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Being, Having and Power During the Crisis

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Economic and political consequences of the crisis

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Being, Having and Power During the Crisis

  1. 1. 1 5 April 2020 Being, Having and Power During the Crisis by Dominique Strauss-Kahn The health crisis that we are experiencing is different from any faced by previous generations. The Black Death in 1348 and the Spanish Influenza of 1918-1919 are noteworthy instances in that they allow us to reassess the potential ramifications of a pandemic. Yet, they shed no light on the capacity of society to rebound when it has a globally interconnected economy and has lost almost all recollection of what the risk of infection entails. One difference that is immediately apparent with respect to the current health crisis is the speed at which the disease is being spread. Just three months after its onset, nearly half of the world’s population is on lockdown. Even though it is most likely that the initial epidemic was quickly transformed into a pandemic on account of the virus’ highly contagious nature, the role played by globalization in speeding up the movements of people all over the world is key to understanding the illness’ fast proliferation1. The slow response time of developed countries, which resulted in their health systems being quickly overwhelmed, is undoubtedly to blame as well. It shows a lack of foresight and misguided confidence in the ability of their healthcare systems to protect their population on a massive scale, especially given the fact that their protective equipment and diagnostic tests are outsourced, as the need arises, from foreign, predominantly Chinese, suppliers. This by itself does not necessarily amount to a fatal blow. Drawing on its hard-won experience with past epidemics, Taiwan ensured it had a sufficient stock of protective gear,2 the ability to manufacture this equipment and a command center dedicated to managing infectious diseases, capable of quickly launching procedures for managing and sharing data on infected patients. Perhaps it is not that surprising that a healthcare system is unequipped to handle such a drastic temporary need. Yet, in this case, it is vital that it be responsive, i.e. able to redirect its services and tap into reserves that have been identified and set aside. This versatility, it would seem, has been sorely lacking. Another structural difference between this health crisis and previous ones is its magnitude. Countless officials initially tried to play down the seriousness of the situation by comparing it to the number of deaths from the seasonal flu, Ebola and the HIV/AIDS epidemics, or even the harmful health effects of addictive substances like alcohol or tobacco. Apart from the fact that we will only be able to fully grasp the lethal impact of Covid-19 once we have stemmed the tide of transmission, proffering this type of argument merely contributes to downplaying the global and absolute nature of this pandemic. It is global insofar as there are no longer any geographical areas that remain untouched and also because the pandemic has now affected the global population on a scale unlike anything seen in 1919: the sheer number of people asked to stay home today is twice the number of the total world population at the time of the Spanish 1 Jin Wu, Weiyi Cai, Derek Watkins and James Glanz, “How the Virus Got Out”, The New York Times, 22 March 2020 2 France had also set aside a large strategic stockpile. Created in 2007, the Health Emergency Preparedness and Response Agency (Établissement de préparation et de réponses aux urgences sanitaires (EPRUS)) had, at the height of the swine flu pandemic in 2009, one billion masks for the infected to prevent dispersal and 900 million FFP2 or filtering face protection masks. In 2013, the doctrine managing strategic stockpiles was amended, shifting protection from workers to employers. In 2016, EPRUS’ missions were merged with those of other bodies under the umbrella of the new French national public health agency.
