 9 8 0 –1 1 / 2 0 2 0 ( I N P E R C E N T )
14
12
10
8
6
4
2
0
JAN 1980
JUN 1981
NOV 1982
APR 198 4
SEP 1985
FEB 1987
JUL 1988
DEC 1989
M AY 1 9 91
OCT 1992
MAR 1994
AUG 1995
JAN 1997
JUN 1998
NOV 1999
A P R 2 0 01
SPE 2002
FEB 2004
JUL 2005
DEC 20 0 6
M AY 2 0 0 8
OCT 2009
M A R 2 01 1
A U G 2 01 2
J A N 2 014
J U N 2 01 5
N O V 2 016
A P R 2 01 8
S E P 2 01 9
1 2 M O N T H M O V I N G AV E R A G E SOURCE: TR ADING ECONOMIC S (2020)
NOTES: THE FIGURE SHOWS THE NUMBER OF SOVEREIGN DOWNGR ADES AS
ALL COUNTRIES A S H A R E O F T H E TOTA L N U M B E R O F S O V E R E I G N S R AT E D I N A G I V E N M O N T H .
8 The Pandemic of Fearfiscal and monetary policy. But grace Balance-sheet damage takes time
periods will come to an end in 2021. to repair. Previous overborrowing
often results in a long period of
As the US Federal Reserve’s November
deleveraging, as financial institutions
2020 Financial Stability Report
become more cautious in their lending
highlights, policy fatigue or political
practices. This muddling-through
constraints suggest that forthcoming
stage, usually associated with a
US fiscal and monetary stimulus will
sluggish recovery, can span years.
not match the scale reached in early
In some cases, these financial crises
2020. Many emerging markets and
develop into sovereign-debt crises, as
developing countries are already at or
bailouts transform pre-crisis private
near their monetary-policy limits as
debt into public-sector liabilities.
well. As 2021 unfolds, therefore, it will
become clearer whether countless The first step toward dealing with
firms and households are facing financial fragility is to recognize the
insolvency rather than illiquidity. scope and scale of the problem, and
then expediently restructure and
Firms’ high leverage on the eve of the
write down bad debts. The alternative
pandemic will amplify the financial
– channeling resources into zombie
sector’s balance-sheet problems.
loans – is a recipe for delayed recovery.
Corporations in the world’s two
Given the pandemic’s already huge
largest economies, the United States
economic and human costs, avoiding
and China, are highly indebted and
that scenario must be a top priority
include many high-risk borrowers.
The European Central Bank has for policymakers everywhere.
repeatedly voiced concerns about the
rising share of NPLs in the eurozone,
while the IMF has frequently warned
about the marked increase in dollar-
denominated corporate debt in
A B O V E : C A R M E N M . R E I N H A R T. many emerging markets. Exposure
to commercial real estate and the
O P : E M P T Y O F F I C E TO W E R S I N
T
hospitality industry is another source Carmen M. Reinhart is Chief
T H E C I T Y O F LO N D O N D U R I N G T H E
S E C O N D N AT I O N A L LO C K D O W N . of concern in many parts of the world. Economist of the World Bank.
The Pandemic of Fear 910 The Pandemic of Fear
pulling
Europe’s Watershed Year
JOSEP BORRELL
EU High Representative for
Foreign Affairs and Security Policy
In 2020, people around the world experienced life in
slow motion, even as political developments accelerated.
For the European Union, navigating the COVID-19 crisis has
been challenging; yet, despite much naysaying, Europeans
not only stuck together, but grew together, forging a more
cohesive bloc. In 2021, global cooperation ought to make
a strong comeback, and the EU should continue to pursue
“strategic autonomy” so that it can safeguard its citizens
together
and interests in the years and decades ahead.
The Pandemic of Fear 112020 m a r k e d
i t i s a t ru i s m t h at The Pandemic Stress Test
a watershed. In fact, the world has
There is no denying that the EU
been undergoing several tectonic
struggled during the early days of
shifts for years now, including
the pandemic. We were ill-prepared,
but not limited to growing public
and many member states were
distrust, polarization and identity
initially inclined to let everyone
politics, tepid economic growth,
fend for themselves. But genuine
rising debts, and deepening
acts of solidarity soon followed,
inequality. We have witnessed the with many countries taking patients
weaponization of interdependence. from, and sending emergency
Trade, technology, investment, equipment to, those most in need.
