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Ian Bremmer: spin vs reality of COVID-19 response
More than 50% of the planet is presently locked in place. Impact on the global economy is extraordinary. Oil prices in the floor - when you shut down global supply and demand for the economy, you don't need a lot of energy. And when you have a limited amount of places to store that energy, further production is nearly worthless.
Here in the United States, what has been politically, reasonably functional so far is about to become much less so. Those of you watching the White House press conference every day, and if you watch cable news right afterwards, that's a complete shit show. It's made for television, political theater and drama. But the actual policies we've seen from the United States so far, have been reasonably coordinated.
What do I mean by reasonably coordinated? Well, first on the finance side, Fed Chief Jay Powell has been very effective and early in not just getting rates down, but also providing credit lines where necessary across the economy. Fiscal stimulus has been fast, has been bipartisan. There's going to be more coming for small businesses and NGOs that had initial hundreds of billions depleted quite quickly. That looks pretty close to passage. And also the reality is the governors are in charge. The governors engaged in the shutdowns and they didn't do so politically. They engaged in shutdowns as they realized they needed to engage in shutdowns. That's been fairly straightforward.
The big problem was health care. That was less about politics than the fact that the United States didn't have testing and adequate stockpiles of health care materials. When the World Health Organization offered a test, the Americans didn't use it. To be fair, the Americans usually use local CDC produced tests. When it was clear that they weren't working, they could have gone to use the W.H.O. approved tests, like the Germans; we didn't. So, that hurt and it hurt that we were late in coordinating and stockpiling critical health care material. People were more worried that the health care systems weren't going to work. But ultimately, that equipment got there, the masks got there to the people that most needed them, the health care workers. And that meant that we didn't see large numbers of health care workers getting sick and dying like in Northern Italy. And you never saw triaging of large numbers of people that needed critical care.
Going forward, it's going to get a lot more political. I think for a few reasons: First, even though we have health care systems that have surged, we don't have adequate testing, to be able to say that quarantines have worked the way we want and that we know we can reopen economies. But the pressure to reopen economies is gonna be massive because people are suffering. They're suffering from not being able to get to work. They're suffering because the economy is falling apart. They're suffering because they don't have child care and kids can't go to school. So, the pressure to restart economies is going to be immense. That would be a lot easier to deal with if you had the contact tracing and tests that we have seen early stage in Germany or South Korea.
Some states will have tests up and running, others will not. They'll be coordinated locally, not nationally. And as they open, some states will need to close again. According to the White House guidelines, two weeks in order to go from phase one to phase two. You're going to see additional cases. That's going to be a serious problem. People will be going back to the hospital. That's already started in Kentucky. Is that going to slow them down? I hope it does. And the fact that this is being done state by state is going to prove very problematic as the US economy starts reopening. And as, and all epidemiologists expect this, we get second outbreaks either this summer or in fall and winter.
I think on the fiscal side: We've got the $2 trillion done. We're going to see another $2 trillion done. That is almost all relief for having shut down the economy. But what about stimulus? What about getting companies going again, getting the economy going again, as we start reopening summer and fall? That's not going to be easy. That's not going to be politically bipartisan and coordinated like the last few tranches have been. They'll be much more politicized as the election is getting closer. And that means either there's going to be massive overspending and waste, which will cause a political bunfight afterwards and big fights, or it means that you're not going to get adequate cash to those that most need it. And that's going to limit the ability of the American economy to rebound.
You're going to see similar problems in Europe. There's nowhere close to a willingness of the Europeans as a whole to provide the kind of redistribution of wealth of debt that would be required to get the Italians, the Spaniards, the Portuguese growing again. So, the Germans are running very well domestically, the Danes, the Netherlands. But you don't see that in the south. You don't see that in Eastern Europe. The potential of existential crisis for the eurozone is real.
Finally, China. I've discussed on previous videos how, one, they were responsible for the initial cover up, but two, once they started focusing on the crisis, they did an extraordinary job, empowered by technology, surveillance on the ground, able to quarantine and prevent significant additional outbreaks. No, I don't trust their numbers, but I do trust the fact that their economy is seriously up to speed again, in a way, the Americans and Europeans are gonna have a much harder time.
What's interesting is that internationally, the Chinese are playing much less of a leadership role than they are domestically, now that they have the crisis under more or less wraps. They made big press in initially sending healthcare equipment, medical equipment and personnel to the Europeans and other countries. It's been relatively small. There hasn't been big follow through. It's mostly press. This is not the Americans in Indonesia after the tsunami. It's not anywhere close to what the Chinese are capable of doing, what these countries actually need. That is causing a fair amount of blowback. We're seeing it from German media institutions, from the French, from the UK and especially from African countries, because a lot of Africans have been treated so badly on the ground. In China as well, the Chinese haven't handled that well. I've heard from heads of international financial institutions that the Chinese are nowhere close to offering the kind of money and support that these countries desperately need.
The Americans and Europeans are going to be focused on their own crises, and that's going to be massively expensive for these countries. So, their willingness to provide international aid will be more constrained. While the Chinese are less constrained. Second largest economy in the world, not providing leadership, very little cash they're going to be willing to put to put up. Which means the developing world is going to be really on the back foot in three and six months time. And also, the idea that China is going to be suddenly replacing the United States, providing leadership, you saw in The Economist magazine this week, China winning out of coronavirus, well, it's clear that the Chinese economy is doing much better. Their growth this year, next year will look a lot better than the Americans, Europeans. They will be gaining on the Americans in terms of the gap in size of economy and impact of the economy. But in terms of providing international leadership, there I don't see the Chinese playing much of a role at all. And it's important not to get ahead of of ourselves on that one.