  2. 2. 2 flu. It is absolute in that it is now obvious that no one can consider themselves immune from the risk of contamination. It is this last particular characteristic that distinguishes this health crisis from previous ones: its all-encompassing nature waylaid and shocked a global population that had largely forgotten about infectious risks. In doing so, it invaded the cosy existence into which the economically developed countries have been lulled. Death has not only become a more distant prospect because of a higher life expectancy; it has also become more unacceptable, as the qualms about deploying ground troops in the most recent conflicts have demonstrated. In the richest countries, the “value” of human life has considerably increased in the collective unconscious. Now, however, we are once again being reminded of the precarity of our existence. This crisis of being will most likely have ramifications that it is too early to discuss here, but it also brings to light a crisis of having and one of power, which calls for an analysis to determine the best course of action. A Crisis of Having We have had our fair share of economic crises. This one is different. This recession only very slightly resembles the ones we have known because it involves both a supply shock and a demand shock. A supply shock and a demand shock The detrimental impact on jobs of the supply shock will be difficult to avoid. It stems from the guidelines to stay at home, which have proven essential in combatting the virus. With part of the workforce on lockdown for an indefinite period, a decline in production is inevitable. Many businesses will be making cuts to their workforce while others will shut down. These jobs are lost, most likely for a long time. All of this also tends to occur in the wake of a natural disaster, but the impact in those cases is generally limited to only part of the economy. Perhaps some of these businesses will be saved by the vigorous state intervention. Having recourse to “temporary nationalizations”, which I did previously conceive in the rare cases of national independence3, might save some but not all. Unsurprisingly, the demand shock is the result of several overlapping factors: the income of a large part of the population has disappeared, the consumption of items deemed non-essential has been postponed, other purchases have been made impossible by the lockdown, and since “my spending is your income”, demand weakens further. This is the well-known cycle of a recession. On top of this, financial assets are melting away. During a conventional recession, if not obliged to immediately sell for whatever reason, the wisest management of financial assets would involve awaiting a return to normalcy. With Covid-19, any return to normal will not emulate past examples. Some financial assets will collapse to zero as the businesses they represent close for good in greater numbers than in previous crises, wiping out equity. The disintegration of financial assets can be traced back to precautionary behaviour that depresses global demand even further. The “risk of ruin” for some investors, which had disappeared for the most part after the Great Depression, is now back. 3 Dominique Strauss-Kahn, “For True Equality, Elements for Radical Reformism” (Pour l’égalité réelle, Éléments pour un réformisme radical), Les Notes de la Fondation Jean Jaurès, July 2004, p. 72.
  3. 3. 3 It is this simultaneity of shocks to both supply and demand that makes the current situation so singular and so dangerous. In the short term, losses are inevitable In the US, it only took fifteen days for nearly ten million Americans to find themselves unemployed. In Europe, 900,000 Spaniards have already lost their jobs. In France, the French National Institute for Statistics and Economic Research (INSEE) estimates that the cost to the country of one month of lockdown will likely amount to three percentage points of GDP. No one will be spared. According to the International Monetary Fund, “Never in the history of the IMF have we witnessed the world economy come to a standstill. It is way worse than the global financial crisis of 2008.” These terrifying figures have led some to adopt a bellicose reading of the crisis. National governments, the United Nations and the IMF have all referred to a “war” against Covid-19. And yet, armed conflicts do seem so relevant when trying to understand the economic paralysis that has crippled us. It is the evaporation of knowledge, even more than the destruction of capital, and namely the expertise nestled within the companies that will inevitably go bankrupt, which should be a cause for concern. It is an organized coma and a long-term breakdown of the supply chains that we are witnessing rather than the redirection of manufacturing towards a war economy. For the most fragile countries, the pandemic threatens to be devastating. With the crisis still in its infancy, a number of commodity exporters, most notably oil producers, already found themselves with insufficient levels of currency reserves. The price of oil fell to under 20 dollars a barrel, and copper, cocoa and palm oil prices have collapsed since the start of the year. For countries that are widely supported by remittances from abroad4, 2020 may see a sharp contraction in both consumption and investment. As for tourist destinations, they will need to survive an almost complete halt in economic activity in the first half of the year5. With this economic downturn, millions of people from the “emerging middle class” risk being relegated again to extreme poverty. More poverty in these cases means more deaths. Countries in Africa are not only younger, but also more fragile, with the highest rates of malnutrition, HIV infection and tuberculosis in the world, all of which makes the coronavirus more lethal among these populations. Even worse, unlike in the developed countries where drastic lockdown measures can be introduced, overcrowded urban slums make this impossible, as running water is not easily accessible and ceasing to work or to go to the market for food are quite simply not an option for the world’s poorest. The Ebola outbreak showed that the closing of schools – a measure adopted by 180 countries worldwide – often results in the permanent dropouts, unwanted pregnancies and a generation of students who sacrifice their education. Can these tragic consequences be averted? Not completely, but certainly in part if we are able to avoid the cumulative effects of the recession by fighting the subsidence of the aggregate demand curve. A response is underway and the central banks have been playing their part by flooding the market to ease liquidity flows. Unlike during the 2008 crisis, the banks have proved particularly quick and coordinated in their response. As early as 3 March, the US Federal Reserve lowered 4 In Haiti, these transfers amounted to 32% of its GDP in 2018 5 In the Maldives, an extreme case, 75% of its GDP depends directly and indirectly on tourism and its currency reserves amount to no more than two months of imports.