tourism, and other former venues Then the EU-level measures kicked
of deepening cooperation have in. The European Central Bank
become instruments of power and provided massive liquidity, and the
domains of intense competition. European Commission authorized
This was the big picture that we member states to incur large deficits
in the EU leadership saw when we to support their economies.
took office in December 2019, just The discussion quickly turned to how
before conditions became even the EU could provide fiscal support
more challenging. For Europeans, to the hardest-hit countries, and
it looked as though everything we these debates culminated in a historic
held dear was being contested, be it “recovery fund.” An unprecedented
multilateral cooperation; solidarity €1.8 trillion ($2.1 trillion) was
between countries, generations, and allocated for a new “Next Generation
individuals; or even basic respect EU” instrument and the bloc’s next
for facts and science. In addition to seven-year budget. Moreover, two
several crises brewing in the EU’s longstanding economic-policy
neighborhood and the escalation of shibboleths were shattered. For the
Sino-American tensions, we were first time, EU leaders agreed to issue
hit suddenly by COVID-19, which large-scale common debt and allow
has compounded all the other longer- for fiscal transfers, provided that
term challenges Europe faces. spending is aligned with the twin
B O V E : E U H I G H R E P R E S E N TAT I V E
A
F O R F O R E I G N A F FA I R S A N D S E C U R I T Y
POLICY JOSEP BORRELL.
OP: EUROPE AN COMMISSION PRESIDENT
T
URSUL A VON DER LE YEN.
€1.8tr
A M O U N T A L LO C AT E D F O R A N E W “ N E X T G E N E R AT I O N E U ” F U N D A N D T H E B LO C ’ S N E X T S E V E N -Y E A R B U D G E T.
12 The Pandemic of Fearpriorities of funding a green transition results for citizens. No one will be safe This is not just about market failures
and securing Europe’s digital future. until we have a reliable vaccine, so the in medical supplies. Strategic
paramount questions on vaccination autonomy is about how Europe can
On the international front, the EU’s
position has been clear: a “pandemic
are who will get what, when, and The point is address vulnerabilities across a
how. There is a serious risk of “vaccine not to embrace wide range of areas – from critical
world” needs multilateral solutions.
nationalism” or “vaccine diplomacy,” technologies and infrastructure
We have lived by this motto even
with rich and powerful countries autarky or (such as digital networks and cloud
when others were going it alone.
Our May 2020 (virtual) pledging
forcing themselves to the front of the protectionism, computing) to rare earths and
line. In early 2020, some countries but to safeguard the raw materials needed for the
conference to raise funds for vaccine
used “mask diplomacy” to extract green transition. We must avoid
research was a perfect demonstration
political concessions in exchange for our political excessive dependence on external
of the EU’s unique strengths. While
the United States and China were
critically needed personal protective independence…” suppliers in these strategic sectors.
equipment. The EU will insist on the The point is not to embrace autarky
proverbially at each other’s throats,
opposite approach: vaccines must be or protectionism, but to safeguard
Europe stepped up to lead on this treated as a global public good and our political independence so
critical issue. Moreover, we did so distributed based on medical needs. that we remain masters of our
in a quintessentially European way own choices and future.
(call it “Multilateralism 2.0”), working The second big multilateral priority
with not only governments, but also for 2021 is climate change, another Some elements of this strategy were
foundations and the private sector. area where the EU has shown put in place in 2020. Europe now
leadership. Having already set a 2050 has a mechanism to screen foreign
Since the summer, Europe has carbon-neutrality target, we are investments, and we have begun
suffered a second wave of infections close to an agreement on a binding to address the distorting effects of
and struggled with renewed commitment to reduce greenhouse- foreign subsidies. We are also boosting
lockdowns. Although we have far gas (GHG) emissions by 55% by 2030. the international role of the euro,
more knowledge about COVID-19 and Moreover, these efforts seem to have and preparing additional measures
how to treat it, “pandemic fatigue” inspired others: China has signaled its on issues such as government
is widespread. Worse, the initial intention to become carbon neutral by procurement. As matters stand, the
economic rebound appears to be 2060, and Japan and South Korea have EU procurement market is almost
fading, indicating that the crisis will said they will do so by 2050. We now totally open, while that of some others
continue to dominate our lives for need the US, India, Russia, Brazil, and remains almost completely closed.
months – and perhaps years – to come. other big emitters to get on board. We must either ensure reciprocity
As such, we must keep mobilizing or take steps to restore balance.
