On February 12, the Dow Jones reached its highest close, followed by the S&P 500 and Nasdaq, which hit all-time highs a week later. It was the mother of all bull markets. There was a notion among the investors that the trade war initiated by US President Donald Trump was adding value to their investments. But the last week of February saw a complete reversal of mood when stock markets across the world reported their biggest weekly loss since the 2008 crisis as the number of Covid-19 cases increased outside China.
Adding salt to the injury, the price war between Russia and Saudi Arabia forced crude oil to tumble as much as 33% on March 9, making investors jittery. In response to this crisis, the Dow Jones Industrial Average fell more than 2,000 points. It was the largest plunge in its history, followed by two more record-setting falls through mid-March. In total, global stock markets lost about US$16 trillion in less than a month. Even the most aggressive responses from central banks such as cutting interest rates and launching huge stimulus packages were not able to cheer the market mood.
In two weeks, the world has gone upside down, sparking fears of a global recession. Billions of people across the world are now isolating themselves, nations are in lockdown position, only emergency services are in operation. Still, the death count and the number of Covid-19 cases increase each day.
Even the most proactive responses from governments, institutions and think-tanks across the world were not able to reduce the impact as infections rose exponentially. Does a virus have the potential to bring the world’s most powerful governments, markets, and institutions to their knees? Does a small virus have so much power to dictate its terms to the world, or is it an “ice-nine” moment?
An ice-nine event
“Ice-nine” is a term coined by author Kurt Vonnegut in his book Cat’s Cradle. It’s a fictional substance that is supposedly a polymorph of water that freezes at 45.8 degrees Celsius, rather than zero degrees. One of its peculiar properties is that any regular molecule of water that comes into contact with this unusual water would turn into solid ice-nine.
It is a perfect doomsday machine: If any amount of ice-nine were exposed to natural water bodies such as lakes or seas, then all the world’s water would freeze into solid ice-nine.
Currently, Covid-19 is behaving much like an ice-nine molecule. Much like water, humans are acting as asymptomatic carriers. As one man or woman comes into contact with the virus, so rises the risk for the rest of humanity.
But what’s really surprising is the sudden emergence of the virus and mystery surrounding it. From the start of the outbreak, China suppressed information about the virus and its nature, which left fertile ground for speculation about the Chinese regime’s intentions.
The city where the virus originated adds to the speculation. Apart from its wild-game market, Wuhan is the only place in China that has a Biosafety Level 4 laboratory.
BSL-4 is the highest level of bio-containment, where the deadliest pathogens are studied. A column published in Nature in 2017, “Inside the Chinese lab,” clearly pointed out Western scientists’ concerns about the capability of the system to handle dangerous pathogens and the addition of a biological dimension to geopolitical tensions between the US and China.
A small virus has almost frozen the world. What raises suspicions among the bio-scientific community is that it is highly unlikely for a virus to have acquired such unique insertion naturally in a short duration of time. Yet this deadly novel coronavirus has affected almost every country. Nations are taking measures on a war-footing level. Countermeasures being taken are similar to those that would respond to a biological weapon.
Asymmetric warfare
In power games, the more brutal the better. But these days with the nuclear threat, conventional war and old strategies lose meaning. Nations today don’t need to use systematic warfare to sabotage one another’s interests.
The traditional distinctions between civilian and military lose meaning, as defeat in one jeopardizes the other. Asymmetric response is the best, as the battle is not in one region or confined to a fixed time frame.
The most common asymmetric response is to focus on attacking critical infrastructure vulnerabilities. The combatants seek to fight in an area where they can win or at least inflict enormous damage to their enemies’ interests.
The best example was Stuxnet. A highly sophisticated type of malware, its prime purpose was to stop Iran’s nuclear enrichment facilities from developing nuclear weapons. It was designed to hit only one very specific target, the centrifuges that spin nuclear material in Iran’s nuclear facility in Natanz. It was so well programmed that the victims couldn’t even know that power outages and other disruptions were caused by a computer virus.
After it was identified by the information security community in 2010, it reached its objective to derail the Iran nuclear program. Until some deep researchers with authentic data determine the true origins of the coronavirus that causes Covid-19, doubt will remain.
Black swan
Stuxnet was quite revolutionary in creating a new type of warfare that threatens even the strongest military powers. It was a “cyber black swan event” that completely changed the dynamics of cybersecurity and changed the status quo in the region with serious political and economic implications.
The Covid-19 pandemic is another major black swan event, whose implications will be felt across the planet over the coming years. Apart from taking thousands of lives and locking down half of the world population, it has also given severe shocks to the global economy. We are seeing the sharpest downturn since the Great Depression.
The United States shed 6.5 million jobs last week, up from 3.5 million the week before. The United Nations called for a $2.5 trillion rescue package for developing countries. Economists across the world are accepting the fact that the global economy is heading for a severe recession.
The longer the outbreak lasts, the greater will be the damage to the economy. But apart from that, this virus will add friction to the geopolitical relations between the two major powers, the US and China. In the process, it will also raise a debate over which system is more capable of responding effectively to the challenges of the 21st century.
China has declared victory over the new coronavirus without any help. But if developed democracies across the world cannot slow the spread of the virus, then for the rest of the world there will be a “Suez moment” such as overburdened Britain experienced in 1968 when it relinquished its major role east of the Suez Canal.
China will not waste time filling the gap left by neoliberal democracies, providing new leadership with new values. This will be a decisive global shift in the world order, as authoritarian states will now put themselves forward as a new role model. For the current world order, time is running fast.