corona
virus HOW CHANGE THE WORLD ECONOMY and politicis
what would happen I'm
not sure it is what's going to happen and partly because I think we're going to
go through a very difficult time in the economy and big economic disruptions
tend to unsettle politics and to create grievances and resentments the second
thing is a context in which this pandemic struck and it's one in which the post
Second World War order is breaking down where China is clearly the rising power.
Role of USA
where the United States
certainly under Donald Trump has either the less willingness or capacity to be able
to play the role of sort of overarching power who is prepared to get involved
all over the world to try and sort out people's problems and I think that sort
of sense of a world that's slightly falling apart and a more rival hues world
where the United States is worried about Chinese power the pandemic has comments
hit the world and just when those issues are becoming more intense and so I think
I fear that it makes them harder to solve rather than easier to solve his era
of globalization was very much slow and long before the covid-19 pandemic came
along and that was only partly related to the election of Donald Trump it was
slowing even before he became president and I think that was a kind of
lingering after effect of the financial crisis but you know what the historical
experience tends to show is that crises tend to kind of reinforce pre-existing
trends.
Covid 19 :Effect on World Economy
Strategy of china
which began to ease its lock down in kind of late February in March and at the moment I mean it's certainly the case that economic activity has has recovered from its lows but it's still a long way off the Chinese economy is running at about 90% capacity or compared with what was up before the pandemic hit and that's really for a few reasons you know what seeing is that people are going back to the office and going back to the factory and all that kind of stuff basically because they have to but what they're not doing is going out and having really spending the money having a good time investing in big things and what that means is that the sort of supply-side of the Chinese economy has it has in a way got back to normal but there's a the demand side hasn't and that means that unemployment is going to probably be persistently quite high in China for quite a long time so if people working in restaurants in bars in shops and all that kind of thing there just isn't really demand for their services.
How world economy slow down?
so I think what you're going to start to see now is as you
know various American states start to loosen down loosen their lock down so now
of course as Europe starts to come out a lot I think it's very unlikely we're
going to get back to where we were at the beginning of this year first effects
of this disease was interruption supply chains and I think that might remain
with companies in that they might diversify their supply chains and that was
kind of happening anyway because China is becoming a more expensive place to
manufacture things as against that supply chains have a strong driving force
for getting costs down and of being optimized and they'r pretty intolerant of
inefficiencies and so that will still sort of be pushing very strongly in the
other direction I guess one thing I might add today is to think about the
financial system and about how that world you know that's part that's part of a
supply chain to you know how a power company is able to access finance in order
to start producing stuff what you're seeing now really across the world is
really unprecedented levels of uncertainty and so I think what you could see is
that you know financing new projects and getting people to commit to projects
could actually become very difficult and this is starting to show up in the
data now where if you look at surveys of managers you know they're asked what
are your plans for investment and so on they're much lower now than they were
even in the absolute depths of the financial crisis of 2008 2009 and back bear
in mind back then you know some people really thought the financial system was
going to come to a complete stop it's held up a mirror to them to the to the
most vulnerable aspects of society.
I mean you know Singapore is a great example of that you know
it's a country that apparently had dealt with the outbreak extremely well and
then a few weeks down the line there's you know there's huge outbreaks in the
in the migrant labor camp that keep the Singaporean economy going and there are
the kind of seedy underbelly of the Singaporean economy and people there have
very poor access to health care and of course there are still millions of
people who are uninsured in the US and you know there's are worries that those
people and though that you know particular people lose their jobs that people
will be less willing to go forward for testing and so on.
Look forward with new Strategy and save economy from recession
what's happened in this time is that states of governments and politicians
if we can we want to avoid all bankruptcies and we want to
make sure that nobody becomes unemployed what that does is it opens the door to
really significant government intervention in the economy going forward so you
know let's imagine that in a few years where we've moved to move beyond this
pandemic but of course there will be another recession at some point down the
line I think if it's generally accepted that the government did a pretty good
job during this crisis of protecting jobs and protecting firms then people will
say well heaven if it worked last time then why not do it again so I think we
could see quite radical changes in sort of expectations of what the state
should do and what the state thinks it's legitimate for it to do you often hear
people say that one thing at least good thing that's come out of the pandemic
is that has been good for the climate you can calculate you know how many
hundreds of thousands of tons of carbon dioxide haven't been put into the
atmosphere because there have been fewer flights and so forth and I suppose
there is a sort of demonstration effect you know people might you know this is
in the sense something that doesn't normally happen but as against that you
know a poorer world a world that has less inclination to invest and a world as
worried about unemployment and life and death is a world.
Investors view
I think is less
inclined to invest in the transformation of you know the world to a sort of
carbon free economy there's one big wrinkle on that however which is the oil
industry the price has collapsed countries in the Middle East Russia Venezuela
that depended upon oil is a very important the main source of their foreign
exchange earnings are suddenly finding that they are getting enough money to do
the things they want to do oil companies are beginning to see that perhaps the
oil price might not recover for a very long time that also is giving people a
sort of incline and a glimpse that there may be a future without oil which is a
very important component of the transition to away from a carbon-based economy
I mean it's gonna become more distant I suppose in the sense that I think you
know if you're gonna have a meeting with someone and face-to-face you know for
the foreseeable future there has to be a pretty worthwhile meeting so I think
the idea of going for a speculative coffee with someone well seen at least for
a while kind of weird you're only your you'll reserve your your ventures out of
the house for people that you sort of know you're going to have a productive
time with so I think that will potentially you know reduce the exchange of
ideas and that kind of thing and I think the same goes for for travel business
travel and research travel and so on you know if you look at what's happened
say in the scientific community and in economics most papers research papers
now most research projects involve a large team of people and also a growing
proportion of those projects evolve people in more than one country you know
normally that might be the America or Canada but you do get an incredible
diversity in cooperation and I think that if you know meeting people and
traveling becomes harder.
Which are Most affected countries ?
you can see a really
big hit to innovation and patenting and all that kind of stuff probably quite a
lot so we did a analysis a couple of weeks ago looking at the countries which
countries that we're going to be most affected potentially by their by the turn
down and if you look at the very top of the ranking so the countries most
affected they are true and dependent economies Greece comes unfortunately right
at the top and then Italy and Spain are printing in the top as well and Turkey
also is very high up there particularly in Europe to tourism ministers are
starting to talk to each other and say you know how can we make this work if
Greece doesn't have a tourist season this year this summer its economies and is
in really really serious trouble so what I expect you'll start to see is people
thinking you know pretty creatively about what they might do so if you take the
example of Israel earlier this week they said the hotels could reopen but you
could only stay on the ground floor I actually remain fairly optimistic about
saying the prospects that people will be able to to travel and so on I think it
it might become something is open to fewer people you know if if the flight
from say London to Spain is only allowed to be two-thirds full because of the
required social distancing then that means the ticket prices will have to go up
and so it would be available to fewer people but my sense is that because this
is such an important issue for some countries that is there people will find a
way of making this work if it's all possible.
thank you.
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