Corona Virus: “Thinking the Unthinkable” event

When I wrote my last blog “ Thinking the Unthinkable - A new world beckons us” ( https://ramnarayanan1112.blogspot.com/2020/01/thinking-unthinkable-new-world-beckons.html )little did I ever think that the prophecy of the thought would be proved true very soon with the present global crisis due to the Coronavirus.

To refresh the memories, the authors of the book and the driving forces behind the thought, Nik Gowing and Chris Langdon propound the thought that the world is becoming more and more volatile. Very aptly, rather the normal black swan events, Nik and Chris talk about black Jellyfish events- which lurk in the sidelines without catching anybody`s attention and explode suddenly. The Coronavirus has indeed proved to be a black jellyfish event!!!

Two of the main reasons that impede a proper response to these black jellyfish events, as per the authors, are the inabilities of present-day leadership to handle such events. Its mainly attributed to the lack of proper tools and frameworks to pro-actively address these events effectively. On top of these, I would that egos and silo minded thinking of the present-day leaderships have added to the woes in fighting the virus attack.

Events of last 2 months – leadership failures - China, Saudi, USA, Russia, Europe

China started facing the first signs of the deadly coronavirus in December `19 itself but refused to accept the seriousness of the issue and kept it under wraps. Only when the Chinese were faced with a huge number of cases, which could have got blown to huge proportions during the Lunar New year movements, did the Chinese government swing into action. The damage was already done within China and one can only guess whether the numbers and facts that are still emanating from China are completely true!! The Chinese didn’t allow WHO officials to enter China till late February`20, which had they allowed earlier, could have helped the WHO sound off the other governments about the seriousness of the Corona Virus.

The response of the developed western nations too proved inadequate and adds credence to the “Thinking the Unthinkable” theory. The USA president, Donald Trump shouted loud in late February`20 that the USA will not be affected much, and his government is in control of the situation. A month later, the US has had the highest number of virus cases and the government is short of medical supplies.  Trump is at odds many times with one of his top medical advisors Dr. Fauci. Trump, facing an election this year, has put economic agenda ahead of health agenda by not declaring a total lockdown and wants the country`s businesses to start off in full steam by Easter in mid -April. Does he any evidence that the virus will die off by then? Guess not and certainly, Dr.Fauci doesn’t believe so!!!

The Italians and the Spaniards, despite the huge movement of people from China, didn’t take any preventive actions and had to pay the price with the highest fatality rates. The European Union too didn’t come to their rescue, at the most needed time, indicating frictions within the Union. Left to fend for themselves, these countries had to announce a lockdown and take their own actions. Leadership woes in the EU!!!

The financial markets rout was led by the collapse in the oil prices thanks to the ego hassles between the Saudis and Russians and the US. Each wants to kill off the others` oil-linked businesses. The USA needs its shale oil producers to survive and be less dependent on the Middle East for oil, while the Saudis and Russians want to crush the US shale oil business. To support the oil prices post the virus outbreak, the Saudis approached Russia to cut oil production but was rebuffed by the Russians. Due to the poor political relations between the US and Russia at present, the Russians wanted low oil prices to hurt the US shale oil business.

However, both the Russians and Saudis need oil prices to be above $60/bbl to sustain their social spending costs. If no truce is attained on the oil wars, social spending will be cut in Saudi and Russia, which will lead to more suffering for their people while the decline in the US shale oil business will lead to more job losses. Politicians and leaders fight while people suffer!!

Will the leaders arise out of parochial thought process??

I am pretty sure that the global economic and geopolitical scenario will undergo many changes once the world recovers from this pandemic, very similar to the post-world wars scenarios. However, the challenges will be different this time, especially for the political and business leaders, who will face some tough but pertinent questions:

Ø  Will China be the enemy in this war and made to atone like Germany?

With the devil`s advocate theory, that China has fabricated this virus to weaken other countries be proved?  Many leaders have made indirect references to China as the culprit. Unlike Germany which was the aggressor in the world war, China can always claim that it too was affected and has helped in other countries' efforts to fight the virus. China is an economic powerhouse now and is back on its feet now as other countries struggle. Countries will find it hard to ignore China.

Ø  Will firms with high dependence on Chinese supply chains develop a “China de-risking strategy”?

This is a big topic of discussion especially in pharma and automobile companies which have been badly hit. I sincerely hope that firms, as a part of their de-risking strategy, do a “China derisking “activity. No other country today can offer the manufacturing base as China and hence the global firms` movement on this aspect will be slow. Business leaders, with a focus on business recovery and short-term results, will need to take tough decisions in the next 1-2 years to move away from China.

Ø  Will Donald Trump and focus on health rather than the economy?

Trump was planning to run his re election campaign on a booming economy that has been adversely affected now. Will he focus more on getting the virus under control rather than the economy? Will the US people vote now for a socialist-leaning candidate in this election who will focus on health spending?

Ø  Some other pertinent questions that global leaders will face now:

·         Will governments focus more on health infrastructure to help fight pandemics in the future?

·         Will countries like Italy, who had signed up for China`s BRI initiative, give it up now?

·         Will the Indian government move fast and bring in structural reforms to seize this opportunity and make an India as a better alternative to China for manufacturing?

·         Will countries like Japan and Taiwan who have handled the crisis very well be looked up for healthcare systems?

·         Finally, how will the global leaders come together to address the costs of this pandemic especially the lockdowns? Like the UN, which was established after the World War -2 to establish world order- will the IMF and World Bank`s roles are enhanced?

To conclude, global leaders have a tall task now once they recover from the virus. New political and economic orders will have to be established now. New frameworks will need to be developed to tackle the situation which is futuristic as well as sustainable.

“Thinking the Unthinkable” prophecy has been proved right with Coronavirus attack. Hopefully, leaders will be able to address the right issues with the right frameworks keeping their partisan interests aside!!!

Till then Stay healthy, stay safe!!