Hoover Institution

The Pandemic: A Global Review

Ravenel B. Curry III Distinguished Fellow in Strategy and Statesmanship

The coronavirus pandemic is not, by the standards of the great plagues of the past, a particularly deadly disease. The plague that struck the Athens of Pericles seems to have had a much higher mortality rate, though its geographical reach was restricted. The epidemic that wrecked the Emperor Justinian’s drive to re-establish imperial authority in the west was similarly responsible for more death than the current outbreak – so far. The 14th century Black Death pandemic was far more destructive of life, as were the successive waves of disease that reduced the population of pre-Columbian America to a remnant. What made COVID-19 so damaging was its rapid spread – at the speed of jet airliners rather than, as in the past, at the speed of horses and sailing ships – combined with the fragile nature of our complex economy.

This realization, that the very complexity and global reach of our contemporary economies makes us more vulnerable to sudden disruptions may be the most lasting effect of the pandemic. Societies everywhere will think much more about resilience. New pandemics are almost certainly inevitable, and now that we know how ruinous the consequences can be, households, firms and governments will take steps to reduce their exposure to this kind of disruption.

The pandemic is a disaster, and its immediate effect on every government and every society around the world has been and will be bad. Even countries which succeed in limiting the number of infections will suffer economic disruption as a result of the pandemic’s global effects. South Korea’s car factories may stay open, but if the cars cannot be sold as global markets shut down, Korean automakers will not emerge unscathed.

Cold and calculating as it may seem under these tragic circumstances, those engaged in the study of international affairs must try to weigh the impact of the pandemic on the relative standing of the major powers. If no one gains in absolute terms, those better placed to withstand the disruption may, by limiting their losses, improve their relative position in global power politics.

It is, however, still too early to assess the impact of a catastrophe still in progress. In particular, both the global financial system and the financial systems of leading countries are so full of moving parts whose interactions are poorly if at all understood that one simply cannot assess the chances of a massive meltdown. It is even harder to predict how such a meltdown would start, much less to know how the turmoil would unfold, which industries, banks or economies would be hardest hit. Nor do we predict the long-term consequences of the measures taken to address the economic costs of the pandemic. Absent that knowledge, and absent any knowledge of how long it will take to find a vaccine or treatment or to retool the world for life under continuing threat, it is impossible to know who will be hit hardest or how bad the damage will be.

Given all these uncertainties, the best predictor for relative success is probably the overall health and resilience of the world’s powers. The United States, with its diversified economy, abundant natural resources, deep pockets, strong capital markets, growing population and flexible political system is uniquely well placed to ride out almost any storm. The European Union’s weak executive, cumbersome institutional structure and fragile currency will likely ensure that it remains focused more on maintaining its inner coherence than on affecting events beyond its frontiers. Meanwhile, the pandemic has likely strengthened the hands of British Euroskeptics. Just as the 2008 financial crisis undercut the arguments for British adoption of the euro, the pandemic weakens the case for British membership in the EU. Had the UK not left, it would, as a large net contributor to the European Union budget, face a staggering bill as its share of the cost of helping southern European countries recover.

China’s authoritarian party structure ensures that decisions once taken will be carried out quickly and thoroughly; that is an advantage at times of crisis. On the other hand, China’s dependence on global networks of commerce both for the exports that allow its economy to flourish and the energy and raw materials that keep China running is problematic at a time like this, especially when China’s poor choices early in the pandemic and aggressive diplomacy since have left it more isolated and less trusted than at any time since the 1970s.

China became a major world power by using and sometimes abusing free-trade rules and global supply chains, but it has now taken an ax to the roots of its own business model. If the cost of doing business in China includes increased exposure to ruinous shocks like the pandemic, “Made in China” doesn’t pay. And if Beijing can lie so vociferously and implausibly about the pandemic, can private investors or foreign governments ever rely on its promises?

Russia’s problems seem even more daunting. In Russia, troubles brought on by coronavirus arrived before major outbreaks did. The major damage began when Saudi Arabia launched a price war aimed at persuading Moscow to cooperate with Riyadh to keep oil prices from crashing. Since then, oil prices have gone as low as $20 a barrel, with some futures contracts dipping briefly into negative territory. President Vladimir Putin’s core message for 2020 was that a stable and respected Russia was becoming more secure economically. A referendum scheduled for April would have sealed his grip on power. But thanks to the pandemic and the resulting oil price implosion, the referendum has been postponed, and Mr. Putin must find a new message. After years of consolidating power domestically and expanding influence in Eastern Europe and the Middle East, Vladimir Putin may be undone by the coronavirus as Pericles was by the Plague of Athens.

It is in the remaining parts of the world – Africa, Latin America, South and Southeast Asia and the Middle East – that the effects of the pandemic may have the most impact on power politics. For the United States, the prospect that the pandemic plus its associated economic costs could destabilize a string of countries around the Caribbean from Venezuela to Mexico could complicate the task of American recovery and further polarize American politics over issues like migration, military interventions and foreign aid.

In the Middle East, the potential for disruption is high. While both Saudi Arabia and Iran suffer from the fall in oil prices, Iran’s economy, more fragile because of sanctions, is less exposed as its oil sales have been so dramatically curtailed. In both countries and elsewhere in a region still quivering from the aftereffects of the Arab Spring, the potential for an economic downturn and a public health crisis makes a return to political instability a real possibility. Egypt without a tourism industry, Iraq without much oil income, Jordan and the Palestinian Authority with fewer sources of subsidy: these are not the building blocks of a stable and prosperous region.

Turkey is something of a wild card. Its fragile economy has been hit hard, and it is not yet clear whether public health efforts will control the virus in a country hosting millions of refugees. But a weakened and self-absorbed Russia, a war-torn Syria, a navel-gazing Europe and a distracted America could potentially open what President Erdogan might see as a major opportunity. Northern Syria is one focus of Turkish ambitions, but observers should not forget that “neo-Ottomanism” has a western as well as an eastern dimension. Turkey has a restless and opportunistic government, and though its capacities (perhaps now more than ever in a global economic freeze) are limited, its appetite is large.

Nigeria and Ethiopia are two African countries to watch. Nigeria’s oil dependency means that it has already suffered a heavy economic blow. For Ethiopia, the global slowdown comes at a time of acute domestic fragility. Religious tensions across the continent, exacerbated by economic, ethnic and regional rivalries, have been growing. Currently, a major COVID outbreak is racing across Nigeria’s vulnerable north. The record swarms of locusts across East Africa, that in normal times would have attracted massive global publicity and been the springboard for major relief campaigns, have passed largely unnoticed in the shadow of COVID-19. Now, the combination of a locust-driven famine, a pandemic, and a global economic recession will likely present some countries with their gravest test since independence.

One country that so far has received little attention is Pakistan, but Pakistan may be far more vulnerable than is widely realized. Its close business and political ties with China ensured that travel between the two countries remained high well after others were imposing travel bans. Since the start of May, the number of reported cases in Pakistan have doubled. Experts believe the rate of infection could be even higher. The economy was performing poorly even in good times; in 2019 inflation hit a five year high and debt levels were already reaching unsustainable levels. The global recession will have a severe impact on Pakistani employment and GDP. Last month, Pakistan’s foreign minister contacted his Beijing counterpart to discuss debt restructuring. Five years after the launch of the 80 billion dollar China-Pakistan Economic Corridor – a cornerstone of China’s Belt and Road Initiative – one quarter of proposed infrastructure projects have been completed. The pandemic has thrown the future of CPEC into question. As both countries face economic crises, it remains to be seen if China and Pakistan are truly “iron brothers”.

Read in Hoover Institution