Looking at a post-COVID-19 world

Every country, including the Philippines, is preoccupied with the immediate challenges of this COVID19 pandemic. Electoral politics from the US to almost every country in the world are being decided by the behaviour of this pandemic in their country. Trump will most likely lose his reelection bid due to his failure to address the pandemic effectively.

The COVID19 may be called a health problem; but, its greatest impact has been on economics and politics. The geopolitical world will also be affected and we will see a different geopolitical geography in the post-pandemic world. There has never been a time in the history when the economic life has stopped practically throughout the whole world. Even in the midst of the two world wars, this never happened.

While the COVID19 is basically a health problem, its economic impact is what is causing the global recession. It is clear that most of the economic impact is not derived from the virus itself but from measures taken to prevent its spread. According to the IMF World Economic Outlook, 2020: “ Many countries face a multilayered crisis which is caused by a health shock, domestic economic disruptions, falling foreign demand, the reversal of capital flow and the collapse of commodity prices.”

When the COVID 19 crisis is finally over, the world will have changed. While parts will go back to the pre-pandemic days, there will be parts that will encounter permanent change.

The pandemic disrupted the global supply chain because of the excessive dependence by Western economies on East Asia, especially China, in manufacturing industry production. Multinational companies will have to review their supply chain and manufacturing  investment strategies from now on. Already, Japan has announced financial assistance for Japanese companies willing to relocate their plants away from China. There is a rising tide of anti globalization even in Western countries. Both Trump and Biden have publicly vowed to bring home manufacturing jobs. This can be possible if Western countries are able to shift their factories to their own countries. In order to make such large scale production transfer possible and sustainable in developed countries in terms of costs, the dependence on manual labor in factories will have to be reduced. The rate of automation will increase considerably and the use of modern technology such as artificial intelligence will have to be accelerated.

The International Labor Organization (ILO) predicts that by next year there could be a 25 million increase in global unemployment due to this virus. Also, even if they do not lose their jobs, some people’s income levels may remain below average for some time.

High unemployment and falling income will mean that many people will see their income levels remaining below average even if they do not lose their jobs. This period of high unemployment and falling income will definitely increase debt levels of the average household and income distribution will continue to deteriorate. These problems of low incomes and severe income inequality will lead to serious problems in domestic politics which may lead to more political and social instability.

The breakdown of health care systems in most countries have broken down. Overcrowded hospitals, lack of medical supplies and the worst feature is the lack of trained medical personnel, especially doctors and nurses. The Philippines is known as a major source of nurses; but, during this pandemic crisis many hospitals are claiming severe lack of nurses. After this crisis is over, responsible governments must review and overhaul their public health system.

The other phenomenon is that most countries, including the Philippines, are increasing their debt levels to extremely high levels to finance welfare and health programs. There is no question that this is necessary now. If people are mandated to stay home, they must be given subsidies to replace lost income. Until the pandemic is brought under control and economic activities return to normal, the burden of these financial debts will not be questioned. However, sooner or later, these public debts will have to be repaid. Budget deficits will have to be addressed. Failure to do so will result in inflation and even more economic recessions. It has been reported that the global debt stock has already exceeded $250 trillion. Tax reforms will have to be imposed. The question is who will bear the brunt of these tax reforms? Some countries will find a way to resolve these issues without causing political instability. In other countries, these issues will cause more social division as business insists that invigorating the economy will require more financial and tax incentives for business. The issue of income inequality will continue to fester the world economy.

In the post-pandemic world, China and the US will continue its rivalry for world dominance. I believe that Japan will tip the balance. An active alliance between the US  and a Japan willing to venture outside its protective shell will counterbalance China in every aspect. A US-Japan alliance will also provide Asian countries with an alternative to the aggressive military moves of China in this part of the world.

Japan is the third largest economy in the world after the US and China. It is resource poor and import dependent. Japan has largely outsourced its national security to the US. It has increased its economic and security engagement in the Asia Pacific region. A Japan-US alliance provides a security alternative for countries like the Philippines.

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