  4. 4. 4 its rates by 50 basis points, a move which was followed by the Bank of England on 11 and 19 March. On 15 March, the Fed’s rates fell to zero. At the same time, there has been recourse to non-conventional interventions using the instruments developed since 2008. On 18 March, the European Central Bank (ECB) announced a securities purchase programme with a total envelope of 750 billion euro. The coordinated response of the central banks, under the Fed’s leadership, is in contrast to the disjointed response coming from the White House. On 15 March, the Fed expanded access to its swap arrangements to nine additional countries facing an evaporation of dollar liquidity and announced the opening of a repurchase agreement (or repo) facility for the central banks wishing to trade their US Treasury bonds for dollars6. Still, any benefits to be had from this will only be felt indirectly by the emerging economies that do not have a central bank that can fulfil this role. However, it is possible to employ a mechanism that already proved successful during the global financial crisis: the IMF’s Special Drawing Rights (SDR)7. There is nothing to prevent their reactivation; nothing, except perhaps the American aversion to anything resembling multilateral action, an aversion that cannot be counterbalanced by the Europeans’ half-hearted inaction8. Debt relief for low-income countries and a massive issuance of SDRs are today a sine qua non to help prevent an economic catastrophe, the impact of which would reverberate across both shores of the Mediterranean and well beyond. Even before the current crisis, Europe was already struggling to cope with the influx of several hundred thousand migrants knocking at its gates. What will happen when, driven by the collapse of their national economies, millions attempt to force their way through? Even though this might seem like a remote concern in light of the current emergency, and even if public opinion is focused on other concerns, it is the governments’ duty to anticipate crises in the crisis’ aftermath. For Europeans, acting jointly to ensure that the impact of monetary measures adopted to help themselves extend to the emerging countries, starting with Africa, is an absolute necessity. Nevertheless, monetary action has its limitations and, as is the case with any natural disaster, budgetary support must be mobilised. This has been partly done and support mechanisms such as the extension of short-time working schemes in France are a step in the right direction. Nonetheless, they are inadequate for dealing with the full extent of the shock. Supply cannot be ensured by financing the supply side alone and this represents the biggest weakness of the initial support plan proposed by Trump9. Moreover, while China implemented a stimulus package on a massive scale to shore up its economy in 2009, driving global growth along in its wake, the country appears much more skittish for the moment. Admittedly, China’s margin of manoeuvre is today much more limited: growth has dropped and the country’s total debt, public and private, exceeds 300% of its GDP, compared to 170% before the subprime crisis. This probably explains why the present measures announced by Beijing only amount to 1.2% of the GDP. Of course, part of this support will end up as an increase in prices. With the lockdown restricting supply, production capacity is necessarily limited as well. Yet, inflationary pressures in this case, besides being useful for other reasons, can be as effective a support for the production apparatus as any financial measures proposed in this respect. 6 This could be of benefit to China, even if it is not eligible to take part in these swaps. 7 These are intended to supplement the reserves of central banks and allow developing countries to obtain hard currencies. 8 France has finally made a proposal along these lines. 9 The subsequent proposal to issue a check for 1500 dollars to every household is an improvement.
  5. 5. 5 This can clearly be seen in Image I. In this standard graph presenting aggregate supply and demand curves, with demand probably being affected a more than supply, it shows how it is impossible to prevent there being some production losses in the short term, but also how damage can be limited by way of an appropriate policy regulating demand. Moreover, the risk of not doing anything can worsen the situation considerably. A decrease in demand, if not compensated by support measures, would trigger a second impact affecting supply and so on. A deflationary spiral, with all its dire consequences, will have been unleashed. It goes without saying that any impact from support measures will only fully come into play following a progressive lifting of the lockdown, which would allow production to start up again. They must however be introduced immediately in order to be in place when the time comes, but also to quash consumers’ fears, which would only drive them to hoard, the opposite of what is needed.