across all of the relevant domains, Climate change is the existential
from public health and the economy challenge of our time. As with Strategic autonomy also applies
to security and global governance. COVID-19, the warning signs are to cyber issues. How can Europe
visible for all to see, and there is a solid manage data? We must avoid the
scientific consensus about what to do. dichotomy whereby data belongs
A New Moment for Multilateralism The difference, of course, is that there either to Big Tech platforms (with
Revitalizing multilateralism thus will never be a vaccine for climate little government oversight) or to the
will be a top priority for the EU in change. So, we must bend the curve state (including its link to the security
2021. Obviously, we cannot achieve of GHG emissions as fast as possible. apparatus). The EU’s last major tech
this alone. But we anticipate that we legislation was the General Data
will have more partners in the year Protection Regulation in 2018, and
European Strategic Autonomy
ahead than we did in 2020. With Joe much has already changed since then.
Biden succeeding Donald Trump Finally, at the same time that we
These are just some of the many
as president, the US is expected to pursue multilateralism, we must
challenges the EU will have to
rejoin to the Paris climate agreement, build a capacity to act autonomously
navigate in 2021. It will be rough
restore its support for the World when necessary. As I argued a year
sailing, but we will emerge
Health Organization, return to ago, Europeans must confront
stronger if we stay focused on
the Iran nuclear deal, and adopt a the world as it is, not as we wish
two complementary priorities:
more constructive stance within it to be. The EU must “learn to
revitalizing multilateralism and
the World Trade Organization. speak the language of power.”
building up strategic autonomy.
The pandemic has underscored
America’s return to the global stage
the need for European strategic
will serve as a much-needed shot
autonomy, a concept that originated
in the arm for multilateralism.
in defense circles, but that now
We hope that others, including
extends to public health and many
China and Russia, will follow suit
other domains. We have learned
in reversing their selective and self-
the hard way that there are costs to
serving approach to multilateral
depending on just a few suppliers of
cooperation in the UN and elsewhere.
critical goods – especially when the
To be sure, pleas for “rules-based supplier is a country whose value Josep Borrell is EU High
cooperation” often sound less system is fundamentally at odds Representative for Foreign
inspiring than bombastic appeals to with our own. The solution to this Affairs and Security Policy
“take back control.” We must ensure problem is diversification and, when and a vice president of the
that multilateralism delivers tangible necessary, shorter supply chains. European Commission.
The Pandemic of Fear 13A Fragile
By the end of 2020, financial markets –
mostly in the United States – had
reached new highs, owing to hopes
Recovery that an imminent COVID-19 vaccine
would create the conditions for a
rapid V-shaped recovery. And with
in 2021 major central banks across the
advanced economies maintaining
ultra-low policy rates and
NOURIEL ROUBINI unconventional monetary and
Professor of Economics at
credit policies, stocks and bonds
NYU’s Stern School of Business have been given a further boost.
14 The Pandemic of FearThe Pandemic of Fear 15
b u t t h e s e t r e n d s h av e w i d e n e d
the gap between Wall Street and
Main Street, reflecting a K-shaped
320% and other labor-replacing, capital-
intensive, skill-biased technologies.
corporate sector and across many
households imply more deleveraging,
which will reduce spending, and more
G LO B A L D E B T A S A As for emerging markets and
recovery in the real economy. Those P E R C E N TA G E O F G D P 2 01 9 . developing countries, COVID-19 defaults, which will produce a credit
with stable white-collar incomes who has triggered not merely a recession, crunch as a surge in non-performing
can work from home and draw from but what the World Bank calls a loans swamps banks’ balance sheets.
existing financial reserves are doing “pandemic depression,” leaving Globally, private and public debt has
well; those who are unemployed more than 100 million people back risen from 320% of GDP in 2019 to a
365%
or partly employed in precarious on the verge of extreme poverty staggering 365% of GDP at the end of
low-wage jobs are faring poorly. (less than $2 dollars per day). 2020. So far, easy-money policies have
The pandemic is thus sowing the prevented a wave of defaults by firms,
After going into free fall in the first half
seeds for more social unrest in 2021. G LO B A L D E B T A S A households, financial institutions,
P E R C E N TA G E O F G D P 2 0 2 1 .
