What Will World Powers Look Like After The Pandemic?

First of all, we have to admit that there is no surefire way to answer this question at the moment, but if trends and hypes that have started are anything to go by, then the following estimation is a good indicator.

As this is a novel experience in terms of a social and economic crisis, it is hard to predict a future business environment, given that it is the first time Western governments responded to a health crisis by closing down economies in full.

More money printing, more debt, more taxes

It is clear that both the EU and the US will emerge from this crisis with much more debt on their hands. In Asia, Africa and Latin America, debt levels will reach unsustainable numbers in various emerging economies, who will have to cope with bankruptcies in their private sector, most notably in their service sectors.

In order to counter this trend and to support the newly unemployed, both the US and the EU have turned on their money printers, which will help in the short term. Whether this is a long term solution depends on the possibility of a second wave of the pandemic in the fall and winter months.

It is also clear that taxes in Western economies, both in the EU and the US, are set to rise as a result of the excessive lending by governments. Furthermore, it is clear that the austerity policies which were common after the 2008 financial crisis, will not be repeated this time round. Because of this, a tax on the rich seems inevitable.

End of globalization?

It is clear that many in the western world are blaming China for this pandemic and that the relations between various members of the EU-27 are getting strained because of the need, for those with great economical relationships with Beijing, to remain friendly towards China.

Furthermore, dependent on the outcome of the US Presidential Election, the relationship between China and the US, which was already difficult, could worsen if Donald Trump gets re-elected. According to oddschecker, there are good chances that he will.

Unless Joe Biden comes with a surprise VP pick which could change those odds, it is therefore a safe assumption that China will need to find a reliable partner for the future as all the world’s pressure will be on them.

It seems to have found this in Russia where President Putin is suffering from a serious drop in popularity.

The pandemic and its geopolitical outcomes will also likely mean an end to globalization as it was known since the start of the 21st century. This will likely impose massive shifts in the nature of global business and the way business works. Expect countries to prioritize homegrown products in order to save low-paid jobs.

Resurgence of Chinese nationalism

Chinese President Xi Jingping’s position, which looked very stable before the Covid-19 crisis, could come under fire for the way that his government handled the ordeal and it’s new found diminished standing in the world. Because of this, there is a chance that a Chinese politician could rise up to challenge Xi.

In order to stave off a possible internal Chinese coup, the new law that Beijing has as of today installed in Hong Kong, which it still considers a rebellious province, will be an interesting factor to follow. Will China intervene if HongKong protesters rise up again, and will the world powers criticize it?

Will Europe change direction?

Lastly, it will be interesting to see what direction Europe will take. The newly formed European Commission, under the leadership of the former German defense minister Ursula Von der Leyen, is clearly in a waiting position and plans for a further expansion have been put on hold.

Until it becomes clear which was the US-China trade war (and possible all-out war) could go, it is expected that Europe will not take sides.

However, if the Russian-Chinese bromance between Xi Jinping and Vladimir Putin moves to another level, Europe could be forced to seek refuge from the major Communist powers on the Eurasian plateau again.

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