  6. 6. 6 In the medium and long term, a new hand of cards has been dealt a) The globalization of trade has clearly brought about a new international division of production. The relatively low costs of labour in the emerging economies coupled with the development of communication means has led to unprecedented growth in international trade. This has instigated change in almost every sector, starting with the automotive and electronics industries. It is this international division of labour that is facing scrutiny today. The criticisms are not new and the health crisis has merely drawn attention to the matter. Its detractors have always been many. For those viewed as idealists, it was the ecological absurdity of transiting goods from one end of the planet to another twenty times or more that was objectionable, particularly with respect to food value chains. For others, considered dogmatists, it was a question of denouncing a system that allowed those from the richer countries to continue taking advantage of old colonial sources of income. It could be said that globalization was “the highest stage of capitalism” in some ways. For those seen as pessimists, it was the security of supply that needed to be reviewed. This of course raises concerns regarding health safety. Ninety percent of the world’s penicillin is produced in China. A similar situation exists for rare earth elements, with China holding a de facto monopoly of production, including over components essential to the entire electronics and communications industry. All the above critics present valid points in part and it is highly probable that the crisis will lead to some relocation of production, at least regionally if not nationally. The globalization that is at issue is not the world being opened up nor the growing awareness of a global humanity; this has been developing slowly for some time. It is what Hubert Védrine calls the American globalism of recent decades: “It began in the post-war period and accelerated after China’s shift to market forces under Deng in 1979, continued with the Thatcher-Reagan duo in the early 1980s and financial deregulation under the influence of the Chicago School of economics, and ultimately spread worldwide in the years following the collapse in 1991 of the Soviet Union, whose disappearance was – wrongfully! – deemed by many in the West to be the end of history10”. This globalization has not produced only losers. Salaried employees in the emerging countries who work in export-oriented sectors (and others by extension) have clearly benefited from a rise in living standards as a result of higher wages. As for consumers in the developed countries, it did not take long for them to set aside any reservations and turn to imported products in order to enjoy the savings they afforded them. This new significant share of purchasing power is not something they will easily forego. Relocating some aspects of production will incur costs but the lessons imparted by the current crisis might be enough to teach us that it would be wise to proceed anyway. 10 Terra Nova, March 2020
  7. 7. 7 b) Regardless of the form that globalization will ultimately take, the crisis may give the developed economies a chance to break the economic impasse of zero growth. The discussion revived by Larry Summers in 2014 is a familiar one11. Taking up the term introduced by Hansen in 1939, he discusses the danger of falling back into secular stagnation, the topic that fuelled so much debate after the 1929 crisis: it involves an equilibrium with unemployment, which economies are finding difficult to handle in light of low interest rates coupled with nearly non-existent inflation in the goods and services markets at the same time that financial asset prices have undergone a marked increase. Technological progress has resulted in few new products, innovation has primarily led to capital savings, investments have fallen, and it is impossible to rekindle them given that interest rates have already been lowered to zero. Thus, there is an excess of savings. This in turn slows down economic growth because of the lack of significant public investment owing to the indebtedness already perceived, as excessive, using the lens of the GDP/debt ratios seen as unsustainable. Over the course of the last several decades, financial engineering has solved the equation, all while engendering recurring financial crises that mask the true state of the real economy. All of the developed economies are facing this state of stagnation to a greater or lesser degree, and the economic crisis, by destroying capital, may provide a way out. The investment opportunities created by the collapse of part of the production apparatus, like the effect on price support measures, can kick off the process of creative destruction described by Schumpeter; his entrepreneur would thus win in practice the theoretical battle waged long ago against both optimistic stagnationists like Keynes and pessimistic ones like Marx. It is this upending and rebuilding of the supply made possible by the violence of the shock that justifies the measures taken by governments to help the productive sector. They will be meaningless without accompanying short-term measures to sustain demand, but are essential for rebuilding the production apparatus. c) Another element that must be given due consideration: inequalities. At the national level, certain professions can work – at least partially – from home; for others, it is much more problematic or even impossible. Thus, the impact on different sections of the population will not be the same. Image II12 illustrates what this looks like in the United States, lending support to the argument that greater assistance for the least-skilled workers is warranted. 11 Larry Summers, "U.S. Economic Prospects: Secular Stagnation, Hysteresis, and the Zero Lower Bound", Business Economics, 49, p. 65-73, 2014 12 Paolo Surico and Andrea Galeotti, “The Economics of a Pandemic: the Case of Covid-19”, London School of Economics, 2020
