Has Covid-19 ushered in a new world order?

The coronavirus crisis will surely mean radical changes in global politics and economics, but predictions of the inevitable supremacy of China or the collapse of the US look overblown.

Chinese President Xi Jinping © Xinhua/Shutterstock
The rest of the world isn’t applauding Chinese president Xi Jinping’s handing of the crisis © Shutterstock
(Image credit: Chinese President Xi Jinping © Xinhua/Shutterstock)

What’s happened?

Predictions about how the present crisis will affect geopolitics have become almost as volatile as the world’s gyrating financial markets. In January and February, as the new coronavirus began to spread in Hubei, a consensus began to build that this could be China’s “Chernobyl moment”, destroying the elite’s credibility and authority. Perhaps it was even the beginning of the end for the Chinese Communist Party, with strongly positive geopolitical consequences for the US and the broader West. “But then, almost as quickly, the predictions went into reverse,” note Michael Green and Evan Medeiros of Georgetown University. As China appeared to contain the spread and the virus moved on to Europe and the US, it quickly became accepted that the coming global recession, and the absence of clear US leadership, would mean a “geopolitical reordering that would leave China as the victor”, perhaps even a “Suez moment” for the US.

And will it?

Probably not. Beijing has certainly identified an opportunity: casting itself as the leader of the global pandemic response and trumpeting its donations of medical kit to grateful governments (while selling vastly more on commercial terms: $1.45bn worth in the five weeks to 4 April). But the problem with drawing conclusions about long-term impacts while still in the midst of a crisis is that “they are often wrong”, say Green and Medeiros. Undeniably, there has been a “catastrophic failure” of US political and diplomatic leadership during the Covid-19 crisis that “could cost the United States dearly in lives and international influence over the coming months”. Yet in terms of economic, military, technological and diplomatic power, the US remains overwhelmingly superior – and Covid-19 won’t change that. Talk of a Suez moment, in which global leadership is passed from the declining to the rising power, is therefore wildly premature – and nor is Beijing doing a conspicuously good job right now of winning friends and influencing people.

What is it getting wrong?

From the “deplorable treatment of African citizens in southern China to the export of faulty medical equipment, or the official endorsement of conspiracy theories blaming the US military for the outbreak, most of the Communist Party’s efforts to control the international narrative have backfired”, argues Jamil Anderlini, the FT’s Asia editor. Beijing could have won far more long-term advantage if it had switched quickly to a strategy of transparency and co-operation. Instead, mindful of the need to entrench the Chinese Communist Party’s authority in the face of economic downturn, it “arrested people who criticised its cover-up and launched a global propaganda campaign to raise doubts about the Chinese origin of the virus”. As a result, Beijing has alienated previously China-friendly voices in the West (expelling the mainstream US press corps was a blunder). And in the developing world, says Charles Dunst in Foreign Policy, there is fury in India and many African countries – and growing calls for Chinese debt cancellation – over the brewing economic cataclysm and China’s role in causing it.

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What about China’s own economy?

It’s looking shaky. Whether China will be able to turn the pandemic to its advantage will depend on the politics and economies of China and America after this crisis, says The Economist. Following the global financial crisis of 2007-2009, China gained much “clout” by stoking its economy as the West slumped. This time, it seems unlikely to repeat the trick: “another massive dose of stimulus could cripple the country with debt” (which is already 300% of GDP) and Beijing is wary of repeating the tactic. On the other hand, it has to do something to avert economic catastrophe and social upheavals. In the wake of the 2008 crisis, Beijing’s policymakers identified 8% annual growth as the minimum to stave off social unrest. In the first quarter of this year, initial figures show that it shrank by 6.8%.

Is America’s position any better?

The US economy is reeling and its politics are looking more toxic than ever, says Gideon Rachman in the FT. However, the coronavirus crisis is unlikely to shake the dollar’s position as the world’s global reserve currency, or America’s status as a magnet for global talent. What looks more at risk is globalisation – driven by the “decoupling” of the US and China. It has become ominously clear in recent weeks that the US has become overdependent on China for many vital medical products and devices, says Irwin Stelzer in The Sunday Times. “Globalists and free traders are having trouble explaining why America should not subsidise a home-grown pharma industry”, or not use its leverage over the international financial system to discourage other countries from co-operating with China. Similar questions about supply chains and national self-reliance are being asked around the world.

So is globalisation dead?

It’s definitely looking peaky, though the extent to which the economies of the US and China are intertwined – and might sink or swim together – has to be factored in. A big mistake still being made by most analysts is to assume that the Covid-19 crisis will last a matter of months, says Thomas Wright in The Atlantic. It may well be with us for well over a year, “stretching the international order to its breaking point”. According to Gérard Araud, France’s ex-ambassador to the US, when a crisis occurs “one should ask whether it breaks a trend or confirms it”. Globalisation was already under assault from the financial crisis, US-China competition and climate-change activists looking for people to buy local. “Covid-19 piles on the pressure.”

Simon Wilson’s first career was in book publishing, as an economics editor at Routledge, and as a publisher of non-fiction at Random House, specialising in popular business and management books. While there, he published Customers.com, a bestselling classic of the early days of e-commerce, and The Money or Your Life: Reuniting Work and Joy, an inspirational book that helped inspire its publisher towards a post-corporate, portfolio life.   

Since 2001, he has been a writer for MoneyWeek, a financial copywriter, and a long-time contributing editor at The Week. Simon also works as an actor and corporate trainer; current and past clients include investment banks, the Bank of England, the UK government, several Magic Circle law firms and all of the Big Four accountancy firms. He has a degree in languages (German and Spanish) and social and political sciences from the University of Cambridge.