Opinion Columnist NYT
This is the way the world
ends. This is the way the world ends. This is the way the world ends. Not with
a bang, but with a virus.
OK, it’s not that bad — or at
least I don’t think it is. The coronavirus isn’t the Black Death; so far
there’s no reason to believe that it will be remotely as deadly as the
influenza epidemic that swept the world in 1918-19, killing as many as 50
million people.
But that said, we’ve clearly
missed whatever chance we had of containing the disease’s spread. And it’s
going to be seriously disruptive.
For some reason markets, which
had been weirdly complacent for weeks, decided to panic yesterday. I don’t know
why it took so long, but there are three good reasons to be very worried about
the economic impact of what isn’t yet officially a pandemic, but is obviously
headed for that status.
First, we have a deeply
interdependent world economy, and China — still the epicenter of the pandemic,
although this thing is going global fast — plays a very big role in world
manufacturing. The last time we saw a comparable event — the SARS outbreak of
2002-3 — China accounted for around 7 percent of world manufacturing. Now it’s
more than a quarter, and a lot of production around the world depends on
Chinese components.
And I’m not just talking about
iPhones and all that. China, it turns out, supplies some of the crucial raw
materials used in modern pharmaceuticals. This virus won’t just disrupt world
trade, it will disrupt the medical response.
Second, the world economy is
poorly prepared to handle an adverse shock of any kind. Unemployment may be low
— it’s especially low in the United States, but even in Europe it’s low by
historical standards. But we’ve only been able to get close to full employment
thanks to extremely low interest rates, which means that there’s very little
room to cut rates further if something goes wrong. And the coronavirus looks
like something.
True, we could respond with
fiscal stimulus — public spending and other measures to prop up demand. In
fact, that’s what the Chinese are doing. But the West seems paralyzed by
ideology. In America, Republicans seem incapable of coming up with any proposal
that doesn’t involve tax cuts for the rich. In Europe, the Germans still treat
economics as a branch of moral philosophy; saving is virtuous, and nobody can
convince them that sometimes you need to spend.
Finally, the Trump
administration seems both woefully and willfully unprepared to deal with a
public health crisis. President Obama created a global disease “czar” to deal
with Ebola; Trump eliminated the position, and substantially cut funding for
the Centers for Disease Control, because his administration didn’t consider
pandemics a significant national security threat. So who’s going to take charge
if things get really scary? Jared Kushner?
Two indicators of the
seriousness with which our current leadership is confronting the risks: Rush
Limbaugh, recent recipient of the Presidential Medal of Freedom, dismisses the
coronavirus as just the common cold, being “weaponized” against Donald Trump.
And Larry Kudlow, the administration’s top economist, responded to the market’s
fears by … urging Americans to buy stocks.
We still don’t know how big a
deal this virus will turn out to be. But there are good reasons to be seriously
scared.
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