The world is facing its worst crisis in form of COVID19 with no certainty as to how soon the world will recover from this worst nightmare. Many economists and political experts are predicting that the world will go through a ‘reformative phase’ post pandemic situation which will alter political and economic scenario. Below are some of the possible futures which the human race may witness.
Shift of world power order/economic power -: it is just a wild theory but the longer the coronavirus remains active in atmosphere, the longer the business and economies of nations will suffer. As is evident, every nation except China on every continent at present is going either through lockdown phase or national emergency phase. It will result in change in economic superpower. It is very likely that China will equal USA as the mightiest superpower in terms of wealth and economic development if current scenario in the world continues for the rest of 2020. According to various sources, the top 10 economies of the world in 2019 were (based on GDP) were USA, China, Japan, Germany, India, UK, France, Russia, Brazil and Canada . By the time these economies recover from this pandemic situation and on to its usual uninterrupted phase, except USA and China, the rest of top 10 economies will see change in their GDP and hence change in their world rankings also.
Economic sphere changes –: As the coronavirus spread, many industries and corporate offices, big and small were forced to close down their functioning due to absence of labour force. As production came to a halt, it resulted in plunging of stock markets around the world with many stock markets were forced to closed its trading for hours. Due to it, corporate debt rose to an all time high in some countries reaching to historic level. Some companies due to intensive debt cut down its costs, laid-off workers and mulled investment as they want to look for ways to avoid default. Government on its part started pumping cash through relief packages so that these companies survive. It is yet to be seen how many of them are going to survive and resume normal operations and how the rate of employment rises. But one thing is almost certain, the pandemic is going to change economic sphere, development rate around the globe. People may even witness change in economic supremacy. Japan recently has announced its plan to encourage its companies to move its operations outside China to its own land and many countries will likely to follow same pattern. World cities like New York, London etc. are may witness reduction in their power and new cities may very well likely to emerge as economic hot-spots.
Types of economy changes with more focus on welfare of state/ mixed/socialism– The world is witnessing its worst recession yet, worst than 1920’s US recession. There is total or partial shutdown of labour force thus unemployment rate is all time high in various countries like India, USA,UK, parts of EU etc., consumer expenditure has also come down due to change in purchasing power. In many parts, the governments are unable to tackle this nightmare in right way thus resulting in people questioning their approach of survival and recovery. The worst economies that are suffering are those that are capitalist in nature as the rate of laying off employees is higher. Take for example, USA where around 16 million people have claimed unemployment according to Washington Post and although the government has announced $2Trillion plan to boost companies of every scale yet the relief to its people is taking time to reach them directly. In India, the situation is even worst. For week ending April 5, unemployment rose to 23.2% from 8.5% in mid march according to data released by Centre for Monitoring Indian Economy (CMIE) but central government has strictly issued directions and communiqués to companies to refrain from lay-offs and deduction in salary during lockdown period while simultaneously announcing sector-specific relied packages for daily wage labour force and people living below poverty line. In EU, after much discussion amid so much confusion and wrangling among its member states, the EU finance ministers agreed on half-a-trillion euros worth of support to its members. This relief for its members came late and as noted by international media, it certainly exposed division among EU nations who failed to show solidarity at this hour of need.
EU likely to disintegrate; US stronghold in the world likely to decrease; China will retain super economic power status-: As noted above, the EU members seemed at odd with each other to come up with relief package for its economy. While many economy in rest of the world announced financial relied packages for their economy by first week of April, the EU leaders were clearly failed to show unique front in combating this situation and to issue financial relief for its companies. This has resulted in questioning their integrity. Is European Union heading for a division? It is very soon to predict anything but the recent events have certainly raised eyebrows among economists and political pundits.
Countries position likely to change in UN- The President of USA has recently accused WHO, an organization of UN to be China-Centric and has threat to cut off its part of funding to WHO. It is worth noting here that USA is the top donor to WHO. In 2019, it contribution exceeded to $400 Million dollar as compare to China who only contributed around $44 Million.
How India will recover:- India will recover from the pandemic however slow yet economic recovery and GDP growth likely to be appreciated by world economists considering economic slowdown. Indian government will very likely take bold economic steps to accelerate industrial manufacturing and employment in unorganized sector. However, the government must also consider framing green policy for clean environment and water bodies
Health Sector around the world will boom– It is very likely that global health industry will witness surge in form of huge investment and is going to be the next hot investment sphere on par with space industry. This field is about to be exploded with innovations and breakthrough to control not only the ongoing virus situation but also to control and air-borne disease.
The process of Globalisation will halt for some time as predicted by economic pundits- Globalisation of goods, services and people will likely suffer even after the lifting of lockdown. International trade as a percentage of global GDP stood at 59% in 2018 from 61% in 2008 witnessed flat curve. This percentage will further go down as countries may prefer local production and local labour over migrants and imports. There is no time frame over when lockdown will be lifted in different parts of the world and how soon can normal movements of skilled people between borders resume. Certainly local skilled labour force will take precedence over international labour force in short run. Governments around the world will frame trade rules and regulations keeping in mind of achieving self-regulations in key areas like medical equipments, agriculture, finished food products.
Preference of locally manufactured goods over global goods:- Now that the economies are being opened up all over the world and are on the path to progress, countries are likely to encourage its citizens to ‘Buy Local’ thus improving local markets especially small and medium enterprise sector as they are the worst hit and in dire need of revival. Going local will also be in best interest of people as employment opportunities will be created.
No one imagined that 2020 is going to be the ‘Year of Change’ on earth. Now we might witness it for good or worse. But one thing is sure, our social and financial life will never be the same from now on.
This post will be regularly updated. Views mentioned in this post is author’s personal views with some inputs taken from sources mentioned above.