of 2020, the world economy started to
In the years leading up to the undergo a V-shaped recovery in the sovereigns, and entire countries,
COVID-19 crisis, 84% of stock-market third quarter, but only because many but these measures eventually will
wealth in the US was held by 10% of economies were reopened too soon. lead to higher inflation as a result
shareholders (and 51% by the top 1%), By the fourth quarter, much of Europe of demographic aging and negative
whereas the bottom 50% held barely and the United Kingdom were heading supply shocks stemming from the
any stock at all. The top 50 billionaires into a W-shaped double-dip recession Sino-American decoupling.
in the US were wealthier than the following the resumption of draconian Whether major economies experience
bottom 50% of the population lockdowns. And even in the US, a W- or a U-shaped recovery, there
(a cohort of about 165 million people). where there is less political appetite will be lasting scars. The reduction
COVID-19 has accelerated this for new pandemic restrictions, 7.4% in capital expenditures will reduce
concentration of wealth, because growth in the third quarter is likely potential output for good, and
what’s bad for Main Street is good for to be followed by growth of 0.5% workers who experience long bouts
Wall Street. By shedding good salaried at best in the last quarter of 2020 of joblessness or underemployment
jobs and then re-hiring workers on a and in the first quarter of 2021 – will be less employable in the future.
freelance, part-time, or hourly basis, a mediocre U-shaped recovery. These conditions will then feed
businesses can boost their profits Renewed risk aversion among into a political backlash by the new
and stock price; these trends will American households has translated “precariat,” potentially undermining
accelerate over time with the wider into reduced spending – and thus trade, migration, globalization, and
application of artificial intelligence less hiring, production, and capital liberal democracy even further.
and machine learning (AI/ML) expenditures. And high debts in the
84% 51%
A M O U N T O F S TO C K A M O U N T O F S TO C K
M A R K E T W E A LT H I N T H E M A R K E T W E A LT H I N T H E
U S H E L D B Y T H E TO P 1 0 % U S H E L D B Y T H E TO P 1%
16 The Pandemic of FearCOVID-19 vaccines will not ameliorate
these forms of misery, even if
they can be quickly and equitably
administered to the world’s 7.7 billion
people. But we shouldn’t bet on
that, given the logistical demands
(including cold storage) and the
rise of “vaccine nationalism” and
disinformation-fueled vaccine fears
among the public. Moreover, the
announcements that leading vaccines
are over 90% effective have been
based on preliminary, incomplete
data. According to scientists I have
consulted, we will be lucky if the first
generation of COVID-19 vaccines is
even 50% effective, as is the case with
the annual flu shots. Indeed, serious
scientists are expressing skepticism
about the claims of 90% effectiveness.
Worse, there is also a risk that in
late 2021, COVID-19 cases will spike
again as “vaccinated” people (who
may still be contagious and not
truly immune) start engaging in
risky behaviors like crowded indoor
gatherings without masks. In any
case, if Pfizer’s vaccine is supposed
to be the key to our salvation,
why did its CEO dump millions
of dollars of stock on the same
day that his company announced
its breakthrough test results?
Finally, there is the great political
H I P P I N G C O N TA I N E R S
S decoupling of data, information, Nouriel Roubini, CEO of Roubini
AT A P O R T I N C H I N A’ S
event of 2020: Joe Biden’s election to and financial flows, currencies, Macro Associates and host of the
E ASTERN JIANGSU
the US presidency. Unfortunately, this PROVINCE. payment platforms, and trade in NourielToday.com broadcast, is
goods and services that rely on 5G, Professor of Economics at New York
will not make much of a difference
AI/ML, big data, the Internet of Things, University’s Stern School of Business.
for the economy, because obstruction
by congressional Republicans will computer chips, operating systems,
prevent the US from implementing and other frontier technologies.
the kind of large-scale stimulus Over time, the world will be firmly
that the situation demands. Nor divided between two competing
will Biden be able to spend heavily systems – one controlled by the
on green infrastructure, raise taxes US, Europe, and a few democratic
on corporations and the wealthy, emerging markets; the other
or join new trade agreements like controlled by China, which by then
the successor to the Trans-Pacific will dominate its strategic allies
Partnership. Even with the US set to (Russia, Iran, and North Korea) and
rejoin the Paris climate agreement a wide range of dependent emerging
and repair its alliances, the new markets and developing economies.
administration will be limited
Between the balkanization of the
in what it can accomplish.
global economy, the persistent threat
The new cold war between the US of populist authoritarianism amid
and China will continue to escalate, deepening inequality, the threat of
potentially leading to a military AI-led technological unemployment,
clash over Taiwan or control of the rising geopolitical conflicts, and
South China Sea. Regardless of who increasingly frequent and severe
is in power in Beijing or Washington, man-made disasters driven by
DC, the “Thucydides Trap” has global climate change and zoonotic
been laid, setting the stage for a pandemics (that are caused in part
confrontation between the established by the destruction of animal
but weakening hegemon and the ecosystems), the coming decade
new rising power. As the race to will be a period of fragility, instability,
control the industries of the future and possibly prolonged chaos.
intensifies, there will be even more The year 2020 was just the start.
The Pandemic of Fear 17How Might COVID-19 Change the World? JARED DIAMOND Professor of Geography at the University of California, Los Angeles Today, COVID-19 is devastating the world. It’s in the process of infecting many (perhaps even most) of us, killing some, shutting down our normal social relations, halting most international travel, and clobbering our economies and trade. What will the world be like a few years from now, after this acute crisis has waned? 18 The Pandemic of Fear
t h e r e ’s a w i d e s p r e a d a s s u m p t i o n that the first doses must be reserved
that vaccines will soon protect us for medical personnel, because
against COVID-19. Alas, that prospect everybody else needs those medical
remains very uncertain. Scientists Even in the personnel to administer the doses
in many countries – China, the short run, no to the rest of us, and to take care of
United States, Russia, Britain, and sick people. Among those of us who
others – have been racing to develop country can are not medical personnel, rich,
effective COVID-19 vaccines, and achieve lasting influential people can be expected
the first are just starting to become COVID-19 to find ways to acquire doses before
available. That suggests a worst- poor, uninfluential people.
case scenario, a best-case scenario, security for itself
But those selfish considerations don’t
and everything in between. by eliminating just apply to the allocation of doses
There are already many signs of the disease within a country, there is likely to be
an incipient worst-case scenario. within its international selfishness as well. A
Even though some countries have country that develops a vaccine will
developed, tested, and begun to
borders.” surely put its own citizens first. Such
distribute an effective vaccine, prioritizing has already happened
7.7 billion doses for the world’s with respect to face masks: a few
7.7 billion people cannot be months ago, when those masks were
manufactured and distributed scarce and some shipments from
worldwide overnight. Initially, China reached Europe, scrambles
supplies will be scarce. Who will and bidding wars ensued as countries
get those first coveted doses? sought to secure those supplies for
Common-sense proposals stipulate themselves. Worse yet, countries
E M E R G E N C Y H O S P I TA L
BEDS IN WUHAN.
The Pandemic of Fear 19that develop a vaccine may withhold borders, no country can protect O AT S PA R K E D O N
B
THE SHORES OF THE
it from political or economic rivals. itself against climate change just by BURIGANGA RIVER
reducing its reliance on fossil fuels D U R I N G A G O V E R N M E N T-
On reflection, though, selfish national
policies would be suicidal. Even in
Climate change, and reducing its own emissions of I M P O S E D LO C K D O W N
IN BANGL ADESH.
resource greenhouse gases. Atmospheric
the short run, no country can achieve
carbon dioxide, like COVID-19,
lasting COVID-19 security for itself depletion, and does not respect political borders.
by eliminating the disease within
its borders. In today’s globalized
inequality pose But climate change, resource
world, COVID-19 would just come far more serious depletion, and inequality pose far
back into such a country from others threats to our more serious threats to our survival
that had not eliminated the virus. and quality of life than the current
survival and pandemic does. Even in the worst-
That has already happened to quality of life case scenario, if every human on
New Zealand and Vietnam, where
stringent measures did stop local than the current Earth is exposed to COVID-19 and
2% of us die as a result, that’s “only”
transmission, but returning pandemic does.” 154 million deaths. That leaves
travelers have continued to
7,546,000,000 people still alive: far
import new COVID-19 cases. This
more than enough to ensure human
illustrates a key conclusion: no
survival. COVID-19 is a bagatelle,
country will be safe from COVID-19
compared to the dangers that climate
until all are. It’s a global problem
change, resource depletion, and
demanding a global solution.
inequality imply for all of us.
I take that fact as good news. We face
Why, then, haven’t we been
other global problems demanding
galvanized to act against climate
global solutions: especially climate
change and those other global
change, worldwide resource
threats, when we are being
depletion, and the destabilizing
galvanized by the milder threat of
consequences of inequality across
COVID-19? The answer is obvious:
countries in our globalized world.
