As the new Coronavirus spreads widely out of its Chinese birthplace, experts claiming the world is on the verge of an unprecedented pandemic and the markets tumbling down in fear, the United States apparently dreams of drastic changes – of a revolution.
The disease, the plague of modern times, could speed it up.
America wants change
Right or wrong, left or right, people in America apparently want drastic change. In the last election, Donald Trump embodied an anti-establishment streak while Hillary Clinton was the incarnation of the establishment. Now both of the main candidates, incumbent Trump and leading Democratic candidate Bernie Sanders, are vocally anti-establishment – reflecting a strong undercurrent of US opinion fed up with the existing establishment mainstream.
Trump’s election signaled a dramatic new spin compared with previous administrations. It was meant to indicate almost a return to a semi-mythical past, when the US was predominantly Anglo-Saxon.
Trump catered and caters to a numerical minority of the total US population, which yet is a majority in the majority of the sparsely populated states of the union.
The chemistry of the appeal of a return to the past combined with favorable electoral laws to bring Trump to victory.
Background
The end of the Cold War had brought about Bill Clinton’s economic globalization and George W. Bush’s political and military interventions, which were somehow toned down and reconciled by the Obama administration. Perhaps Barack Obama was elected president to signal a change, although the change was not in the direction preferred by some conservatives in the country.
Some social scientists point at the widening income divide between rich and poor and the disappearance of the middle class, which makes many people feel disenfranchised by the present system. Philosopher Angelo Codevilla warns of a tectonic shift from a republican to an imperial America.
With victory in the Cold War, the United States may have thought it had gone from a division of global power with the USSR to being a solitary and absolute superpower.
Yet, decades after the failure of the Soviet empire, trade globalization didn’t fetch the windfall it promised for the US. Nor did the Bush adminisration’s military interventions in Afghanistan and the Middle East open an era of peace and new markets for America. Rather, those wars sapped American coffers and the drain of resources contributed to the 2008 financial crisis.
Moreover, encroachments in many directions by newly ambitious Russia and turns and twists by allies like Turkey prove that the US doesn’t have the total focus it may need. In this latest period, the US has only been consistently focused on China. From the slow but coherent build-up of Obama’s strategy of a “pivot to Asia” to Trump’s showdown in the trade tussle with Beijing, Washington is clearly showing that its priorities are in Asia and China.
In short, the US is not a total superpower, but it is still the only superpower, especially considering that China’s economic performance is shrinking because of the double attack of the coronavirus and the lasting Hong Kong protests.
The challenge for the US, then, can be threefold: regain the trust of its people, rebuild the middle class that made America what it was in the 1950s and 1960s and reestablish the political link with its allies that contributed to winning the first Cold War.
In fact, the US often behaved after 1989 as if it had won the Cold War alone. This was possibly due to the fact that, despite the alliance between the two, Japan mounted a challenge to the US economy and technology in the 1980s, and in the early 1990s the European partners (mainly France, West Germany and Italy) conceived and launched a new currency, the euro, evidently to hedge against the power of the dollar.
When the Japanese economic challenge proved a failure and it was seen that the euro threat against the dollar never really materialized, the US could be in a position to rethink its global outlook and links with allies, new and old.
Flash forward to now
Despite the mounting burden of the coronavirus on China’s and the global economy, the sentiment on Wall Street over the weekend was still high, buoyed by expectations that Sanders against Trump would fare like McGovern against Nixon in 1972, and thus pro-market Trump would triumph.
The sentiment lost steam on Monday, as the virus was hitting economies all over the world, including the United States, where the White House asked Congress for special funds to battle the crisis.
The amount of pain afflicting the global economy will depend on the depth and duration of the emergency. Presently in China, new infections are apparently contained, and the number of new victims is dwindling. But this is happening at the cost of a virtual halt to all economic activity nationwide. Unlike during the 2003 SARS crisis, which was basically limited to Beijing and Guangzhou, the coronavirus has engulfed the whole country. All cities were de facto quarantined, although on different levels.
Consequences of the economic plague
Now some factories are reopening, but so far, the virus is being contained at the cost of virtually stopping the economy. Sales are down and prices are up. Massive stagflation is ongoing, on top of budding stagflation that was already occurring at the end of 2019 because of the massive swine flu, which, by hitting the price of pork (China’s staple protein), walloped the entire food chain.
The Covid-19 disease caused by the coronavirus is hard to detect and has a long incubation period. The reality is that if Beijing were to lift present restrictions too early, infections could blow up again and be more severe. The spread of the virus in South Korea, Iran and Italy is evidence that the flu is not contained outside of China. Is it really contained in China, then, if it started and went on unbridled perhaps for months?
Chinese economists agreed that the present health emergency would spill into a market crunch that might be like, or even worse than, the 2008 financial crisis. They are admitting that the coronavirus could hit not just the first but also the second quarter.
Apple, America’s bluest of the blue chips, depends on the Chinese market for more than a third of its production and sales, and has already announced a drop in its turnover because of the Chinese crisis.
China is propping up the Hong Kong market with a massive US$170 bn fund and promises it can unleash the whole power of its three trillion dollar reserves. But on Monday, Seoul’s stock market lost 3% and Milan opened at a scary -4%, closing at -6%, Wall Street shed 3%. It could be a very hard week. Before the coronavirus becomes a global pandemic, it is spreading on the world markets, and America could suffer badly.
We are still months away from the presidential election, and many expect a strong rebound of the economy after the end of the disease. But this will certainly be hard and difficult. China’s GDP in 2003 was smaller than Italy’s; now it is over four times larger. Then the enemy was Islamic terrorism; now China is the adversary. Then the crisis looked like a freak accident; now it seems more like a systemic issue bound to recur every 15 years or so.
There is a huge crowd of variables up in the air, but one of the variables, not totally unlikely, is that the US market will crash because of the wide consequences of the virus. A deeper anti-establishment mood could sink in, and Sanders could be elected.
Unlike McGovern, who never beat Nixon in opinion polls, Sanders is ahead of Trump according to some surveys. Besides, would Trump be re-elected in the middle of an economic crisis?
Sanders would need to re-assure the establishment, that he would bring a Rooseveltian reform but no Leninist revolution. Still, he could then be in the position to improve the fate of the American middle class and establish a new American “empire.”
President Sanders may seem very far-fetched today, but the spread of a largely unexpected plague and its still unclear economic outcomes looked even more far-fetched nine months ago.
This article first appeared in Settimana News and is reused here with permission.