Task Forces

28.04.2020.

THE YEAR WHEN THE EARTH STOPPED

By Dusan Vasiljevic – Strategic Foresighter, Energy and Environmental Security ​

Are the perceptions of the Covid-19 pandemic and its consequences subject to collapse of the overarching values of the global technocratic society, or are they merely the results of the unsustainable egoism on which the modern concept of the neoliberal economy rests?

The Covid-19 World Pandemic has done what has never happened before in human history, except, perhaps in the Ice Age or in the biblical apocalypse. The whole world stopped, the economy went silent, people shut down in their homes - no production, just the consumption of things that became vital to us, food and disinfectants. The rest of life moved to a virtual space, a global IT broth in which we satisfy our existential need for communication (humans are, after all, a social beings). The only in this doomsday scenario who gains benefit is all that life around us, which we don't normally notice but aggressively suppress - plants, bugs, birds, all living and non-living world (except us) took a breath! No air pollution, no noise pollution, no human pollution...

One day this will stop and then we’ll face another dimension of catharsis that we shall have to go through. There are two extreme positions: either that nothing will be as it used to be or everything will be the same as before, being only a matter of time. Life teaches us that everything happens somewhere in between, but what we don’t know is in which direction it will take. Historically, after major, cataclysmic events such as the world wars, human society has come down to the basic, atavistic principles of unity and convulsive enthusiasm. Then comes usually periods of all-encompassing fervor from which great deeds and regeneration arise. But this time is a bit different. Is the global perception of the Covid-19 pandemic a consequence of globalism and the neoliberal economy, or is the spread of this vicious virus just the trigger to end the human society as it is now, will show the immediate future, but it is uncontested that this tectonic earthquake has shaken the entire world from its very foundations. What the post-corona period will look like cannot be irrevocably declared, but the concept of a neoliberal economy has been suffering from systemic deficiencies for a quite some time.

Such extreme conditions, for which there is no historical memory or even socio-economic immunity, revealed the deep selfishness of modern society in which profit is above all, even above life. The modern world has fallen into a global paranoia and social pandemic that has changed the existing value system, surfing the crest of animal fear.

The neoliberal principle that advocates market mechanisms for managing everything, including public needs, has led to a massive alienation of the states from individuals. In such an environment, capital has taken over a comprehensive control, at the cost of completely disregarding the basic needs of people and society, as a whole. This trait turns neoliberalism to the perverted form of Neo-Slavery, where essential is to make a profit, at all costs. However, this form has its own advanced option in which those that serve the profit have the illusion of well-being and hence willingly consent to such a role. This has been mastered by offering a false standard with insidiously planted consumerism, abusing in this manner the atavistic need for possession driven by fear, where such a high standard is credited using expectations rather than the real values. The darker side of the coin is less visible, one that reflects the harsh reality: you have-you live, you don’t have-you die! Social needs, including education and health are bluntly forced to be a service of capital and social stratification is enormous (only about 2000 individuals own wealth such as nearly 5 billion people in the world and less than ten percent of people own over 90% of the global capital), all of it under the umbrella of democracy and human rights. In order to maintain such relationships, a mechanism has been put in place which provides all and everyone with the impression of knowing or be able to know everything, therefore consent to wanton exploitation is considered to be a matter of choice and not to lack of rational and pragmatic judgment. Awareness and knowledge are prerequisites for rational decision making (based on available, unbiased information). Proper knowledge is missing and as a lollypop, the illusion of reality through global IT and social networks where you can be whatever you strive at, a person of your own imagination that is part of an desirable and alluring virtual life, is provided…

However, when information is preprocessed or washed out from meaningful substance, then informational conglomerate and data noise are difficult to filter and their mass consumption deliver society of non-critical and ignorant individuals, a single-minded society of equanimity and a society which is easy to manipulate. This approach has nothing to do with declared social, economic and political systems but with the uniform aspiration of elites to increase and maintain their power.

CHINESE SLING

The Covid-19 pandemic has raised a number of questions about the relevance and effectiveness of supply chains. For decades, production from the western world was moving to China for the convenience of the low cost production. A blind eye was made on inhumane working conditions, bad environmental and social impact, all because the profits made on world markets “justified” it. China, on the other hand, has patiently built its growth on volumes, small margins and huge turnover. In the meantime, this far-eastern country has reached an enviable level of technological development, even superior in many areas and is now, once discovered that disrupting supply chains is plummeting the world economy, very difficult to pull back home this production! In addition to the technical difficulties of reallocating production and/or the cost of developing the same or new technologies at home, it should be carefully considered that all foreign companies in China had to open joint ventures with a Chinese government that has a 51% initial ownership in these companies! Therefore, such crucial decisions cannot be made autonomously and withdrawal from China cannot be done unilaterally and without huge losses.