COVID-19 catches our attention,
Just as no country can keep itself
by sickening or killing its victims
free of COVID-19 forever just by
quickly (within a few days or weeks)
eliminating the virus within its
and unequivocally. In contrast,
20 The Pandemic of Fear C H I L D I S V A C C I N AT E D
A climate change ruins us slowly and Jared Diamond, Professor of
IN BR A ZIL.
much less clearly, through indirect Geography at the University of
consequences such as reduced food California, Los Angeles, is the
For the first time production, starvation, extreme Pulitzer Prize-winning author of
in world history, weather events, and the spread of Guns, Germs, and Steel, Collapse,
tropical diseases into temperate and other international bestsellers.
people around zones. Hence, we have been slow to
the world are recognize climate change as a global
being forced to threat requiring a global response.
acknowledge That’s why the COVID-19 pandemic
gives me hope, even as I mourn the
that we all face loss of dear friends whom it has
a shared threat killed. For the first time in world
that no country history, people around the world
are being forced to acknowledge
can overcome that we all face a shared threat
by itself.” that no country can overcome by
itself. If the world’s peoples join
together, under compulsion, to
defeat COVID-19, they may learn a
lesson. They may become motivated
to join together, under compulsion,
to combat climate change, resource
depletion, and inequality. In that
case, COVID-19 will have brought
not only tragedy but also salvation,
by finally setting the world’s peoples
onto a sustainable course.
The Pandemic of Fear 2122 The Pandemic of Fear
WILLIAM A. HASELTINE
Chair and President of the global health
think tank ACCESS Health International
The Pandemic of Fear 23COVID-19 stormed across the planet in 2020, striking first in Asia and then surging
throughout Europe and the Americas in what seemed like an endless tidal wave
of grief. With each passing milestone – the first 100 deaths in January, followed by
the first 1,000 in February, 10,000 in March, 100,000 in April, and one million as
of September – the question always has been when it will it end.
under development will prevent
infection or provide lifelong, lasting
immunity. At best, they will limit
the symptoms of those infected and
minimize the number of COVID-19
cases that progress to severe illness.
Moreover, the vaccines currently
approved for use require multiple
doses, with a delay of up to two
months before the benefits kick in.
Likewise, lifesaving treatments
for those with COVID-19 will not
come quickly. Treatments that
initially met with great fanfare –
remdesivir, convalescent plasma,
and dexamethasone – have since
proven to have little to no effect on
overall morbidity or mortality. And
treatments with greater therapeutic
potential, like monoclonal antibodies,
are still many months away, and
may ultimately prove too costly
to be made widely available.
The absence of a medical quick fix
will increase the need for leadership,
governance, and social solidarity.
Political leaders must accept full
responsibility for the lives that are
lost. Less than three weeks after
scientists identified the virus,
and after the first reported death
in Wuhan, Chinese President Xi
d e s p i t e i t s v i ru l e n c e , m a n y s i m p ly As for the fourth component of Jinping locked down 57 million
assume that the pandemic will end epidemic control, many assume that Chinese citizens in Hubei province,
sometime in 2021. But such hopes vaccination or a lifesaving treatment preventing them from traveling to
are misplaced. Controlling an is imminent. True, the pandemic other regions or leaving their homes
epidemic involves four fundamental has brought out the very best in for anything other than necessities.
components: leadership, governance, science and medicine. Researchers
social solidarity, and a medical around the world have moved faster China showed that new infections
toolkit. Most countries today and collaborated more closely than could be halved in just two weeks
have failed on the first three, all ever before, identifying the virus, through standard measures
but ensuring that COVID-19 will mapping its genetic makeup, and such as enforced mask-wearing,
remain with us over the next year. working toward potential vaccines social distancing, and mandatory
and treatments. But even with quarantine and isolation. By contrast,
Most likely, winter in the northern these incredible successes, there in countries like Brazil, the United
hemisphere will bring a sharp rise is still only a slim chance that we Kingdom, and the United States,
in infections and deaths. The losses will have a vaccine or treatment national political leaders dismissed
will be particularly pronounced that is safe, universally available, the threat and dithered in marshaling
in Europe and North America, and effective enough to stop the the appropriate response.
where daily infection rates were pandemic before the end of 2021.
Many commentators have attributed
already spiking in mid-autumn.
At the time of writing in late 2020, we China’s success to totalitarianism,
And just as the weather starts to
are just beginning to see published but a country’s system of government
warm in the north, South America
results for the vaccines that gained is not really the deciding factor. Far
will cool and another epidemic
regulatory approval in December. more important is whether political
wave will crash over us.
