As the new Coronavirus spreads widely out of its Chinese birthplace experts claim the world is on the verge of an unprecedented pandemic, and the markets are tumbling down in fear, the United States apparently dreams of drastic changes, of a revolution.Then, the disease, the plague of modern times, could speed it up.
America wants change
Right or wrong, left or right, people in America apparently want drastic change. In the last election, Donald Trump embodied an anti-establishment streak while Hillary Clinton was the incarnation of the establishment. Now both of the main candidates, incumbent Trump and leading Democratic candidate Bernie Sanders, are vocally anti-establishment.
Trump was in fact elected also to signal a dramatic new spin compared with previous administrations. It was meant to indicate almost a return to a semi-mythical past, when the US was predominantly Anglo-Saxon. Trump catered and caters to a numerical minority of the total US population, which yet is a majority in the majority of the sparsely populated states of the union. The chemistry of the appeal of a return to the past plus electoral laws brought him to victory.
Propping it all there was and there still is a strong undercurrent fed up with the existing establishment mainstream.
The end of the Cold War had brought about the economic globalization of Bill Clinton and the political and military interventions of George W. Bush, which were somehow toned down and reconciled by the Obama administration. And Barack Obama was possibly elected president to signal a change, although the change was not in the direction preferred by some conservatives in the country.
Some social scientists point at the widening income divide between rich and poor and the disappearance of the middle class, which makes many people feel disenfranchised by the present system. Philosopher Angelo Codevilla warns of a tectonic shift from a republican to an imperial America. In fact, with victory in the Cold War, the United States possibly thought it went from a division of global power with the USSR to being a solitary and absolute superpower.
Yet, decades after the failure of the Soviet empire, trade globalization didn’t fetch the windfall it promised for the US and the military interventions in Central Asia and the Middle East of the Bush administration didn’t open a new era of peace and new markets for America. Conversely those wars sapped American coffers and the drain of resources contributed to the 2008 financial crisis.
Moreover, encroachments in many directions by newly ambitious Russia and turns and twists by allies like Turkey prove that the US doesn’t have the total focus it may need. In this latest period, the US has only been consistently focused on China. From the slow but coherent build-up of Obama’s strategy of a “Pivot to Asia” to Trump’s showdown in the trade tussle with Beijing, Washington is clearly showing its priorities are in Asia and China.
In short, the US is not a total superpower, but it is still the only superpower, especially considering China’s economic performance is shrinking because of the double attack of the Coronavirus and the lasting Hong Kong protests.
The challenge for the US then can be threefold: regain the trust of its people, rebuild the middle class that made America in the 1950s and 1960s, and reestablish the political link with its allies that contributed to winning the first Cold War. In fact, the US often behaved after 1989 as if it had won the Cold War alone. This was possibly due to the fact that despite being allies, Japan mounted a challenge to the US economy and technology in the 1980s, and in the early 1990s the European partners (mainly France, West Germany and Italy) conceived and launched a new currency, the euro, evidently to hedge against the power of the dollar.
Now that the Japanese economic challenge failed and the euro threat against the dollar never really materialized, the US could be in a position to rethink its global outlook and links with allies, new and old.
In all of this, despite the mounting price of the Coronavirus on China’s and the global economy, the sentiment on Wall Street over the weekend was still high, buoyed by expectations that Sanders against Trump would fare like McGovern against Nixon in 1972, and thus pro-market Trump would triumph. The sentiment lost steam on Monday, as the virus was hitting economies all over the world, including the United States, where the White House asked special funds to the Congress to battle the crisis.
The amount of pain for the global economy will depend on the depth and length of the emergency. Presently in China, new infections are apparently contained, and the number of new victims is dwindling. But this is happening at the cost of a virtual halt to all economic activity nationwide. Unlike during the 2003 SARS crisis, which was basically limited to Beijing and Guangzhou, the Coronavirus has engulfed the whole country. All cities were de facto quarantined, although on different levels.
The consequences of the economic plague
Now some factories are reopening, but so far, the virus is being contained at the cost of virtually stopping the economy. Sales are down and prices are up. A massive stagflation is ongoing, on top of a budding stagflation that was already occurring at the end of 2019 because of the massive pig flu, which, by hitting the price of pork (China’s staple protein), knocked the entire food chain.
The disease is hard to detect and has a long incubation period. The reality is that if Beijing were to lift present restrictions too early, infections could blow up again and be more severe. The spread of the virus in South Korea, Iran, and Italy is evidence that the flu is not contained outside of China. Is it really contained in China, then, if it started and went on unbridled perhaps for months?
Chinese economists agreed that the present health emergency would spill into a market crunch that could be possibly like or worse than the 2008 financial crisis. They are admitting that Coronavirus could hit not just the first but also the second quarter. Apple, America’s bluest of the blue chips, depends on the Chinese market for more than a third of its productions and sales, and has already announced a drop in its turnover because of the Chinese crisis. China is propping up the Hong Kong market with a massive US$170 bn fund and promises it can unleash the whole power of its three trillion dollar reserves. But on Monday, Seoul’s stock market lost 3% and Milan opened at a scary -4%, closing at -6%, Wall Street shed 3%. It could be the beginning of a very hard week. Before the Coronavirus becomes a global pandemic, it is spreading on the world markets, and America could suffer badly.
We are still months away from the presidential election, and many expect a strong rebound of the economy after the end of the disease. But this will certainly be hard and difficult. China’s GDP in 2003 was smaller than Italy’s; now it is over four times larger. Then the enemy was Islamic terrorism; now China is the adversary. Then the crisis looked like a freak accident; now seems like a systemic issue bound to recur every 15 years or so.
There is a huge crowd of variables up in the air, but one of the variables, not totally unlikely, is that the US market will crash because of the wide consequences of the virus. A deeper anti-establishment mood could sink in, and Sanders could be elected. Unlike McGovern, who never beat Nixon in opinion polls, Sanders is ahead of Trump according to some surveys. Besides, would Trump be re-elected in a middle of an economic crisis?
Sanders would have to re-assure the establishment, that he will bring a Roosveltian reform but no Leninist revolution. Still he could then be in the position to improve the fate of American middle class, and establish a new American “empire”. President Sanders may seem very far-fetched today, but the spread of a largely unexpected plagueand its still unclear economic outcomes looked even more far-fetched nine months ago.
 See for instance https://www.brookings.edu/research/the-dangerous-separation-of-the-american-upper-middle-class/
See https://www.tabletmag.com/jewish-arts-and-culture/culture-news/292763/angelo-codevilla for example and private exchanges with the author.
See Andy Xie https://www.scmp.com/comment/opinion/article/3050960/luck-may-be-only-thing-standing-between-coronavirus-and-us-stock