The Global Economic Crisis

Sep 19, 2020

By Fr Antonio Spadaro
Since last December, a new coronavirus, COVID-19, has been putting our lives at risk. At the same time, it has paralysed most of our systems of production, the survival of which is now under threat. This unprecedented health emergency has triggered a very serious economic crisis, the depth of which will be determined by the duration of the pandemic.

The upheaval unleashed by the Asian virus is new in every respect. The most resounding aspect of this economic shock, in fact, is its deleterious originality. It does not originate from a collapse of the financial system or from an over-production not absorbed by the markets.  It comes from a natural phenomenon which arose by chance, and which cannot be attributed to the bad management of the economic system. A virus has managed to disrupt the global production chain, one of the first stages of which was found in China.

This pandemic is a severe blow to the world. To deal with it, most countries have taken courageous measures to quarantine and suspend social activities. In addition, a coordinated and strong response from the authorities was necessary. Its details were obvious. From the outset, ample public funds had to be assigned to health services. Specific measures were taken to support the people, businesses and local communities most affected. Central banks had to provide abundant liquidity.

It is now clear that we can, if circumstances require it, stop a state’s economy to a bare minimum level of activity. Yet at the same time, we have proof that the consequences are catastrophic. Never before has the global economy suffered a simultaneous shock of this magnitude.

Is globalisation sustainable?
The situation that has arisen raises the unavoidable question of whether it is not now urgent to control the most problematic dynamics of globalisation. It seemed irreversible, and it was believed that it would remain so. The various populisms have wanted to curb or neutralise it, but now it is a global health emergency that is managing to set limits. Borders have been closed, imports and exports have been frozen, populations have been locked up in their homes. Nation states have returned to the forefront, taking a leading role; they have regained their essential mission, to watch over their citizens.

We do not know when we will come out of this pandemic, nor how much we will recover of the previous situation, but perhaps an epochal change is taking shape. With the crisis that started in China, we are now dramatically aware of the limits and risks involved in the current configuration of the international economy, particularly in the globalisation of production.

The fragmentation of production chains, as a result of the fatal logic of making profits at all costs, has made it necessary to relocate production, and this has seriously affected health and environmental controls due to the very high volume of trade that aggravates the pollution of our planet.

The economic impact of COVID-19 will be much greater than that of SARS in 2003, perhaps because that epidemic disappeared without anyone knowing why; or because the world was then less economically integrated than it is today. A virus, an invisible biological structure, brought this globalised world to its knees. Once we rise, we will have to decide how to organise ourselves and how to deal with a future that is seriously compromised.

Without the intervention of the states, we could neither have faced the pandemic nor prevented the collapse of the economy. In the immediate future, as public health is restored, states will lead the process of reactivating their economies. This is a natural task for them as representatives of the relevant political communities. When we emerge from this crisis, the world will be different. The psychology of investors will change, as will the way we organise production and consumption. In addition, we will see that the state is once again active in the economy in order to remain there and guarantee the common good. ––La Civilta Cattolica