The Coronavirus is a Turning Point in the Global Order

Sam Marrero, NESA Center

Henry Kissinger wrote in an article for the Wall Street Journal last month: “The Coronavirus Pandemic will forever alter the global order….when it is over, many countries’ institutions will be perceived as having failed.”

The current global system, the result of a deal struck in 1945 at Bretton Woods which institutionalized allied hegemony and created those very institutions, is breaking down.

In light of the current crisis, why don’t we see effective global health cooperation? Part of this can be explained by a shift in global power that could not have been foreseen in 1945. We’ve seen a large power shift to emerging economies. Non-governmental actors play a much larger role than could have been foreseen. The WHO is only funded some 20% by sovereign states, with the remaining 80% coming from NGO’s, such as the Gates Foundation. But the WHO is still run by member governments, and voting power still rests with the member nation states. The issues have also changed since 1945. Social media has changed how we relate to the world. Today’s scale of capital movement dwarfs that of the immediate post-war period. International travel in the 1950s, or even the 1990s, was not nearly as copious as it is (or was) in 2020.

The Coronavirus does not respect national borders. Social distancing is simply not realistic in many countries. Take Egypt, for instance. Its more than 90 million citizens live mostly in the narrow Nile River Delta area. Cairo is among the most densely populated cities in the world; millions live in hastily erected neighborhoods resembling shanty towns. Although testing is shoddy, Egypt has avoided a crippling outbreak with less than 9 deaths per one million citizens. For comparison, the United States has had roughly 300 deaths per one million with death rates in European states even higher. Unlike some wealthier gulf Arab states, Egypt did not try to impose a strict lockdown. But with tourism suffering, and an already weak private sector now in free fall, an economic crisis in Egypt has started. Egypt’s experience is but one example of what is faced by many populous, resource-constrained states.

As The Economist magazine put it: “The underlying anarchy of global governance is being exposed.”  But a new system has not emerged to replace the current one. Instead, coronavirus has intensified the US-China confrontation; a blame game between the world’s two largest economies. US-China trade tensions appear to be escalating again, as the pandemic’s shutdown has puttargets for the phase one deal between out of reach with no signs of a renegotiation. That the United States has turned its back on the WTO and pulled out of the TPP in favor of bi-lateral trade negotiations further shows the irrelevance of the global system once spearheaded by the United States.

The global governance vacuum is not necessarily being filled by China or any other economic power. China appears primarily concerned with its immediate backyard. In the National People’s Congress Prime Minister’s work report, the word “peaceful” was struck from the usual talk of reunification with Taiwan. More concerning was the passing of a security law which grants China the broad power to suppress unrest in Hong Kong. Secretary of State Mike Pompeo called it a “death knell” for Hong Kong’s autonomy. If the U.S. carries on with threatened sections as a response, a new cold war could ensue. China also even went as far as using a trade ban to punish Australia for calling for an independent inquiry into the coronavirus outbreak.

Domestic legitimacy buoyed by a strong economy is the chief priority of the Communist Party of China, which prefers to operate on the shaky pillars of the existing global system rather than forge a new one. China will enact the stimulus needed to add to jobs to stabilize a labor market rocked by the Coronavirus. Even though Chinese factories have opened up, orders from abroad are not necessarily coming in like before.

National security will dictate that the United States and many other nations will strengthen domestic production capabilities for PPE, ventilators, pharmaceuticals and vaccine development. Companies will safeguard global supply chains going forward to protect from future shocks. This includes diversifying suppliers and stockpiling raw materials and parts. It’s not easy to move all manufacturing back home, domestic labor cost is too high and China is an important market to which countries want to maintain access.  But we may see a proliferation of smaller, more regional supply chains and production points, as the US administration’s stance has made US companies reconsider manufacturing in China if it can be avoided.

Though globalization has brought many benefits to be sure, the pandemic is a turning point in the global approach to health care, business and quite possibly in the global order itself. Today’s existential calamities—pandemic, climate change, economic inequality—require global, not national, solutions. There is an anti-establishment mood growing in the United States and in the world, but with nothing on the horizon to replace the old order, life is likely to get less predictable and more unequal until global solutions are impossible to ignore.