Hungarian soldiers stand guard at the Keleti (Eastern) railway station in Budapest during the spread of the Covid-19 pandemic. Photo: Karoly Arva / AFP

As the coronavirus pandemic ravages the world, exacting a historic toll on economies and societies, it is time to start soul searching to correct the many mistakes made in the past few months.

The United States saw and should have understood how China, Taiwan, and South Korea handled the infection, and even learned from Italy, where it blew up well before it arrived in the US. But it apparently chose to ignore the evidence and tried to support an economy that had been doomed to recession for months.

This cost the US and world many lives, people who didn’t volunteer for a war, but were “drafted” into it, and thus more difficult to accept by Americans. It deeply dented America’s status and global leadership. With authorities now forecasting between 100,000 and 240,000 dead, the pandemic could produce the largest death toll on American soil since the country’s Civil War. History tells us an event of this scale could have grave consequences for American politics, possibly deciding the November presidential elections.

Whatever happens, much will depend on determining what the US did right or wrong in this crisis.

Propaganda war

Many in Europe and America are peddling the idea that authoritarian countries like China, unlike democracies such as the US or European equivalents, are better geared to apply the strict quarantine rules necessary to bring the spread of the disease under control, short of a cure or a vaccine.

Yet perhaps this is simply not true. China’s success where the US and Europe have failed may have planted a seed of deep mistrust and animosity between the US and China that will feed the ongoing bilateral propaganda war.

In fact, there are rules of war, and rules of peace. Democracies are able to wage wars and win them. But after wars, they revert to freedom. Authoritarian systems basically don’t change the rules in peace and war. Now democratic countries should realize these are very exceptional times, almost like times of war. It’s not about China – it’s about the world.

Democratic South Korea and Taiwan did well. Massive testing, investment in IT infrastructure, social solidarity (following instructions by medical authorities), and the simple availability of hospital beds and equipment are the common factors, as Asia Times columnist David Goldman eloquently put it.

That proves that democracies can do better, not worse, in these trying times – provided they realize these are trying times and stop pretending everything will go back to normal next Monday.

Moreover, people were already angry at China before all this – imagine what will happen after the epidemic and now that Beijing tried to deflect blame. This should be the real focus of Beijing. Stop being defensive and cope with the real problems that started this epidemic.

Catholic Church in danger?

The Catholic Church is in greater danger than ever before. If the Pope were to get infected and die, a conclave would be called in the middle of the pandemic. Then about 120 elderly cardinals from all over the world would travel to Rome to meet and discuss succession in the middle of the contagion. It would be a logistical nightmare, and simply many could get sick and die for it.

In times of past plagues, the cardinals were largely already in Rome and therefore already in harm’s way. But now the Church has become very different, far more global, with unparalleled liabilities. In this situation, it is just extraordinary how the Pope continues to risk his life and the life of his Church to perform his religious duties.

In all of this confusion, Italian politics sticks out like a sore thumb, and its tribulations could be an indication of difficulties facing other countries.

Italian political debate since March 25 – that is, since the ex-chairman of the European Central Bank Mario Draghi wrote in the Financial Times – is all focused on him and on the issues he raised: a great stimulus plan for the economic recovery of Italy and the EU after the epidemic.

For days now domestically and abroad Draghi has overshadowed Prime Minister Giuseppe Conte, whose internal and international credibility and personality are much weaker. Meanwhile, almost to recover some luster, in the past few days Conte met the Pope, and had a phone call with US President Donald Trump. But the premier didn’t offer anything substantial for Italy.

The rumors in Rome are that the balance now stands on an understanding: Conte will lead the emergency of the epidemic and then Draghi will arrive for the reconstruction. This is because, the consensus seems to be in Rome, changing Conte at this moment would frighten even more an already panicked population.

But if China’s experience can tell us something, it is that the emergency of the epidemic could be very long.

Almost two and a half months after the coronavirus alarm began on January 23, the situation in China has not yet returned to normal, although there have been improvements. We do not know when the plenary assembly of the Chinese parliament (the National People’s Congress), originally scheduled for March 5, will be held.

Another significant problem is that visas of foreign residents have been suspended indefinitely. The suspension is upsetting many foreign residents, who feel very unsafe and have no rights in the country. Unlike in other countries, they have no permanent residence and years of life in China could simply be cancelled with the stroke of a pen. This could have massive long-term repercussions for Beijing’s economic and social dealings with foreigners.

In the coming days, the weather should gradually warm up and help the global battle against this atypical pneumonia, but there is no certainty. And there is no certainty that the current drive to reopen production activities in Italy and other parts of the world will not lead to extremely dangerous resurgences of the epidemic, something that happened in recent days in Hong Kong and possibly in China.

The coronavirus emergency could continue for months, and the Conte-Draghi back-and-forth could go much further than expected.

In the meantime, international events which strongly affect Italy are in great flux. In Hungary, Viktor Orban asked for special powers, which could indicate a dangerous authoritarian drift on the continent. But Orban understands domestic and international politics well.

Domestically, the coronavirus could possibly spin further out of control. Externally, the EU is struggling to take on short-term initiatives. Countries like Poland and the Czech Republic may be tempted by the same Hungarian drive and a chill of Brussels towards Budapest would deepen the existing rift between ex-Western and ex-Eastern Europe.

