A post-Covid-19 world

Major wars and pandemics, are the sort of happenings that change the world as we know it before they have happened. The Black Death lead to massive deaths in the Middle Ages, also it broke the back of feudalism and created a working class. On the positive side, the dominantly dogmatic thinking gave way to a greater wave of scientific explanation of nature and the phenomena happening within it, and became the precursor of the whole Renaissance Movement.

Covid-19 pandemic is one of such happenings; the post-Covid-19 world will be drastically different, and in some very important ways should be different if the mankind is to avoid future existential threats like climate change. One of the significant ways that the world should be different is shunning the 'Neoliberal' assault on economy and democracy over the last four decade or so, and which, according to a world-renowned intellectual Noam Chomsky, was the main reason behind the happening of Covid-19, and even the delayed response of governments at the back of dirty and self-serving politics almost everywhere. He points this out in these words: "We should think about the emergence of this crisis: why is there a coronavirus crisis? It's a colossal market failure. It goes right back to the essence of markets exacerbated by the neoliberal, savage neoliberal intensification of deep socio-economic problems... The market signals were wrong. The drug companies we have handed over our fate to private tyrannies, called corporations, which are unaccountable to the public, in this case big pharmaceutical... So it comes from the corporate sector, an ideology that is typified by a Ronald Regan reading a script handed to by his corporate masters, with his sunny smiles saying: government is the problem. Let's get rid of government, which means lets hand over decisions to private tyrannies that are unaccountable to the public... The point is we started again with a colossal market failure, pointing to fundamentals problems in the socio-economic order, made much worse by the neoliberal plague, and it continues because of the collapse of kinds of institutional structures that could deal with it if they were functioning."

Hence, governments, multilateral institutions, and mainstream educational institutions everywhere will have to dismantle the deep-rooted Neoliberal thought process in the post-Covid-19 world. This is important for politics and the quality of democracy, because there are already strong waves of xenophobia and ultra-national rhetorics, which are being used as wings by political parties who are generally on the extremes of the political spectrum to take centre-stage. The governments will have to step in and take back their rightful place to rein in the profit-over-people mindset of the ruthless corporate sector almost everywhere that has led to astronomical increase in income and wealth inequalities, particularly since the Reagan-Thatcher era of the 1980s.

At the same time, private interests, entrenched in short-term gains and overall profit optimization, have resulted in malfunctioning of markets that have eluded working towards greater long-term goals for humanity at large; for instance, not actively developing a vaccine of coronavirus but profit was pursued from non-essential production like body lotions and creams when the virus first presented threat to humanity in the shape of SARS, almost two decades ago.

As the world moves out of the current pandemic, hopefully in the next two years or so, as a vaccines gets formulated and globally administered. There is first of all no certain way to know the realities with which the world finds itself, given the changing nature of the Covid-virus itself and the difficulties that present themselves in dealing with it.

Having said that, what is quite likely given the current crisis has brought the global economy to such a sudden halt - both in terms of aggregate demand and supply shock, which is quite novel in its own right - is that unlike the Global Financial Crisis of 2007/08 after which austerity policies were practiced in a dominant way, the reverse in the shape of monetary and fiscal expansionary policies will continue for some time. So the biggest and most likely worry for the governments and multilateral institutions working with them is to manage large debts in the public sector; because the likely governments are providing fiscal stimulus under the lockdowns and supporting private businesses in both retaining their employees and deal with their highly possible debt defaults.

To manage public debts, it will be therefore important - and which is quite likely - to keep real interest rates on the lower side, and which should be manageable since there is little fear of high inflation almost everywhere, given the deflated demand and supply, and the very low commodity/crude prices globally. At the same time for developing countries, there should be provided a substantial debt relief/moratorium by the likes of Paris Club countries and multilateral agencies. Fiscal policies will therefore remain the main focus of attention for governments everywhere where, in addition to the above policies, there would be a need for greater taxation on the rich - as happened after the Second World War when expansionary fiscal/welfare policies were adopted - to rein in the high fiscal deficits that many countries will find themselves in.

Covid-19 has highlighted the importance of 'virtual' interactions is a fact. It may be in the economic or social interaction. The post-Covid-19 world will see a great boom in the technological sector, especially with regard to digitization of businesses and, e-commerce. This boom will also manifest itself in the entire nature of work, especially in the public sector, and also in the context of 'distance working'. This would unleash a race for companies everywhere to compete for a market share, and present the public sector with the necessity to be more pro-active and innovative in supporting the technological sector, and the associated higher education sector if it wishes to support the sector for greater revenues and employment opportunities. At the same time, policy will have to deal with the negative fallout on environment.

Internationalism is under threat in the post-Covid-19 world, both in terms of political and economic agenda. The European Union is already facing a crisis in this regard. The pandemic has already deepened the divide between countries as they become more protectionist, and could even lead to the dismantling of multilateral institutions like the World Trade Organization (WTO), which will not be good for the overall global economy. Hence, it would be important to deal head on with the policies of the WTO that exhibited favouritism - another reflection of neoliberal policies in the trade arena that needs to be done away with if the institution itself needs to be retained.

This will be important because dealing with existential threats like climate change and pandemics would require a global effort. In the same vein, the programmes of the IMF and the World Bank will also have to be taken away from the neoliberal mindset if these institutions are to survive and work on a global landscape. Renowned intellectual Naomi Klein, among many others, for example, has highlighted that there is a need to move toward a 'Green New Deal'. She argues: "The idea is a simple one: in the process of transforming the infrastructure of our societies... humanity has a once-in-a-century chance to fix an economic model that is failing the majority of people on multiple fronts... from wage stagnation to gaping inequalities to crumbling services to the breakdown of any semblance of social cohesion... a Green New Deal could instill a sense of collective higher purpose... [and] takes its inspiration from Franklin Delano Roosevelt's original New Deal, which responded to the misery and breakdown of the Great Depression with a flurry of policies and public investments..."

Just like the Black Death, the two World Wars, and the likes, the Covid-19 marks a significant break in the way life was before this crisis hit us. The world stands at a crossroads: it needs to reform and adapt to continue life in a normal way. It also requires to strive for a 'new-normal' that shuns the practices and mindsets that led to the pandemic and helps the mankind to effectively deal with new realities that the crisis has ushered in.

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund) He tweets@omerjaved7