Good and bad crises

Mahmoud Mohieldin
Wednesday 7 Apr 2021

A good crisis can be rife with opportunities, explained the Italian thinker Niccolò Machiavelli, but will this be the case with the present crisis over Covid-19?

Amidst the present onrush of political and economic crises, we frequently hear the Chinese adage that “a crisis is at once a blessing and a curse.” What about those people who only get the curses, you may ask. Where did all the blessings go?

The peoples of the East do not hold a monopoly on maxims about crises. British leader Winston Churchill, whose political career had its own share of downs, as well as ups, once said “never let a good crisis go to waste.”

This Churchillian motto, commonly heard these days, originates with the master of opportunism Niccolò Machiavelli, who, in his book The Prince (1532), explained how “good crises” are rife with opportunities. They are times when ordinary people are filled with worry and suspicion, while politicians and rulers variously deny the problem or affirm it, surrender to it or fight it, wreak destruction or emerge as saviours.

In the late 1980s, I had the opportunity to hear a most enjoyable discussion between two Egyptian pioneering political science and economic scholars of the day, Abdel-Fattah Qandil, a professor of economic planning, and Ibrahim Sakr, a professor of international relations. The topic was a recently published new edition of Thank God for my Heart Attack, a non-fiction work by the US journalist Charles Y Harrison that first appeared in the late 1940s.

As I listened to the professors enumerate the lessons to be gleaned from Harrison’s memoir, which aims to help readers adopt a lifestyle more in tune with the advise of medical and nutrition experts, it occurred to me that one of the two men might have suffered a heart condition of some sort himself that had warned him to change course in his life. At all events, their conversation turned from the specific to the general and the need to take advantage of critical moments by formulating policies that try to tap the potential of every cloud’s silver lining.

Hundreds of clouds have come and gone since those days, and the chief decisive factor in dealing with their consequences has been the degree of innovation in managing such problems effectively and resolutely.

The past couple of years have brought a goodly dose of crises precipitated by the Covid-19 pandemic and its economic and social consequences. The variations between the responses of some countries and others enable us to discern the difference between good crises and bad.

In previous articles, I have refuted the idea that everyone is equal in the face of a perfect storm. The myth of “all of us are in the same boat” is, indeed, a myth, as has been evidenced by the disparities in the severity of the impacts of the present crisis. This has enabled us to identify good crises in resourceful countries that have responded effectively and have therefore been able to start rebuilding their economies and recover from the crisis, and bad crises in countries that are short on human and economic resources.

There are many areas where the disparities or unfairness are pronounced, but the most important are the following:

- Inequality in the availability of a vaccine against Covid-19. Despite the refrain that “no one is safe from the pandemic until everyone is safe,” variations of which we have heard from the leaders of the richest nations, some of the latter control the production and distribution of the vaccines against Covid-19 and in ways that do not comply with what they say is safe.

The recently appointed director-general of the World Trade Organisation (WTO), Ngozi Okonjo-Iweala, has pointed out that only ten countries have administered 70 per cent of the vaccinations in the world and some countries have yet to obtain a single dose. We are thus looking at the significant control over the production, distribution and availability of a vaccine at the time of an epidemic.

Not only is there a lack of support mechanisms for the poorer nations, the richer ones have reserved the vaccines that come off their production lines in advance for distribution among their own citizens. The only way to remedy this injustice, apart from providing the necessary funding, is urgently to revise the rules governing intellectual property rights when it comes to the production and trade of vaccines and other remedies before viruses mutate in ways that defy the capacities of developing and developed nations alike.

But will the wealthy nations, which have turned a deaf ear to this need before, listen?

- The discrepancy in economic growth and recovery. The global economy shrank by about 3.5 per cent in 2020. Some experts predict on the basis of assumptions about the pandemic being brought under control and continued injections of funds being made available for economic relief and stimulation, that the global economy will grow by about six per cent this year. In other words, this year will more than compensate for what the world lost in economic terms last year.

But such figures are averages, and, as such, they hide more than they reveal. While the US and Chinese economies may attain that growth rate, the European nations will not. Lagging further behind, the countries of the Middle East and North Africa (MENA), a region consisting mostly of Arab countries, will attain only 2.2 per cent growth, according to World Bank forecasts. This is considerably less than the global average growth rate, and it is therefore less than is needed to compensate for the economic problems caused by the pandemic, among them growth rates estimated at minus 3.8 per cent.

Against this backdrop, we will see great discrepancies in performance that will deepen the inequality of income distribution between, as well as within, countries. Labour-intensive sectors such as tourism, the service industries and some other sectors will not be able to recover their pre-crisis productivity rates. But countries with large public purses and the ability to augment them through inexpensive loans in their own currencies have invested huge amounts in economic recovery projects, as is the case with the US, which has already pumped $1.9 trillion into the economy and will follow this with at least another $2 trillion of investments into infrastructure, education and public services.

Europe, Japan, South Korea and other Organisation for Economic Cooperation and Development (OECD) nations are doing the same thing, each according to its ability, in order to realise a sustainable recovery, stimulate job growth and increase international competitivity.

The Arab governments, with a few exceptions, do not have the wherewithal to follow suit. This means they have to encourage the private sector to chip in, while continuing to allocate public funds to stimulating investment and leveraging it towards sectors or projects that have the best prospects of creating jobs and raising productivity.

At this stage, the priority should be given to the promotion of digital transformation and associated infrastructure, export-oriented industries, sustainable investment in the green economy and human-resource development through education, skills-building and healthcare.

- Zero-cost financing for the rich versus zero-financing for the poor. The processes of financing and localising sustainable development and inclusive growth remain a huge challenge under the conditions of the pandemic and the discrepancies affecting the economic circumstances of the developing nations. Whereas the developed nations have the ability to borrow at practically zero cost in the financial markets, the poorer ones do not stand a chance of obtaining loans in those markets. As for countries caught in the predicament of being somewhere in the middle, they can borrow on the markets, but at exorbitant rates that will increase national debts that were already on the rise before the pandemic struck.

These countries do not benefit from the initatives introduced by the G20 group of countries, such as suspension in debt-servicing payments or debt-relief, because of the lack of an integrated and more comprehensive sovereign debt-management system to include all qualified debtors and creditors. On top of this, they face the problem of the mounting debts of the corporate sector.

International cooperation will be needed in order to prevent this wave of indebtedness from spiralling out of control and into a full-blown crisis, and these efforts will need to produce more than patchwork solutions or sedatives. Hopefully they will come into being before it is too late, at which point the world will once again regret not having applied the maxim that an ounce of prevention is worth a pound of cure.

*An Arabic version of this article appeared on Wednesday in Asharq Al-Awsat.

*A version of this article appears in print in the 8 April, 2021 edition of Al-Ahram Weekly

Short link: