Coronavirus: how the world economy is reconfigured after the pandemic

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Ambito – The Coronavirus pandemic has caused, by the irremediable social isolation, and the consequent economic situation, the greatest global crisis since the Second World War. Changes, in some cases, drastic, and in others, with some slight nuances, are those that are already envisioned in a forced way today, but that will probably find the legitimacy of the society over the months so that they last over time . The “black swan” that constitutes the new coronavirus has brought back to the table debates that were postponed, has accelerated other discussions, and has also led to the emergence of new controversies, on topics related to economic and financial rules, the role of State and private sector, supranational institutions, integration criteria, international trade, consumption, production, forms of work, digitization, inequalities, among others.

The truth is that while the vast majority of humanity – and rightly so – is hanging second by second, minute by minute, on the evolution of the pandemic, and the decisions that governments make to face it, and in turn limit the damage economic produced, Ambito Biz consulted several economists, teachers and researchers to try to clear the great economic uncertainty that invades us, once the COVID-19 goes down in history, or at least rehearse some scenarios that are projected today for the ” day after”.

DANIEL MARX: “THE ROLE OF THE STATE WILL GROW”

My impression is that the role of the state will grow, particularly in what refers to the provision of services considered basic, in terms of regulation and order. In addition, the product of transfers you will make, you will also find yourself with asset management tasks, companies, and activities that you did not have before. The latter is likely to try to reverse it to the private sector, but it will take time.

As for order, there will be new tensions between visions of national states, supranational agreements, such as treaties on common markets. Also, there will be damaged activities and companies, some severely punished, and others that may emerge stronger. This will mark changes in consumption, production and income, not necessarily returning to the pre-pandemic starting point.

In the world political order, catalyzing the trend we saw there will be more or less dynamic and adaptable economies.

(*) Former Secretary of Finance, former Deputy Minister of Economy, director of Quantum Finanzas.

MARCELO ELIZONDO: “THERE WILL BE HUGE CHANGES IN INTERNATIONAL TRADE”

This pandemic is going to generate enormous changes in international trade. We are going to a world much more based on qualitative requirements and that is going to generate changes in production processes. I do not see a reversal of globalization, because the economy is already global, culture is global, and the demand of 7.5 billion people cannot be supplied if there is no production on a global scale. But I do see an emergence of requirements that make international business a more complicated and demanding process. I imagine many new health and safety standards in the products that are exchanged.

Furthermore, the criteria of economic integration will no longer be merely tariff but will have to do with identities or qualitative symmetries. The world is probably going to start to see that it horizontalized societies, cultures and economies through globalization, that they were very different in their degree of evolution and that they generated a fiction that tariffs equaled everything. But in reality inequalities existed, and this is probably why new requirements for people, transfers, investments and products appear now.

There may also be even some reversals in foreign investment flows. Culture is probably beginning to be an important element in these flows and in the selection of commercial allies.

On the other hand, we are going to see a much more digital and intangible world, with an international trade in which information as part of the offer and products will prevail, as well as this necessarily falling into telework, which leads us to try new experiences.

Clearly another aspect that will change is the institutional baggage. The international institutions that we have today have been completely surpassed from the traditional ones, such as the United Nations, to the more specific ones, such as the WHO. The European Union has virtually broken down for this emergency and has re-imposed borders between countries. Brexit seemed a strange thing to us and today there is a Brexit from each country. Perhaps it will normalize, but it will not be the same again.

(*) International business specialist and ITBA professor.

IGNACIO CARBALLO: “THE GAP OF INEQUALITY WILL WIDEN”

I am very skeptical that the day after Covid-19 there is a drastic change in the way the economic system is being managed. But I think that throughout this journey, debates are taking place and others that have been neglected are being taken up again, although it is also true that new edges appear.

First of all, when all this is over, the inequality gap in the world is very likely to widen due to the economic impact. There will be communities that are practically destroyed. Inequality ends up limiting not only economic growth, but also generates social conflicts, civil movements, and the resurgence of authoritarian governments.

I also see a drop in political polarization. We come from a world marked by Brexit, Trump’s protectionist policies, the Greek referendum, that is, an unpredictable world in terms of political governance. However, today there is a trend towards union, as we see in Argentina, with the support of the opposition to the Government regarding the measures it takes. At the same time, there is a fall in the prestige of the great state compared to the provincial and municipal states. Smaller states generate greater empathy because they are closer to people, as in Brazil or the US. This opens a very interesting door to think differently from federalism as we did. I think federalism returns to the center of the scene.

