COVID-19 and international relations

Translated from Spanish with permission from an article written by Prof. Victor Zajdenberg for hashavuabogota.com  29-04-2020

Faced with the surprising global situation created by the “corona-virus”, many politicians, economists and health professionals have started to determine how an epidemic originating in Wuhan, a town in China, has become, with so much speed, a global pandemic with its consequent economic and social blow.

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The first results suggest, every time with more weight, the involvement of the totalitarian regime of China and the World Health Organization (WHO). Let us look at the evidence and arguments put forward by researchers and analysts from various countries.

CHINA: A few years ago, Guy Sorman, Professor, Economist, Writer and renowned French political analyst, spent a year touring into China’s most hidden towns and provinces, an experience that he captured in a book that he subtitled “The Empire of Lies” (Editorial Sudamericana ) in which he detailed the calamitous injustices, the corruption of power, censorship and forced self-censorship, continuous vigilance, crude propaganda and outrageous repression of its 1,300 million inhabitants. In mid-November 2019, a Wuhan doctor became alarmed when he found that an abnormal number of patients were contracting an unknown sort of flu that caused a higher percentage of deaths. He first decided to inform his medical colleagues at the hospital, who appealed then to the Director of the hospital, who took his time to decide. In mid-December 2019, Wuhan doctors decided to inform the Government about the new coronavirus.

 

Guy Sorman asserts: “The Chinese government does not like bad news and for a month they decided to say that it was not true.” They immediately jailed the doctors, forbidding them to tell the truth. Meanwhile, the virus spread throughout the Hubei Province and from there to the country. The intense commercial and human interchange between China and the world caused by transport and travellers, mainly from Europe and the USA, took the virus to their respective homes. That is why Guy Sorman concludes: “If it had not been for that political delay, the disease could have been contained in Wuhan. For this reason, I consider the Chinese Government to be directly responsible for this pandemic.” Several European countries and Great Britain have already begun to demand huge compensation for the countless costs that will be borne by China for this disastrous action by its dictatorial government.

 

WHO: Critics from all over the planet have accused the WHO and especially its Chief, the Ethiopian Tedros A. Ghebreyesus, not only of having acted late and badly but also of having praised China when it should have denounced them for their perverse injustice. This time and space granted by the WHO to China allowed the virus to cross borders and continents since from November 2019 to February 2020 millions of people travelled around the world without knowing what was happening. This was what caused an epidemic disease then to turn into a pandemic. The painful and unimaginable reality that can be caused by the indolence of a dictatorship.

COVID-19 and the global economy

FOREWORD: “Political Economy” is the science that deals with the study of the laws and principles of nature that govern the production and distribution of goods in order to satisfy human needs. On the other hand, the “Economic Policies” are those that a State or Government, in turn, establishes as decisive priorities that are supposed to be able or should improve the economic situation of a country and its citizens. These can be changed based on the results of such policies through “trial and error” or “cost-benefit” analysis; on the other hand, the excessive deviation from natural laws, sooner rather than later, leads to an inevitable crisis that in economic terms is called “bankruptcy”, “default” or the name by which you want to disguise it.

The first economist in history, Joseph son of Jacob (see the Bible) advised the Pharaoh of Egypt to collect cereals in silos during the seven years of climatic bonanza to face the next seven years of drought that he predicted would come. And so, Egypt became the most important Empire to which all the peoples of the region went to endure the famine. In the modern world Norway, a small country after the 2nd WW, can be taken as an example of the same concept. It was the poorest in Europe but after discovering oil off its coasts it not only became one of the richest but also decided to collect huge monetary reserves to face any “Black Swan” that might appear in its own country and / or in the world.

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THE BLACK SWAN or the impact of the highly improbable: written by Nassim Nicholas Taleb. What is a black swan? An unpredictable event (a brutal drought, the collapse of the oil price and currently the killer covid-19, also called “the china flu ”) which is introduced into a supposed perfect model. According to Taleb, black swans are an integral part of our life for which the vast majority of people and societies do not take into account the element of chance. This prevents us from recognizing opportunities and makes us too vulnerable. If we add to the brilliant investigation of Taleb the purposely wickedness of many corrupt, wasteful, incompetent and ineffective politicians, it will be possible to understand the vulnerability and absolute failure of certain countries whose populations will have to suffer much more than others that are more farsighted.

The southern European countries in debt have the chance (still) of being part of the European Union (EU) with the more thrifty north. Presumably, the US will know how to temporarily use Keynesianism during the “corona” to reinvent, when possible, a more national capitalism. China will almost certainly use its billions in reserves and its totalitarian power to cope with the plague. The State of Israel pays with its reserves the payroll of its businesses. The problem is exacerbated for certain Latin American countries (except Chile, Uruguay) with hyperinflation that may follow. Countries without monetary reserves and without credit should adopt economic policies for which Keynes is now inapplicable and try Schumpeter.

PARADIGM CHANGE: Thomas S. Kuhn has written “The Structure of Scientific Revolutions” where he studies that the best path to progress (in this case that of countries in an emergency) should be examined without preconceptions. Although the present state is vital while the pandemic lasts, it should also take care of private activity, especially SMEs, so that, as Joseph Schumpeter, Economist and Professor at Harvard University, says: “Business and innovation are instruments that serve to make a new dynamic interpretation of capitalism and economic development ”.

Since it is not known when COVID-19 may be defeated, the country that is in intensive care for both ills, the virus and possible hyperinflation, should act quickly in order to be prepared to resurface from the sudden drop in GDP that will occur. To do so, it should, in parallel to the essential healthcare expenditure, begin to shrink non-healthcare public spending, expenditures that are not consistent with the drastic decrease in tax collection for obvious reasons. The current meagre tax revenues should be earmarked for the health emergency but also to support the small and medium-sized companies that are the main job givers and possible future developers, innovators and exporters.

One thing we can be sure of, the recovery of the “Welfare State”, to a greater or lesser degree depending on the action that each country has had in this terrible crisis of COVID-19, will take many years to return. It has already been said by Kenneth Rogoff, Economist and Harvard Professor: “We are going to a recession not seen since the Great Depression” of the 30s of the 20th century. It will take a different New Deal than the one Franklin D. Roosevelt, President of the USA at the time, applied with the advice of John Maynard Keynes.

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