Covid-19 - intended or unintended consequences

21 Apr, 2020

Covid-19 rolls on like Hitler's blitzkrieg. Human society is advanced enough to cope with some consequences. But it does not have the tools to cope with three occurrences:

1. God's wrath - i.e., earthquake, volcanic eruptions, Tsunamis, some pandemics, etc.

2. People's wrath - When people finally revolt no power can contain them. History is a testament - the French 'Storming of the Bastille', the Bolshevik Revolution and the elimination of Czar Nicholas dynasty, the overthrow of Reza Shah Pahlavi, etc.

3. Consumer revolt - In the age of capitalism, the consumer is the most important entity. Mega corporations can be destroyed by many factors (technological obsolescence, high leverage etc.) but consumer dissatisfaction is the death knell.

After every worldwide disaster like the COVID-19, the world order transforms. The strong and powerful take the opportunity to further consolidate their hold. The poor are given SOPs. In fact, they are made powerless. Let's dwell on what may follow in the aftermath of Covid-19.

The plutocrats

This term refers to the 1% of the people who rule the world. The other 1% are the enforcers and the keepers of their estate. Each country has its plutocrats. They are a worldwide club. They cooperate and protect their mutual interests. Post-COVID-19, the plutocrats are going to enact laws and regulations that will further make them impregnable. After 9/11, the Department of Homeland Security was created. It has such sweeping powers that once you become a target, you're done. Guantanamo Bay awaits you. So too in the EU, China, Russia and the other G-20 countries. The plutocrats (Wall Street) outgun Main Street 10:1.

People's power

Depending on the damage created by Covid-19 - economic, health, social, psychological, people will react en masse - from Tokyo to Timbuktu. But the plutocrats are well prepared - they have all the tools. Organizational power, military power, economic and financial power, media power etc. They can buy-off any rebellion. The Arab Spring that started in Tunisia in 2010 never gained traction. The monarchies of the Arab World nipped it in the bud. The Royal family of Saudi Arabia gave a bribe of US$90 billion in social benefits to its citizens. Expect the same again. In advanced democracies, the moves will be soft and subtle to keep alive the slogan "ALL MEN ARE CREATED EQUAL". In any case, the working class is rapidly losing its relevance with the advent of infotech, biotech and AI. Soon, the working class will be classified as "the irrelevant class".

Oil/economy

Oil is at an all time low. Finally, OPEC+ and Russia (egged on by the US) have struck a deal - an unprecedented cut of 10% (10 million barrels per day). The GCC economies are already delving into their foreign reserves. But the US faces a bigger challenge. Elections are due in November 2020. If the economy does not rebound, Trump is in trouble. The shale oil belt in Midwest USA is facing layoffs, shutdowns and bankruptcies. Banks are taking a big hit. Shale oil generally breakeven at US$55 per barrel. Old Middle East wells breakeven at US$12 per barrel. The COVID-19 economic impact may last several years. Maybe longer. The only way to stimulate an immediate recovery is the age-old formula - ignite a war.

Imminent war

Please see my article of 14 September 2017 "Merchants of Death". The military industrial complex, worldwide, has had a good run since 1980 - the Iraq-Iran war, the two Gulf wars, Syria in the Levant, Libya in North Africa and conflicts in rest of Africa. They do not want a slow down or a diversion of funds to COVID-19. When an economy hits a prolonged L shaped curve, the historical precedence is to start a war. Pakistan's economy took off in 1953 after it became linked to the supply chain in the Korean war. The Great Depression, which started in the US in 1929 only subsided in 1941 when the USA became part of the WWII. The war effort production rose to tenfold. The figures are staggering. Defense spending (2019) as a percentage of GDP is as follows: Oman 11%, Saudi Arabia 10.8%, Afghanistan 10.1%, Israel 5.1%, Pakistan 3.7%. The biggest arms exporters are the US, Russia, France, Germany, China and Israel. The biggest arms importers are Saudi Arabia (US$3.8 billion), Australia (US$1.57 billion), China (US$1.56 billion), India (US$1.53 billion), Pakistan (US$777 million). The 'Deep State' of many countries is already war gaming - they are considering options. Venezuela is tempting. But USA does not want to destabilize Latin America. Yemen is a side show for MBS and MBZ. A second war in Syria is being considered. But the biggest target is Iran. An outright war with Iran will involve, starting from the East, India, Pakistan (in some form), Afghanistan, Iraq, Lebanon, Turkey, the Levant countries, NATO, the US and Russia. Israel has the most advanced military technology in the world - waiting to be tested. China will wait and watch. A two-year war will stimulate the world economy. After the war, an even bigger economic injection - rebuilding the infrastructure. All paid for by GCC countries, but contracts being awarded to Western or Pacific Rim corporations.

Conclusion - COVID-19 will have interesting ramifications for the world order. There will be winners and losers.

(The writer is the former Executive Director of the Management Association of Pakistan)

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