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The scariest thing about Covid-19

International disorder.
The resources needed to contain both the virus and its economic impact have to come from a multinational effort. Image: Shutterstock

The world has been through a lot in the last 100 years. From the First World War to the great financial crisis, major disruption is certainly not new.

Nevertheless, a pandemic like the coronavirus in a globalised world is unprecedented. The extreme sell-off in financial markets over the past few weeks illustrates how worried many people are, primarily because so much is still unknown.

Nobody can be certain what the human and economic cost will be, or for how long it will last. Optimistic assessments point out that China appears to have the spread of the disease under control less than three months after its first case, but more pessimistic projections suggest that the world won’t be truly in the clear until a vaccine is developed. That could be 18 to 24 months away.

Read: ‘D’ word rears head as coronavirus-hit markets brace for recession

History lesson

The last time the world faced an economic event of this scale was the great financial crisis. The credit crunch that threatened the banking system in 2008 had serious and far-reaching consequences that were felt across the global economy.

How the world responded to it is telling.

Once it became clear that the crisis would not be limited to the US banking system, it also became apparent that countries acting on their own would not be able to deliver a sufficient response to the fall-out. This led to a deliberate and co-ordinated effort by the world’s major economies to mobilise resources to contain and ultimately reverse the damage.

The first to act were central bankers, who cut rates around the world in late 2008. They also orchestrated ways to maintain liquidity.

The fiscal response was slower, but within months governments were acting collectively. The US was at the forefront of this, not because that is where the crisis began, but because it was, and remains, the only power capable of prompting this kind of multilateral action. By engaging and working with the G20, it led efforts to reinforce the global financial system.

The International Monetary Fund (IMF) was a recipient of much of the money that was made available, and it was able to provide support across the globe. This included providing financial or technical assistance to Greece, Portugal, Ireland and Spain when the eurozone debt crisis hit in 2009.

Frenemies

Even 12 years ago the US-China relationship was testy, but they found some common ground in the need to protect their economies. As a percentage of its GDP, China’s stimulus package was the biggest of any of the G20 nations at around 14%. In nominal terms, it spent about the same amount of money the US did, even though its economy was three times smaller at the time.

Even though competition between these two nations remained high, there was a sense of common responsibility.

Unfortunately, that appears to be lacking today at a time when the world once again needs coordinated, collective action.

Covid-19 and its impacts cannot be contained by any country on its own. Yet, at a time when the world desperately requires a multilateral response, there is a risk that countries are instead preferring nationalistic isolation.

Lockdown

In particular, the US and China are far from seeing eye-to-eye at the moment. There is an ongoing diplomatic spat about who has responded better. The US blames China for not containing the coronavirus when it first appeared, while China is using the initial bungling by the US government to argue to its citizens that this is proof that western democracies can’t offer the same kind of protection that they have from their one-party state.

This has spilled over into China accusing the US media and President Donald Trump of racism, particularly in his characterisation of Covid-19 as a ‘Chinese virus’, while the US has reduced the amount of journalists from Chinese news agencies it allows in the country.

At the same time, senior politicians in both countries are engaging in a bizarre and dangerous argument about who has the better conspiracy theory. Was it the US military that brought the virus to China, or was it China that let the virus escape from a lab?

Contributions

The world can’t afford the two biggest economic powers to be so far apart at a time of crisis. The resources needed to contain both the virus and its economic impact have to come from a multinational effort.

If the US and China fail to lead this effort, who will?

Physically, many countries have shut themselves off from the rest of the world. They can’t afford to do so politically too.

In 2009, in the midst of the great recession, OECD Secretary-General Ángel Gurría delivered a speech at the Finnish Institute of International Affairs in which he argued that “the only way out from this crisis is multilateral cooperation”.

His sentiments are as relevant today as they were then: “The big lesson of this crisis is that we are all one,” Gurría noted.

“As the song says, ‘we all go together when we go’. And this realisation of this interdependence is an opportunity to revise our theories, our concepts, or daily behaviour and its relation with the economy, with society, with the environment. At [the] OECD we are making a big effort to adapt to the new global economic reality.

“But we must act together, for now we know this is not a ‘solo’ challenge, and surely you all have an important contribution to make.”

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COMMENTS   12

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And all the Mall owners and retailers have done is improve hygiene protocols.

Be responsible and shut them down for non essential items.

And how do you think salaries will be paid if everyone closes? Do you think small businesses that are already on extended loans and struggling to survive, will be able to cope with this?

I get that health and safety is a concern, but the financial impact will be severe on a sector that is already on its last legs due to poor governance and difficult market conditions.

As someone with a small business, I really hope a lockdown situation can be avoided. I can pay the salaries this month, but what about next month?

I have to think not only of myself but also the people I employ and how it affects their families.

This might also sound callous, but how will her immunity be achieved if everyone is isolated and no-one gets the virus?