  8. 8. 8 At the international level, there has been much discussion of the fact that the subprime crisis considerably widened inequalities between individuals; inequalities between countries, however, have been progressively shrinking. The current crisis risks completely negating any gains achieved. In the short term, this will stem from the possible, and unfortunately even probable, consequences of the crisis on the economies of the low-income countries. In the medium term, the relocation of certain activities that is almost certain to occur will be carried out at their expense. All of this makes it even more critical that these economies receive the support discussed earlier. d) The future of our economy, difficult from every viewpoint, still lies for the most part in our hands. National governments have already begun to take action as can be seen in Image III13. However, this chart highlights several weaknesses. 13 Paolo Surico and Andrea Galeotti, ibid. 69london.edu The economics of a pandemic: The case of Covid-19 High earners more likely to work from home • 29% of American workers could work from home according to a BLS survey in 2017-18 • Proportions varies widely across occupation (see chart) and industry • Income is also a crucial factor: • 0-25th percentile: 9.2% • 25-50th percentile: 20.1% • 50-75th percentile: 37.3% • 75-100th percentile: 61.5% Source: BLS (https://www.bls.gov/news.release/flex2.t01.htm) 96london.edu The economics of a pandemic: The case of Covid-19 Governments have started responding Source: Macro Insights from Blackrock Investment Institute (26 Mar, blackrock.com)
  9. 9. 9 Firstly, the scale of the stimulus packages already decided upon varies greatly (in red). Secondly, the greater share taken up by loan guarantees, albeit useful, only very indirectly provides support for the demand of the most disadvantaged. Lastly, a coordinated response is notably lacking, particularly considering that a key component ensuring the success of the 2009 stimulus plan was its widespread coordination amongst the main stakeholders.14. I believe that the European Union not only has the ability, but the duty, to provide a response to this crisis, but the lethargy shown by the European Council on 26 March and the playacting of the Eurogroup do not give much cause for optimism. The main point is that the Member States should pool their budgets in order to be able to carry out significant action15. Three instrument proposals are currently under discussion within the Eurogroup: - Providing support amounting to 100 billion euro for short-time working schemes; - Strengthening the mandate of the European Investment Bank empowering it to make or guarantee loans (this seems to be underway); - Adapting the European Stability Mechanism (ESM) to meet the challenges of the present situation16. Yet, each of these options fails to address the central issue of the need for a joint budget response in order to not jeopardize the sustainability of the debt of the most fragile countries. All of this also takes us back to the debate on the creation of coronabonds and, more broadly speaking, the borrowing capacity of the EU, which has been conspicuously absent. It is also a political issue: the ECB will not be able to pool debts through open market operations for long without explicit political backing to do so. There are two possible paths forward. The first would be an explicit request from the States to monetize excessive debt; this would however encroach on the ECB’s independence. The second option is to move ahead with those willing to jointly issue new debt to finance not only the immediate response to the health crisis, but also the international solidarity efforts that will be needed, especially those targeting Africa and, lastly, a massive recovery package once the worst of the health crisis has passed. The choice is therefore made simple, namely deciding which of these taboos should be broken: the independence of the European Central Bank or the unanimity of the Member States. In any case, what is needed without delay are: - aid packages to stimulate demand on a scale equal to the loss in production (several GDP percentage points for 2020 alone). Regardless of whether they are intended for households or companies, they must be based on real support for their of liquidity through fiscal and budgetary measures; 14 As early as 2008, the IMF had announced at Davos the need in the future for a global fiscal stimulus plan. This began to take shape at the 2009 G20 in London under Gordon Brown chairmanship and helped to prevent millions from being unemployed as projected. 15 On these points, see Shahin Vallée, “Macro Note: Options for the Eurogroup and a Possible Staged Path to Coronabonds”, 2 April 2020 16 This mechanism, created in 2012, can mobilize up to 700 billion euro. It is often erroneously referred to as the European IMF. The main difference with the IMF comes from the fact that the ESM’s are borrowing and not monetary resources. It is not a European Monetary Fund but a European Budgetary Fund.