Based on what we know today, we leaders are willing to trade short-
can be sure that none of the vaccines term economic pain and quotidian
24 The Pandemic of Fear L A B P R O C E S S I N G C O V I D -1 9
A
T E S T S I N S PA I N .
conveniences for the safety of their
citizens. In New Zealand and Australia
– both vibrant democracies – bold
leadership and strong governance
brought new infections down
almost to zero, and political leaders
like New Zealand Prime Minister
Jacinda Ardern were rewarded
accordingly at the ballot box.
The first year of dealing with
COVID-19 has taught us that
piecemeal measures will only feed
the pandemic. National and global
crises call for national and global
coordinated action. The US, the
UK, Brazil, and other laggards have
failed on both counts. Indeed, some ICROSCOPIC VIE W OF
M
T H E C O R O N AV I R U S .
countries are still pursuing the foolish
notion of herd immunity, despite M A S K E D P E D E S T R I A N S
scientific evidence suggesting that I N TO K Y O ’ S S H I N J U K U
D I S T R I C T.
no such protection exists for this
disease. There are four common
(though rarely remarked upon)
coronaviruses that infect up to
15% of the world’s population each
year, and that come back year after
year, often re-infecting the same
people. Assuming that SARS-CoV-2
is no exception, any country that
places its hopes on a herd-immunity
strategy will be endangering
the rest of us year after year.
Though the Chinese government how much they are willing to That is the biggest lesson of 2020.
made some critical misjudgments sacrifice for their fellow citizens. If it is not incorporated into national
early on, one thing it did right was policies in 2021, the pandemic may
Clearly, a change in messaging is in
to warn the rest of the world that the well last not just through the next year
virus was transmissible, airborne, order. We are at war with a virus.
but for many more years to come.
and controllable only through drastic Few doubt the importance of personal
and immediate measures. The liberty, but this is a time when we all
countries that ignored the warning need to forego certain conveniences
have since suffered the most, both for the sake of those around us.
economically and in human terms. Each new earthquake, tsunami,
Meanwhile, the countries that or emerging disease reminds us
demonstrated social solidarity in that nature is a dangerous force. If
controlling their outbreaks have there was a reason why many Asian
been able to reopen their economies, countries reacted more quickly
though not necessarily their borders. and effectively to COVID-19, it
In the end, though, a collective was because they still harbored
response merely reflects the sum memories of SARS, H1N1, and the
of individual actions. In too many avian flu. Their experience in recent
countries, individuals fear that years shows that public-health
acceding to protective measures measures that are stringently William A. Haseltine, a scientist,
amounts to giving up one’s personal applied through strong leadership, biotech entrepreneur, and infectious
freedoms. Yet in times of war, governance, and social solidarity disease expert, is Chair and President
when the dangers are apparent, can quickly bring a pandemic under of the global health think tank
people have shown time and again control and limit the death toll. ACCESS Health International.
The Pandemic of Fear 2526 The Pandemic of Fear
Learning to Live
with COVID-19
ERIK BERGLÖF
Chief Economist at the Asian
Infrastructure Investment Bank
The Pandemic of Fear 27As COVID-19 infections continue to rise in much of the world, many are clinging to the hope that
the arrival of vaccines will soon restore life as we knew it. That is wishful thinking. Even with
effective vaccines, COVID-19 will be with us for the foreseeable future – for several years, at least.
We are going to have to learn to live with it.
A S A N I TAT I O N W O R K E R I N P I S A .
S O C I A L LY D I S TA N C E D H O M E L E S S
A
S H E LT E R I N M A N I L A .
a n i n t e r n at i o n a l pa n e l o f are vulnerable, particularly if public health fairly rapidly. Many
scientists and social scientists, immunity is short-lived. have also provided strong economic
convened by the Wellcome Trust, support, in order to protect lives
As the study shows, eradicating
recently constructed four pandemic Eradicating the the virus and ending the medical
and livelihoods amid lockdowns.
scenarios. Key variables included virus and ending emergency will require not only a But short-term emergency measures
what we may learn about the biology
of SARS-CoV-2 (the novel coronavirus
the medical vaccine that cuts transmission, but like blanket lockdowns are not a
also effective treatments and rapid, sustainable solution. Few countries –
that causes COVID-19) – such as the emergency will accurate tests. Such a medical toolkit especially in the emerging and
pace of mutation and the extent to require not would have to be made available developing world – can afford
which an infection elicits antibodies –
and how fast we develop and
only a vaccine and affordable to every country, to lock down their economies,
and be deployed in a manner that let alone keep recommended
deploy effective vaccines, as well that cuts
leveraged global experience and policies in place until an effective
as antivirals and other treatments. transmission, engaged local communities. vaccine is widely available.
