The human species has a history rife with accomplishment. Life expectancy has increased from under 30 in the Bronze Age to over 70 today. We’ve created languages, harnessed electricity, composed symphonies, traveled to the moon and rolled out the iPhone.
Yet there’s still much beyond our control. Recent events remind us that any number of forces are outside the grasp of even the strongest strongmen and the most democratic democracies.
Two of these untamables are timeless; disease and economic cycles and another is brand new, the Internet. And yet right now all three seem to be working in concert, wreaking havoc and vexing authority across the globe. It’s also interesting to note how the U.S., China, and Russia are being buffeted and or in one case even taking advantage of this environment.
Let’s start with the news which is disease.
Here we are, in the year 2020—40 years after we eradicated smallpox—wrestling with the COVID-19, a virus with a name that sounds like source code but is straight out of the Middle Ages. The power of this coronavirus extends well beyond the mere 2,867 and counting it has killed (as of my deadline.) In fact, if it was only those deaths, COVID-19 would be a blip. It’s the fear of more death that has (among thousands of disruptions) essentially halted air travel between the U.S. and China, crashed the Toronto stock exchange, closed schools in Japan and shut off Mecca to pilgrims.
Going forward who’s to say. “It’s almost impossible to judge how serious this is going to be,” says Jonathan Fenby, TS Lombard chairman of China research of COVID-19. “It’s an unknown unknown.” Ah yes that. (In case that reference is lost on you, I highly recommend watching this classic Rummy.)
Which segues nicely to economic cycles.
The coronavirus will also conceivably wipe out earnings growth for the S&P 500 this year (according to Goldman Sachs) and shave God-only-knows how many points off GDP in China, the U.S. and the world economy. “I view the odds of a global recession as pretty significant,” says Kenneth Rogoff, professor of economics at Harvard University and former chief economist at the International Monetary Fund. Ken is not alone in his view.
The problem here is that for decades we’ve been living under the illusion that central bankers and their monetary tools would always be able to ride to our rescue. That narrative has become ever more powerful, especially after the 2008-2009 financial crises. A few rate cuts, a little QE and the sickest of economies will heal, the severest of downturns will be stymied. Now, with rates so low, the Federal Reserve et al is almost out of firepower. (Don’t get me started on negative rates being a help.) And yet Fed Chair Jay Powell assured us Friday that when it comes to coronavirus, “we will use our tools and act as appropriate to support the economy.” There you go again Jay.
In any event, I think the notion that we have been able to mitigate economic cycles to some degree is a dangerous one. It’s inevitable, isn’t it, that there will come a time when central bankers face something they can’t fix. COVID-19 could provide that moment. Ultra-low rates increase the likelihood.
Which brings us to the Internet and its role in current events.
‘A fire hose of information’
COVID-19 reminds me why computer scientists decided to name replicating programming bugs that modify other programs by inserting their own code, a virus, right?
In fact with COVID-19 we’re experiencing what the World Health Organization has dubbed the world’s first “infodemic,” which WHO characterizes as an “overabundance of information – some accurate and some not – that makes it hard for people to find trustworthy sources and reliable guidance when they need it.”
Or as one wag put it, our three sources of information here are the U.S. government, the Chinese government and Facebook. Good luck with that. Actually in the case of the latter source, that could be a proxy for the Russian government and its trolls to a degree. The South China Morning Post ran an AFP story that said “Russia [is] pushing fake news about the US using the outbreak to ‘wage economic war’ on China...” by deploying thousands of fake Twitter, Facebook, and Instagram accounts.
“The Russians are good at identifying cleavages and social problems and ramping up division,” says Marek Posard, an associate sociologist at the RAND Corporation whose research focuses on technology and the military, who notes they did this with the AIDS crisis in the 1980s, saying AIDS was a U.S. government conspiracy.
National Institutes of Health director Francis Collins had warned me about this in an interview earlier this month. “There is an absolute flurry of crazy things being put forward in terms of what started this,” Collins said.
Ground zero of the infodemic happens to be in the same country of origin as COVID-19 — China. There, Xi Jinping’s government is facing significant problems waging a multi-faceted, multi-front digital war. On the one hand it’s suppressing all manner of information, both true and untrue. On the other hand, it’s pushing out its own propaganda.
Oh and at the same time, the Chinese government is providing what it insists to be accurate scientific medical updates (number of infections and deaths—which they say are dropping) to the World Health Organization. Complicated doesn’t begin to describe. “As skeptical as I usually am about Chinese official data, I’m even more skeptical of this case drop,” says Sarah Cook, a senior research analyst for China, Hong Kong, and Taiwan at Freedom House.
What then are the longer term implications of COVID-19? Well for one thing, the coronavirus has become a significant force of anti-globalism. It has closed down borders way more effectively than any trade war, nationalistic fervor, or even the most zealous border patrol agent could ever imagine.
Will we get a snap back, V-curve in terms of global flows lost by the coronavirus? Not 100% back to where we were before, I bet.
COVID-19 also exposes some of China’s weaknesses. It shows that the country continues to be a cradle of disease, a huge issue. And it suggests that the Chinese economic orthodoxy of fast growth trumping economic cycles won’t last forever either. (Xi JinPing & Co also clearly didn’t anticipate what would happen in Hong Kong when higher paying jobs and social mobility dried up for young people there—who connected to each via social media, by the way.) A command and control economy works well in the best of times, the rest of the time governments and societies need to be flexible. That’s not China’s strong suit. High levels of debt in China don’t help either. Or as Rogoff puts it, “a highly leveraged economy needs to keep moving to not fall down.”
The COVID-19 crisis also demonstrates that ironclad oversight of the Internet is probably not a long-term sustainable proposition for China. And yet we see that if China is too strict in controlling the Internet, then the U.S. position of an unfettered laissez-faire Internet is equally untenable. We learn again that when it comes to social media, the U.S. is at least partly not much more than a 329 million-person-rich-target for Russia. (And if COVID-19 ever really does hit our shores—heaven forbid—you will see a real sea of disinformation here.)
“In our national context we’re on the side of having a fire hose of information,” says Andrea Matwyshyn, a professor of policy and law at Penn State Law School who focuses on cybersecurity. “[In] a public health crisis having trusted sources of info is obvious in its importance. Trustworthy sources on other hand may not be getting the Internet play we like to see them have.”
As for the Russians, it’s kind of their time, right? They like to take advantage of what they would consider to be opportunities like COVID-19. Have you noticed by the way that while China has about 78,000 confirmed cases of COVID-19 and the U.S has 60, Russia has only reported two cases? For now at least, it seems the Russians have it all figured out.
This article was featured in a Saturday edition of the Morning Brief on February 29, 2020. Get the Morning Brief sent directly to your inbox every Monday to Friday by 6:30 a.m. ET. Subscribe
Andy Serwer is editor-in-chief of Yahoo Finance. Follow him on Twitter: @serwer.