  10. 10. 10 - a coordination of these policies with actions being carried out by the central banks in terms of monetary matters; - an instrument to mobilize shared budgetary and debt resources in Europe. Without joint efforts, the budgetary response will be insufficient; - concerted action at the global level including the extension of this liquidity beyond the borders of the developed countries. A Crisis of Power This is perhaps the most worrisome aspect. It involves a crisis of sovereignty, which touches on the autonomy of States in a world where multilateral institutions are struggling to enact decision-making on a global scale. It is also a crisis of representation, which affects the exercise of power, the guarantee of public freedoms and the legitimacy of authorities, particularly in democracies. In this case, it is not the health crisis or the Covid-19 pandemic which has prompted these crises; they have merely pulled back the veil on largely existing weaknesses. The crisis has shed a harsh light on the relativity of our sovereignty. It has highlighted a dependence on technology that, either out of ignorance or national pride, we have a tendency to underestimate. This holds particularly true in the health sector. We discovered, dumbfounded, that we are dependent on China for a substantial percentage of our supply of medicine. By letting this country become “the world’s factory”, did we abandon control over essential areas that guarantee our security? There have been warning signs even within an integrated whole such as the European Union. The shortage of curare necessary for intubating patients in serious condition seems partly attributable to the fact that the ingredients originate from Italy and Spain. Solutions to this situation can be found within the Union in the future. The situation is less straightforward when it comes to equipment using advanced technologies, exposing our dependency on the US. This reliance touches not only on health matters but is part of a much wider technological dependency. Even though people are aware of the poor security surrounding our means of communications, particularly smartphones, it does not mean that they take any extra precautions. What do we know about the contracts signed between the French intelligence services and Palantir, the business founded by Peter Thiel? Rightly or wrongly, artificial intelligence can be frightening, but perhaps citizens would prefer that the guarantees given by the officials they elected did not rely so heavily on foreign powers or, at the very least, it is likely that they would wish to be duly informed. What can be said about the use of Windows at the Ministry of Defence of France? Even if we are unable to regain our lost digital sovereignty, we could invest in open source software, which ensures some degree of independence. Europe, and even France by itself if no one were to follow, could quickly contribute in a meaningful way to the digital common good. This point goes well beyond the scope of mere security issues. Daniel Cohen17 rightfully points out that this crisis can hasten a shift to digital capitalism. National or even European independence should not be measured using only the yardstick of nuclear capabilities. 17 Daniel Cohen, “The coronavirus crisis signals the rapid onset of a new capitalism, digital capitalism” (La crise du coronavirus signale l’accélération d’un nouveau capitalisme, le capitalisme numérique), Le Monde, 2 April 2020
  11. 11. 11 The health crisis has unleashed old nationalist impulses. To remedy this, it is not enough to warn of the horrors of fascism while waxing lyrical about the universality of the human condition. As individual nations, we are too small to compete, but this is an area where the European Union can take its rightful place and shine. Far from marking its death, which some insist on proclaiming, the new interest shown by Europeans in the notion of sovereignty can give Europe a second chance. The fragmentation of globalization, that the crisis is almost sure to bring about, represents a fortuitous opportunity to regain control of the reins. For this, popular support is needed, weak as it has become, to the point where it no longer seems possible to accomplish anything more in this Union weighted down by enlargement, hobbled by bureaucracy and delegitimized by its allegedly undemocratic character. The gradual return of national self-interest has been killing off the founders’ dream through a thousand small cuts. Sovereigntists of all stripes have been milking this as much as possible, omitting to mention to their supporters that a return to sovereignty is only possible by sharing it with other Europeans, as demonstrated by the creation of the euro. Ironically, the impossibility of listing the countless benefits obtained through European construction has led to a failure to convince citizens increasingly harbouring doubts regarding its interest and usefulness. In fact, its detractors almost seem comforted by what they see as the ineffectiveness of European action during this crisis. The absence of any political vision in the health sector and the economy has inhibited the adoption of any preventive actions and the strength of the national egoisms at work has delayed the execution of necessary measures. A shock was necessary for the true nature of the EU to once again rise to the surface; one that refuses to abandon collective values and a social model that defines its identity. It is this identity that got lost amidst globalization, but which can rise again as it breaks down. The shock has already occurred. A rebirth is possible provided that two conditions align: that European solidarity asserts itself as the health crisis is resolved and that men and women carry forth and embody a renewal of political Europe. It is only in the coming days, weeks and months that we will see whether these conditions have been met. The challenge is daunting, considering how much of its credibility Europe has lost. It must be persuasive by coming up with a post-crisis proposal worthy of Monnet, capable of achievements visible to anyone seeking justification for any calibrated transfers of sovereignty. The crisis also reformulates the question of democracy using new terms. Our democratic model, born during the industrial revolution, has already undergone several tribulations. Fundamentally, it is a model of representative democracy: it is grounded on the premise that consent is given to delegate power conferred through the right to vote to men and women who will then exercise it on our behalf. Representatives are elected who we believe are capable of implementing the policies that we aspire to and in whom we trust to do so. However, this consent, much like this trust, are increasingly being undermined, the prevailing mood being less concerned with the general interest than with accumulation on behalf of individual interests18. We have reached this point following a coinciding of several factors. First and foremost, there was disappointment at poorer than expected results. Then there was the development of social Ed 18 Max Weber, in “Economy and Society”, stresses that the voluntary submission necessary for any form of socialization is dependent on the qualities that the dominated person ascribes to the one who is dominant.