What's going to happen? Let’s, for example, look at the global pharmaceutical industry, which has a degree of dependence on Chinese basic substance production of more than 80%. One scenario aims at maintaining the “status quo”, hoping that everything will go by quickly and that the former relationships and market profit matrices will be restored, presuming certain increase of retail prices in order to compensate the loss. This approach is best suited to China because it will strengthen its position as a world leader, facilitating further growth and taking over bigger chunk of world markets, controlling such material chains even tighter. This kind of approach is part of Chinese long-term policy that has been slowly but systematically implemented for many decades. On the other hand, in this scenario, the western or western sound industries shall be able to quickly gain surpluses and cover the incurred losses and yet, will fall into the booby-trap of even deeper, long run dependence on an uncontrolled supplier of strategic products. Today, this is China, but it could be any other country, that is, any supplier that cannot be managed by the domestic or indigenous economy.

Second extreme scenario is that the pharmaceutical industry, experiencing from immediate pandemic, begins to transfer technology back home or to countries under better control of western investment capital in this field, in order to mitigate the threat of same or similar scenario we are facing today. Such a move would need to have strong states’ support, because, as noted, China also holds a stake in the ownership of these companies and will not easily give up the possibility of having a monopoly on a particular market niches. It is clear that by abandoning production in certain industries, China will lose the ability to control its own expansion and will do everything to prevent this. True, China is not aggressive, expansionistic military force, nor will it seek to protect its interests by direct military threats or engagement, but it still has a range of mechanisms in the economic field and even in influencing in a number of countries where it has a serious stake in local economies. It should be taken into account that the Chinese political&economic system enables rapid reallocation of massive investments in any industry and to any domestic or worldwide geographical area, aiming at supporting projects or activities that need not to generate immediate financial benefits and/or profits, but are rather considered a part of a long-term, development strategy. Moreover, since China holds a large share of the industries, such economic moves are seen as a boon for the country. Furthermore, China owns the largest package of US debt.

Such a scenario bears also a whole bunch of questions that are currently without proper answer. The relocation of installed or China's genuine high-tech industries, would mean that, in addition to the cost of the entire transfer, the cost of production will be higher and thus, the higher retail prices shall apply. Capital’s inertia tends to retain existing state of the art, so it will try to resolve the problem with current or even higher margins, but that will mean significantly higher production costs. This will mandatory inflict the fact that the products will not be available to all users in the same way as before and will reduce turnover. However, the question is whether reduced turnover with increased margins can absorb the loss. Furthermore, the high price hinders the export of domestic products and services and further reduces the distribution of goods, thus making it difficult to obtain return of investments in domestic production. If users do not have access to, for example, health care, this means that lack of medical treatment and drugs in a future may easily create a ground for new epidemic, which makes the whole technology transfer operation, pointless. If, however, solution is craved in creating internal price parity, aiming at enabling sufficient consumer capacity to easy purchasing of targeted products, that would make all price and income thresholds higher, and then back to the square one ...

This can apply to all industries, whether in real or in financial sector, without exception and only differences might be in local service suppliers, however, they are also part of the big picture and not resilient to impacts beyond their area of operation. In any case, China will try to impose itself as an inevitable driver for new consolidation, aiming at reinforcing its position of a global supplier, at a time when other countries are still lagging in recovery.

Globalism is dead – long live globalism!

Globalization vs. Globalization

What changes can realistically be expected? Recovery and further continuation will occur in a multidimensional space (with at least three variables: industry, a society with bold existential fears and the environment) and cannot be simplified to time lapse and economic growth alone. It may happen that, if not to full extent, but then considerable redesign of current economic model shall happen with a greater weight on self-sufficiency of national economies and at shorten supply chains wherever possible. The fragmentation of global economic relations, the decomposition of services and commodities chains (perhaps financial, as well) and national consolidations are also likely to happen. This may to lead to the creation of a number of closed internal economic circles and a kind of tangential economy, where external economic relations will be significantly reduced to goods that cannot be obtained locally and relying on national economies, only. The question is how such concept of containing national or regional territories will affect investments that are global today and recognize no boundaries. Investments are planned in the way that the returns are largely determined by international trade and financial markets. Certain fragmentation of investment packages might happen as well as dynamic financial adjustment to new conditions, but emerging role of state and local businesses/investors is rather likely. A shift in focus of service sector to more secure rather than fast delivery of goods and products is more than certain. These will, somehow, slowdown and reduce overconsumption, which might not be a bad thing, especially if all these changes are merged with changes in social behavior models. Hospitality business and tourism that are affected the most will continue to have major challenges, but survivors will certainly adjust to demand, which is unlikely to decline permanently and shall recover in the coming years.

