Updated: Mar 27, 2020
Heads of state and government met today in Group of Twenty (G20) formation to discuss coordination concerning overlapping cross-border health, economic, and financial crises. They met after three weeks of uninterrupted establishment of national boundaries, export bans on medical equipment and food, mobility restrictions on individuals, and increased restrictions on how (and how quickly) international shipments can enter importing country territory.
The more COVID19 continues its deadly globe-trotting, the more humans retreat behind walls. March has been the cruelest month for human internationalists. The virus and illness has traveled across the most lucrative and busy hubs for global commerce, as this map from Johns Hopkins University illustrates:
Every major urban center loved by globalists and humanities majors has been hit. It matters little that in a high intensity flu year in the United States (where vaccines are widely available and administered) the Centers for Disease Control indicates that flu-related deaths can take up to 41,000 lives, generate up to 19 million hospital visits and affect up to 41 million people. Such comparisons and problematic because COVID19 requires a much higher percentage of infected individuals to receive intensive care, overwhelming advanced economy hospitals globally.
Supply chains and economies will never be the same again.
From the Bretton Woods Conference in New Hampshire at the end of World War II to the present, economic and financial crises have mostly been solved by an ever-expanding group of responsible policymakers banding together in a "committee to save the world." And so today global leaders gathered and issued a strong and eloquent statement of solidarity against an invader that does not speak their language.
As our COVID19 Report subscribers know, we have been expecting a strong statement of unity. The target audience was not the coronavirus. It was the capital markets. World leaders promised twice to do "whatever it takes" to accelerate scientific research and deploy all available financial resources to insulate the economy from widespread death and disease.
As expected, the three-page statement provided a conceptual overview of the range of policies put into place over the last month at the national level. It pledged to continue the deep scientific coordination underway to address the health/vaccine issues while taking a gentle swipe at countries that may not have been sharing good data with international partners. It promised that G20 Members would support rapid and significant deployment of IMF and World Bank and other shared financial resources internationally to attempt to cushion the economic blow associated with the disease.
The G20 refused to condemn export bans on medical equipment and pharmaceuticals, much less food. It merely promised to "continue working together...(to) avoid unnecessary interference with international traffic and trade." The G20 promised that health measures would be "targeted, proportionate, transparent, and temporary." While G20 leaders said they remain committed to the same goals that have underpinned the global economy for 75 years ("free, fair, non-discriminatory, transparent, predictable and stable trade and investment environment"), the leaders statement fails to acknowledge the likely deep and irreparable damage that COVID19 is inflicting on the fabric of the global economy.
Policy experts and strategists will be disappointed. Headline-reading algorithmic bots may be fooled by sentiment analysis into thinking that a corner has been turned, but the reality is that the G20 today did not agree to much of anything
It is difficult not to pity the G20. The group has no budget and no capacity to mobilize independent resources beyond that which sovereign states can individually muster. While the IMF can be instructed to mobilize its balance sheet in order to supplement national central bank lifelines, no communique can keep people from becoming ill, The G20 itself has no budget and no capacity to mobilize additional resources beyond that which the sovereign states individually can muster. While the IMF can mobilize its balance sheet to supplement central bank lifelines that meet short-term liquidity needs, no communique can stop people from becoming ill. It remains very unclear whether even unlimited funding will be able to address the very real and very physical constraints that accompany the shattered global supply chain.
The most important immediate challenge for the G20, however, is that leaders currently are operating at the base of Maslow's hierarchy of needs (depicted on the left). The responsibility to protect health and safety outweighs a range of free trade commitments. When the priority is to preserve lives, complaints concerning export bans and customs quarantines will not be at the top of a summit agenda.
The future of manufacturing and shipping will certainly be antiseptic, automated, and more distributed. But the transition to that future will have to transit through increasingly stringent phyto-sanitary standards that until recently had often been considered non-tariff trade barriers. And policymakers do not yet have enough data to make new rules.
Stated simply, cross-border cooperation experiences significant constraints when policymakers operate at the bottom of Maslow's pyramid.
Markets bounced today, reflecting at least relief that cross-border coordination continues to function. The question is whether the habit of cooperation will continue to hold in 3-4 months time and how it will evolve.
Developed countries and their citizens at that stage will have exhausted the temporary fiscal lifelines and they will be antsy to start moving around again. At-risk populations from prisons to war zones to the poorest countries on the planet will be experiencing the brunt of the pandemic at that point. National interests will begin diverging sharply as national inventories run low, particularly if policymakers have not managed to restart international supply chains.
Today's G20 statement was a good first step, but it is far from the last word on pandemic management.
These insights were powered by the patented BCMstrategy, Inc. data platform, which quantifies public policy risks. Our platform tracks and analyzes global public policy initiatives every day, automatically, across multiple issues including COVID19 and cryptocurrency issues.
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