This, in turn, could strengthen extreme right groups such as Germany’s AfD, which could drive a continent-wide neo-fascist inclination like a century ago. Compared with European right-wingers, the Italians are milder, but there remains a risk that could short-circuit mutual encouragement, just like in the 1920s.

On the other hand, just like a century ago, right-wing populism justifies itself by standing up against left-wing populism and the rigidity of the present elites. Italy, for example, has a public debt of 140% of its GDP, bought to a large extent not by the Italians (who do not trust the government in Rome much) but by the EU and US funds.

These do not give money away to Rome, but lend it at very low rates, today between 1% and 2%. If these rates rise above 3%, Italy will go bust. But Germany, the US, France, and Italy’s other “enemies” (as they are referred to in some populist papers) try to keep rates on Italian debt low to save the country. In Rome, many politicians don’t know what to do, nor what to say.

The reality is that no one in the world has the muscle or desire to take on Italy’s more than 2 trillion euros in debt. In reality, the money is lent almost for free – which, over time, is a virtual gift to Italy.

It is true that China has more than $1 trillion in US debt, but that is essentially a complex deal: China lends money to America, which then uses those funds to finance its trade deficit toward China, on the order of around $500 billion per year. In Italy, there are simply no numbers to set up such an exchange. China could perhaps buy $1 trillion in Italian public debt, but Italy could never bear a trade deficit with China of almost 30% of the Italian GDP.

Thus, Italy has returned to geopolitical confrontation, affirmed by Russian and Chinese activism in Italy and by the media coverage Italy gave them.

But their strategic designs are different.

Russia wants to split or at least weaken the EU, which is the closest neighbor to resist Russian ambitions. Italy is an important partner in maintaining this balance, today, just as in the Cold War. China, on the other hand, has different intentions. It wants to have a strong base in the EU and to strengthen the EU as a strategic counterweight to the US and Russia.

Perhaps the measures proposed by Draghi should be seen in this context.

Italy can’t hope to be supported by issuing Eurobonds or resorting to the ESM (European Stability Mechanism) without drastic and radical reforms of the Italian political-economic system.

It is not so much the consolidation of the past Italian debt; it is the uncertainty of future debt. If Germany and the northern European countries sacrifice for Italy without sufficient guarantees, this will stir up the worst neo-fascist and anti-Italian sentiments in those countries, which history shows have never helped Italy.

Then, the structural reforms in Italy and the guarantees required by Germany are insurance, internally and externally. Italy is, in fact, unreliable squared: first, because in 20 years, since entry into the single currency, the debt-to-GDP ratio has not improved as promised and as Germany’s did; and second, because this government and this parliament appear weak and inconsistent.

After all, the sentiment is shared by the Italians, who despite being the world’s largest savers are the only ones among developed countries that export their funds abroad on the order of 50-60 billion euros per year.

Let a good crisis go to waste?

In this there is the coronavirus crisis, and everyone knows it’s unwise to let a good crisis go to waste.

Diseases, like weather, are circumstances that can be used to defeat an enemy. The rebellious slaves in Santo Domingo used yellow fever to defeat the French troops. Napoleon was beaten by dysentery and typhus, cleverly managed by Russian General Kutuzov during the invasion of Russia. Will someone strike the enemy with its management of the coronavirus?

This is already happening. The slowdown in economic activity has dumped oil prices and kindled complex trade and political tensions between energy-producing countries. Saudi Arabia, with the lowest production costs for oil, is using this advantage against its enemies. Russia or Iran could be pushed into an economic crisis because of low oil prices, which make their production too costly and can eventually bankrupt them.

Iran, already deep in an economic recession, is suffering because of a massive spread of the virus. It can buckle and break under the pressure of oil prices below its production costs, and this may also be the Saudi goal irritated by Tehran’s support for war in Yemen or Syria. The possible fall of the present Iranian government could be a low hanging fruit of this contagion and it could send shock waves through the Middle East and Central Asia.

Russia on the other hand, after having accrued massive reserves in gold, and presently under the pressure of low oil prices, may want to use the occasion to replace at least partly the international use of the US dollar with that of gold. The US injection of $2 trillion into the market to buttress the shaky US economy, could put the greenback under pressure as international means of exchange and gold could partly replace it. The weakening of the US dollar as an international financial standard could alter the present global order and move it in unpredictable directions.

All of this is already happening, yet they only indirectly deal with the epidemics. But dealing with disease directly could be far more complicated. Using the disease against your enemy could be fine if, like the slaves or the Russian Cossacks, some populations are largely safe from the contagion. But this is not the case, and therefore perhaps everybody should join together to make the necessary adjustments to fight and survive the disease.

Then the US has a lot to learn from China in this crisis, as well as from China’s neighbors who were quick to realize the importance of what was happening and cherry-picked from Beijing’s success with the epidemic.

This is not new. The West won the Cold War against the USSR not because it backed dictators but because it passed liberal labor laws that drained the appeal of communism to the western lower classes. In order to beat China in the propaganda war, the US should not fight China head to head but it should learn from what China does right and better.

China should do the same with the US if it wants to win too. If the Soviets had learned from the US during the Cold War, as America did, it would have been different. In the end, the Soviets had political liberalization without market freedom. China did the opposite and has market liberalization without political freedom. The truth is that the two work together as three centuries of modernization prove.

China might want to learn from this before its temporary gains backfire.

Reprinted with thanks from Settimana News

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