Whether this could be a good prerequisite for the further development of the circular economy or not, is a merely question of economic justification for introducing further this business model, to which no reliable answer can be given at this stage. The new dimension and importance of circular economy may be seen as a comprehensive demand for having a “secure economy”. Today (mid-April 2020), the price of crude oil is at historically low levels, therefore petrochemical products, primarily all kind of plastics are cheaper than recycled raw materials. Under such conditions, the recycling industry cannot compete with their production costs even though the generation of waste shall not stand still despite reduced economic activities, more likely quite on the contrary. If current trend continues, many waste industries may fail or disappear. Only the waste-to-energy cluster could count on secure future, despite the fact that renewable energy is increasingly cheaper, given the drastic fall in technology prices, primarily in the field of solar and eon energy (wind energy) conversions. The environmental issues and the fight against climate change are not at stake where current set-back is rather result of purely unfavorable commercial terms that can only be mastered with significantly greater efficiency and narrower profit margins. To balance waste management industries, states will need to launch massive support programs in the legal sphere and, preferably through financial and fiscal incentives.

Technology benumbs humanism and its essential features, such as empathy, morality, and ethics while pushes creativity almost exclusively towards the technical sphere and the further development of technologies. This is not good, because progress should not be single channeled process, but it needs to free up space for creativity in the intangible areas as well and not to strive solely to a technocratic society that is almost exclusively serving capital, that is, to increase the material values, only.

The most promising technological development that is certain to experience a sudden leap is the “remote economy”, which will increasingly use the ability to manage remote processes using superb communication (5G). This applies to simultaneously industries (production of elements, welding, 3D printing, even construction, etc.), social activities (remote multilateral communication - remote participation), healthcare (automated history, remote operations…), education (training, education and training platforms that have existed to date but will gain on importance), trade (online sales and delivery of goods), etc. This development trend, unfortunately, can lead to further alienation but also to complete suppression of privacy and control of personal data, with all the consequences it carries alongside (global and complete monitoring of all activities of individuals with the help of mobile telephony, personal implanted chips, nano-implants, online monitoring , huge surveillance networks )…

Whether the resolution of the pandemic crisis will lead to a more humane, or so-called "organic" society in which human activities are synchronized with biological rhythm and needs is yet to be discovered, but it is certain that civil movements, which will increasingly advocate for the organization of society in a way to a greater respect of basic human needs and rights (for example, the need for comprehensive and affordable health care), shall be strengthened. This is for sure not going to be easy since the main question is whether the financial centers or the global economic driving hubs can be suppressed and whether would it be possible to make social needs a priority prerequisite for the survival of the human community. It is necessary to change the functional matrix of modern world in which money is prime and only goal of existence, and to have or not, is to be, or not to be. For that reason, certain social clusters will gain important and meaningful role, although a large-scale social (r)evolution is hardly expected. What the Covid 19 pandemic has shown and demonstrated is lack of human solidarity and understanding that are the essential for progress.

There will be an immense global economic recession, no doubt, or better say, a standstill in growth, which, even without Covid-19, has been questionable for a long time. The neo-liberal concept presumes continuous growth in both production and consumption in order to ensure a rising rate of profit margins and then again new growth. However, no natural process is going one way only, particularly not ever-growing; growth must come to saturation, to an end, no matter what it is. Printing money, creating new virtual values and inflating value balloons, as well as canceling debts and receivables are, in essence, a consensus-driven global bankruptcy, all for the purpose of resetting the system to what it was. Extreme national movements with a strong social dimension will strengthen, while nationalist, far-right political options will seek to capitalize on the destruction of multilateralism with programs that will fictitiously attempt to counter social justice agenda. However, as right-wing, nationalist programs rely on the pillars of neoliberalism, if capital is unable to reclaim its position and influence, it is quite possible that neo-Renaissance movements will emerge.

There is an anticipated fear that, if everything goes back as it was until recently and without lessons learned, the Covid-19 pandemic may just be a general rehearsal for something much, much worse!

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