The world after the pandemic
Branko Milanovic looks at two global income measures to evaluate the effect of the pandemic on the global economy:
- The plutocratic measure which shows whether the average real GDP per capita of the world had expanded or shrunk. This measure has gone down only four times: in 1954, 1982, 1991, and most recently in 2009 as the consequence of the Global Financial Crisis. Each of the four global declines was driven by the outcome in the United States.
- The democratic measure which weighs growth rates of countries with their populations. This measure turned negative in 1961 when the disaster of the Great Leap Forward reduced Chinese per capita income by 26 percent, and moved the world into negative territory. It is therefore the populous countries that largely determine what happens to that measure. In 2020, whether this measure turns negative for the second time in history will depend on what happens in India.
Milanovic foresees four major changes:
- The gap between large Asian countries and the rich world would be reduced and lead to a reduction in global inequality;
- Geopolitically, the shift of the center of gravity of economic activity will continue to move towards Asia;
- The decline in real incomes of Western populations will come exactly at the time when Western economies were exiting the period of economic austerity and low growth, and one could expect that the lack of middle class growth that characterized these countries since the financial crisis would come to an end;
- Politics will remain turbulent as the crisis has brought front stage the attraction of liberal vs more authoritarian ways to manage societies.
The World after Corona
By: Branko Milanovic – City University of New York
The return of big government
In a marked departure from the prevailing wisdom of recent decades, we are already witnessing the return of “big government.” Everyone is looking to the state to inject huge sums of money into the economy, and to rescue (or take over) imperiled companies and sectors that are deemed essential. The state’s massively increased role will have to be scaled back after the crisis has passed, but how to do so is up for debate. Ideally, governments will transfer the returns that come from re-privatization into a sovereign wealth fund, thus giving the public a share in the post-crisis settlement.
The Politics of the Pandemic
By: Joschka Fischer
Building civic capacity
[E]vidence of how the virus has spread across the globe shows that cultural differences matter as much or more than institutional choices. Thus, policy should focus as much on culture as outcomes. Countries that have done best at containing the virus either score low on individualism (China, Korea) or high on rule-following (Germany) or both (Singapore). The United States scores almost pathologically high on individualism and low on long-term orientation. […]
The community-based approach may be less efficient initially, but it could build civic capacity in the form of stronger trust relations and other-focused behaviors that yield benefits two weeks, two months, or even two years from now. At this moment, the economy needs an infusion of money badly. It does so in part because Americans (both individuals and corporations) save so little. A more equal wealth distribution and better saving habits would have us in a much better place.
A Long View of Institutional Choices in Crisis
By: Jenna Bednar, Scott E. Page – University of Michigan
