The Covid-19 pandemic has brought the world to the edge of a new frontier, and underscored the urgency need to redesign economic systems and development models, opting for what the new European Commission has described as greener and more sustainable and inclusive approaches. China, where it all started, has been the first nation to succeed in controlling and preventing the pandemic. The first nation to be affected, it has addressed the health aspect while also providing strong fiscal incentives and more flexible and moderate monetary policies aimed at reviving production and domestic demand.
Nevertheless, if, on the one hand, its impact has been attenuated and gradually eliminated over the short-term, the pandemic’s long-term impact must not be ignored, even though Chinese economic growth has not changed fundamentally. The dilemma has been to be aware of adjustments in the industrial sector and to identify and replace existing growth drivers with new ones. Moreover, the relationship between supply and demand has called for revision: The crisis foregrounded the importance of supply, thus it may be necessary to revise the rules and leave the market more room for the allocation of resources. According to Chinese experts, the partial de-globalization underway is only temporary; policies for encouraging domestic demand and the reform of supply will bring new vitality to the global economy, placing China at the center of a more interconnected world system.
China’s is a long-range perspective, and that is not all: The close linkage between the economies of various corners of the world necessitates a greater awareness of the role of international cooperation, both in economic terms and in drafting sustainable environmental policies in the common interest. China claims to have overcome both the health and economic crises and consequently urges greater collaboration among nations.
The pandemic in Europe is not by any means under control, and the recession it has triggered even less so. The efforts by the European Commission and the European Central Bank and individual Member State central banks paint a picture of cohesive and proactive institutions responding to an emergency. This is a Europe that had been enjoying economic recovery after the devastating financial downturn of the last decade, but is gasping for breath once again, and needs a new more sustainable and inclusive development and growth model. The short-term will call for continued support for the weaker segments of society, while for the long-term the European Commission has provided instruments such as Next Generation EU and SURE. It will naturally be up to national governments to foster growth, development and inclusion; and it is going to be important for Europe to promote banking and financial market unions to strengthen the EU’s role in ensuring world economic stability.
Global governance in times of crisis has clearly taken a beating. Much more needs to be done, and some ideas emerged in that regard: A new Bretton Woods by which nations cooperate on a common political basis, either going toward something new or seeking reform of what already exists, with a view to adjusting to the new economic and social reality that has formed over recent years and that the health crisis has put into even starker relief.
In the interests of future generations, it is going to be necessary to take the focus off individual national interests, to be receptive to agreements of mutual interest, and to be open to multilateral economic policies, leaving bilateralism aside. Above all, we must all confront political as well as cultural change. Only relations based on mutual trust will get broad-based and cohesive reform projects truly under way.