It is now clear that there is a major downside to an economic model which pays little attention to sustainability.
A “black swan” has three features: rarity, extreme effects, and retroactive predictability. In retrospect, the warning signs of an imminent catastrophe are often easy to spot, but few see them at the moment.
An example of a black swan was the 2008 financial crisis, and Covid-19 is an even better example.
Economists tend to make assumptions about this time of year on what the next 12 months will bring.
Some tend to think beyond the box and make wild assumptions that might or may not occur about unexpected events.
Suffice it to say that a year ago, not a single crystal ball gazer expected that Christmas would be banned by government order in December 2020, pubs would be closed and soccer matches for the Premier League would be played on pitches without spectators. No one said 2020 will be a plague year, resulting in more than 1.8 million deaths worldwide, and after the Great Freeze of 1709, the greatest annual contraction of the British economy.
The collective inability to foresee a coronavirus strain that was first identified in China at the end of 2019 indicates that we should all be vigilant about making bold predictions about what is going to happen next. Perhaps financial markets are indicating that by the middle of this year, the mass vaccination campaigns now underway would allow life to return to something like usual.
Maybe 2020 will be reported as a one-off in the history books, an aberration which means nothing.
It is worth noting how little has changed as a result of the near implosion of the global financial system in 2008 – amid all the confident expectations that there will be a political move to the left.
There are reasons to assume that 2020 will be different and could ultimately be seen as one of those years that will prove decisive, such as 1789 and 1914. One is that the pandemic exacerbated the technological transition that was already occurring, when through a computer screen or mobile phone, social distancing and compartmentalization led us to do so many more things from home. People have been browsing more on the net; they have kept in contact remotely with their friends; they have been shopping online. The implication is that economies have accelerated digital transformation.
Organizations that were sufficiently strong going into the recession – Google, Amazon, Facebook – have seen their market dominance increased. For the commercial real estate industry, operating from home has been bad, but perfect for Zoom.
There has been talk for years that biotechnology will be a key component of the fourth industrial revolution.
The reaction to the pandemic has shown that this is not just hype.
How rapidly vaccines were developed and manufactured was breathtaking. The discovery of mutations in the coronavirus has been made possible by genome sequencing.
There was a turn toward larger states that invested far more, borrowed far more, and bossed people around much more in tandem with the rapid technological change.
Rishi Sunak was planning to borrow around £ 60 billion in the current fiscal year before the crisis erupted. If the number is less than 400 billion pounds, he’ll be fortunate.
In fact, along with other finance ministers, the chancellor had no choice. Governments have taken deliberate decisions to close down vast parts of the economy and have therefore been driven to take extraordinary steps to escape mass unemployment and widespread suffering.
Sunak speaks a lot about having a moral responsibility to balance the budget, but he’s an unconvincing chancellor with an iron fist.
Some states, more than others, have weathered crises.
Ironically, the only major economy to post positive growth this year would be the nation that brought the world the Covid-19 – China. The neighboring nations, Taiwan, South Korea and Vietnam, have all been better prepared than Europe or the United States for the pandemic.
The global balance of power has changed from the West to the East in recent decades, and this trend continues. The U.S. has been comparatively weaker since 2020, and China is relatively stronger.
As Joe Biden moves into the White House this month, Donald Trump’s hawkish line on Beijing is unlikely to soften much.
The Modern History of Globalization