In the study we considered how but also effective Yet at the moment, only one of the Such measures are merely supposed
each of these four scenarios would treatments nine leading vaccine candidates stops to slow down transmission and
unfold in five general settings:
high-, middle-, and low-income
and rapid, the spread of the virus; the others buy time for policymakers and
aim merely to limit COVID-19’s health-care professionals to identify
countries, as well as conflict zones, accurate tests.” severity. Moreover, while treatments vulnerabilities and, guided by input
and vulnerable environments for moderate and severe cases from the social sciences, devise
like refugee camps and prisons. have significantly improved, they innovative medium-and long-term
Not even in the most optimistic of remain unsatisfactory. And testing strategies suited to local conditions.
the four scenarios – characterized is flawed, expensive, and subject Unfortunately, this time has not been
by a relatively stable virus, effective to supply-chain weaknesses. used particularly wisely so far, with
vaccines, and improved antiviral policymakers preferring to imitate
With such an imperfect medical
therapies – will SARS-CoV-2 be one another’s solutions, rather than
toolkit, non-pharmaceutical
apply lessons creatively in ways
eradicated in all five settings within interventions (such as social
that account for local conditions.
five years, though community distancing and mask wearing)
transmission could be eliminated are vital. Fortunately, most Non-pharmaceutical interventions
within certain boundaries. And as countries have recognized the are not one-size-fits-all. Nor is
long as one setting is experiencing critical importance of early action, the process of rolling them back.
a COVID-19 outbreak, all settings imposing strict rules to protect Epidemiology – complemented
28 The Pandemic of Fearby the behavioral sciences – must AINTED CIRCLES
P How policy choices are made public-health imperatives, such
ENCOUR AGING SOCIAL
guide this process. and implemented matters greatly. as the fight against malaria.
D I S TA N C I N G AT D O LO R E S
PA R K I N S A N F R A N C I S C O . An effective response must
In practice, this means that advanced Already, the pandemic is fueling
emphasize both individual and
economies should ease restrictions inequality both among and within
collective action, with people taking
only when they have robust systems in countries. Wealth has amounted
responsibility for themselves and
place to monitor the evolving public- to the most potent protection from
their communities. Meanwhile,
health situation and to track and COVID-19, as it facilitates social
as countries like Norway and
trace infected individuals. And they distancing and all but guarantees
Finland have shown, financing
should maintain other transmission- quality health care. But such
temporary “circuit breakers” – as
reducing measures, such as face inequalities weaken the global
rich countries should all be able
mask requirements, for some time. community’s resilience. The most
to do – can enable progress on
These measures must be supported effective interventions are those
reducing community spread.
by sustained investments in public that protect the most vulnerable.
health and health system capacity. Political leaders who think they
Someday, the world may have the
can avoid the pain and discontent
In emerging economies, full that restrictions bring often end full toolkit it needs to eradicate
lockdowns will be much more up imposing higher costs on their the virus and will have to focus on
difficult to sustain. The pressure will populations. Likewise, those who building the infrastructure and
be on governments to find “intelligent focus on who is doing better or implementing the logistics capacity
restrictions” based on evidence worse miss the point: everyone is to deploy it. In the meantime, we
regarding effectiveness, economic better off if others are doing well. should stop placing our hope in
cost, and distributional impact. Competition over medical supplies a quick return to “normal,” and
and yet-to-be-produced vaccine start developing comprehensive,
The political dimension of the creative and cooperative strategies
doses is counter-productive.
relevant decisions – for example, for living with COVID-19.
about whether to open schools or So, while individual countries must
allow large gatherings – must also adapt solutions to local conditions, the
be taken into account. Leaders COVID-19 response must ultimately
must identify the trade-offs of be global. Resources, including
their policy options, recognizing vaccines, must be channeled toward
that they may look very different the most vulnerable countries and Erik Berglöf is Chief Economist
depending on the economic, population groups. They must also at the Asian Infrastructure
social, and political context. continue to be allocated to other Investment Bank.
The Pandemic of Fear 29You can also read