There will be greater labor flexibility in terms of physical presence and use of technology. We are observing digital inclusion on levels like we have never seen before in history. The level of appreciation of the free common space will grow, there will also be a reduction in mass consumption, and the debate about what is a reasonable price or not for products and services will return.

If the pandemic lasts for several more months, the collapse of international trade will deepen, and each country will suffer the absence of what it does not manufacture. This revives local production, with greater state participation to coordinate it strategically.

There will be a rethinking regarding the times of crisis and income generated by the State to generate a fiscal surplus, to subsidize certain services. Public health can no longer be ignored. Hopefully these debates also extend to public education and other basic services.

Regarding indebted individuals and companies, governments are beginning to anticipate delinquent loans from banks, proposing longer payment and delinquency terms. And the same will generate a rethink at the macroeconomic level, with highly indebted states. In relation to the Argentine case, this pandemic can give the government a breath in the restructuring of the debt, since many countries will also need financial support, which surely will lead to a rethinking of the rules of the game of finance global.

(*) Inclusive finance specialist, teacher and researcher.

ALDO ABRAM: “THERE WILL BE NEW FORMS OF INSTITUTIONS”

It is possible that governments are abusing in terms of what is necessary to limit the rights of citizens to prevent this pandemic from spreading. I think that later on it will be discussed which are the just limits within which a government must move, which today has to restrict some rights. I think learning is more about taking into account what freedom means. One has the right to freedom as long as it does not affect the rights of third parties. Freedom is accompanied by the responsibility to use it. In this sense, what a good government should do over time with the learning of this pandemic is to find a way to impose those same limits that we have. Therefore, the current situation will bring us new forms of institutions, which will be perfected over time.

On the other hand, we are going to go towards a more intensive use of technology, because obviously the isolations with more or less restrictions have implied that people have to learn to use some technology instruments to be able to hold meetings or maintain a social life. For some it may come to mean isolating itself more unfortunately because it has more instruments to avoid having social contact with us in the future, while for others it will be one more mechanism to do their job better.

The modalities of work are going to change. We are training intensively with teleworking. Organizations will have a little more confidence in the homeoffice, because clearly today many of those who run organizations have a certain distrust regarding this system because they consider that the person is not responsible enough to be working the scheduled hours. This will tend to change with what we are observing today.

(*) Director of Freedom and Progress

SALVADOR DI STÉFANO: “THE ROLE OF BANKS AND MARKETS WILL BE THOUGHT”

We are going to a world where the economies are going to be in deficit, for which the governments will have to achieve fiscal balance or surplus results, and the interest rate will have to be much higher. For this, it is necessary to encourage capital to invest in business, if there is no investment it will be difficult to get out of this crisis.

The financial system is going to change because if we continue with a scheme that is so oriented to lending to households and little oriented to granting credit to companies, it is difficult for us to have the growth that we are seeking. Therefore, everything related to commercial banks, investment banks and markets will be rethought.

We probably all have an absolutely different working format. In addition, migration will be rethought. In the face of pandemics, people want to be with their family and those far away are likely to return. I do not rule out that Argentina is one of the countries where many people return to live here.

(*) Financial analyst

IVÁN CARRINO: “EVERYTHING WILL RETURN TO NORMALITY”

I do not see that the world economic order will change much. I’m imagining a scenario where the cure for Covid-19 meet, and it’s a past issue. I think we will return to normality, the economy will grow again, and will rebound in Argentina and anywhere in the world. I do not see a paradigm shift, beyond the fact that voices will appear saying that the effects of the pandemic have shown that the market alone does not work, and that the state is extremely important, looking for an excuse for more state intervention, as it has happened in other events of the past, such as in the post war. On the other hand, surely the cure appears from a private laboratory. Health has a large component of private initiative. All in all, we will continue in a scheme of mixed economies. It remains to be seen what happens to the Fed, if it will normalize its monetary policy in line with what it has been doing until now as a result of the extreme fear ending. Whatever the fiscal stimuli have been, they will begin to try to normalize in all the countries of the world. This is an exceptional situation and once it is finished we will return to normal. This implies that the private sector produces, distributes efficiently, and that the State also exists, collects taxes and provides public goods, in fact, at an excessively large level both in the US and in Europe, and of course in Argentina.

(*) Economist, lecturer and professor

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