My hope is that due to our warmer climate (on average) it will be less severe here, but knowing winter is coming and the state of our health in SA (HIV, TB, etc), my guess is it will wreak havoc in the informal settlements. I really hope it doesn’t, because I do not think the government will be able to cope at all with that.

From a very worried small business owner…

That’s the irresponsibility just there. Their economics is much more important that spreading the risk to all.

The weather thing will have no difference, its the behavior that makes the difference. Every responsible nation and their leaders are shutting down malls and why must we behave irresponsibly?

@Africa Pragmatist

Well, that is your view and you are entitled to it.

Mine is different. I will rather limit number of people in an area (work/social), and get some other measures in place, but to close down completely. For how long? That will make most small businesses go over the edge if it’s for even 1 month. Then what?

I’m not saying don’t do anything and let life carry on as it always has, but just give proper consideration for the economic effects too.

Could not agree more. Stopping the economy will lead to more crime including murder, lawlessness, social unrest, suicides due to despair, hunger and of course joblessness. Killing small business can never be the answer to a crisis like this. 60% of the population will eventually be infected, and 3% may die. We can’t stop this. We can however cease and desist from killing the economy too.

@ Africa Pragmatist.

I err with MrG9000 here. The economic destruction will be way worse than deaths caused by virus. My guestimate is that the deaths from suicides globally to follow in the financial destruction, will exceed the deaths from the virus itself.

When one’s job is lost or business is lost, you will be so down in the dumps, that you’ll feel the virus can just as well take your life.

If you’re perhaps a pensioner, thinking you are safe….for example….have you pulled your latest fund values from your asset manager? That could be food for suicide…

What’s scariest about this virus is the failure of global leadership, health departments and the WHO..

Since January each country was given the memo of the deadly virus and it’s contagiousness. So instead of locking down borders they adopted the wait, hope and see approach. WHO also encouraged countries to leave borders open.

Left it too late and going to cost billions of $ to fix and plenty of human lives. A massive price to pay. What’s the value of the CDC’s and WHO if they don’t do their jobs.

The “scariest thing” is still to come before the year draws to a close:

The number of suicides globally (as result of financial distress/business failures/livelihoods destroyed) will eventually outnumber the number of actual deaths caused by the disease itself.

The risk therefore is not only the aged/weak, but also the youth to middle-aged.

The indirect result of fear…spread by social media. Rather, spread hope.

@MichaelfromKlerksdorp……Thank you, couldn’t agree more

Not yet one ‘Corona’ death in SA after more than a month, yet road deaths number 57 per day – don’t see any drivers being quarantined ???

I think the hype is more pandemic then this strain of flu itself, and more worrying in itself

This is silly thinking, and totally BEHIND the curve!

On average, the road deaths will remain at 57 every day – each day for the rest of the year. Terrible. But stable. The country can – and DOES – live with that! Sad, but true!

An infectious pandemic on the other hand, has a steadily increasing quantity EVERY day. The road death figure of 57 will (very!) soon be left in the dust.

And if this happens, it will be solely because we REFUSED to take the NECESSARY painful action WHILE there was TIME for it to work FOR us.

Like being caught in an animal trap in the bundu, and the only survival option is to cut your arm free with your penknife while you are still strong enough mentally and physically to do that, AND then survive the arduous trek through the jungle to (possible!) safety. Not an idle example, by the way – actually happened.

Ramaphosa (the President of Indecision) is being FORCED into these steps by REAL experts looking at the disease fatality projections, and FORCEFULLY telling him that if he doesn’t get his act together within DAYS, his future is toast and MILLIONS will die!

There is NO later coming back from Delay and Ignorance and Downplaying the threat because you didn’t have the technical background to properly understand NOW the full consequences of NOT acting Decisively and Quickly.

By far, the most dangerous vector for incubating and spreading the virus at present are the crowded black Taxis transporting people to work. That entire chain needs to be shut down immediately.

Government will have to come up with a plan to pay people who can no longer get to work, or have no work.

Where this money is going to come from – and for how long – is anyone’s guess (those pension funds now looking really attractive, huh?), but ignoring doing this is NOT going be to an allowed answer. That’s for definite!

I was waiting for the usual advice to “invest for the long-term” in this article, but I see it has gone missing. Time to look after yourself and lock-in whatever is left of your local portfolio and get it into USD. By the time this is over, the rand could be R21-14 to the USD. Our market still has a long way to go down……
Think what property funds are worth when all the malls have been closed? Or Capitec when their out-of-work clients cannot make those monthly repayments?

Its hectic times. The health care system will get stressed out either way. People will die more because of financial difficulties. Everybody is going to get the virus, especially because it can’t be cured. We are lucky this isnt the Zombie virus. Anyway. Let’s pray a vaccine is found soon!

End of comments.

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