  12. 12. 12 networks that have given everyone the fallacious idea that they know better than everyone else what needs to be done. On top of this, there has been a gradual slide from a representative mandate to an imperative one through direct and sometimes physical pressure, which has been made possible by these same social networks. Lastly, there is the slow disappearance of intermediate bodies such as worker unions or political parties. All of this has contributed to the slow decay of representative democracy. It is the now doddering parliamentary democracy, born two centuries ago, which has been hit head-on by the health crisis. Attempts to manage the health crisis have thus given rise to a crisis of representation. If, as Max Weber has stated, “a State is a human community that successfully upholds its claim to the monopoly of the legitimate use of physical force on a given territory”19, this monopoly’s legitimacy is secured through that of representation. This was already being called into question before the crisis. It is now being tested by the crisis. The principle can easily be admitted that, in times of crisis, democracies may have "exceptional" recourse to coercive measures, but this in no way precludes the public’s prerogative to question the extent of these limits. All over the world, the question at the heart of Giorgio Agamben’s introspections, “can life be suspended to protect it?”, seems to have met with a provisional response, namely that life (and even the economy) comes before public freedoms. But will the same hold true in the future if authoritarian measures, starting with a lockdown, were to last indefinitely or to be reintroduced? Democracy stems more from how power is handed down rather than through its exercise20. Nevertheless, these exceptional measures have two consequences. The first is that the line between democracy and an authoritarian regime becomes blurry. The second is that governments elected democratically may become tempted to use the crisis for various ends: attempt to transition towards a less democratic system of government (Hungary) or as a prelude to the management of other domestic problems (India, Algeria). In many countries, democratic life has been put on hold with the postponement of elections, like in Poland and Bolivia, and to a lesser extent, in France. In times of crisis, a spirit of national unity often prevails. To a certain degree, the sense of emergency and the need to survive have sparked a wave of loyalty among citizens. Most often, populations have fallen into line behind the monumental decisions taken by the government, granting their consent and acceptance even if not with enthusiasm21, 22. Still, in most democratic regimes, decisions are questioned, instructions are not heeded and, generally speaking, the relevance of measures recommended by experts, whose authority at other times would have been a given, is regularly challenged. So much so in fact that one can legitimately ask whether the notion of a political programme still has any meaning. Since elected representatives have shown themselves unable to deliver 19 Max Weber, “Politik als Beruf”, 1919 20 If what characterizes democracy is the way in which power is acquired and not its exercise (Adam Przeworski et al., “Democracy and Development: Political Institutions and Well-Being in the World, 1950-1990”, Vol. 3, Cambridge University Press, 2001), then the democratic character of our societies is not discredited. 21 "In democracies, the relationship between citizens and government relies on the triumvirate of compliance, consent, and legitimacy.” Russell Hardin, "Compliance, Consent and Legitimacy", Boix & Stokes, Comparative Politics 22 Eighteen months ago, at the start of the yellow vest revolt protesting, among other things, the 80 km/h speed limit, seen as an infringement upon people’s liberties, who could ever have imagined this turn of events?
  13. 13. 13 on their promises, citizens no longer trust them and want to intervene in the decision-making process at any time; this takes us well out of the realm of representative democracy towards more or less organized forms of direct democracy. The risk then is that of being left with just populism whereby truth and reason matter less than action, even when it is rooted only in passion. Benda has taught us of the dramas that inexorably unfold as a result23. Conversely, in most non-democratic regimes, the legitimacy of power is conferred by the ability of leaders to protect their population and maintain the social order rather than guarantee their liberties. In a majority of these countries, authorities imposed a strong and quick response to the crisis and, subsequently, a certain sense of support and national unity could be seen amongst the populations (China, Vietnam, Jordan, etc.). In other words, the end of the crisis could be the precursor to not only a weakening of the legitimacy of public authorities in democracies, but a simultaneous buttressing of power in autocracies. Due to its rapid onset and the intrepidity with which the virus has spread, the health crisis has required the passing of legislative and regulatory measures on a scale that is without precedent in our democracies. In many countries, the executive leadership has felt empowered to take measures that restrict freedoms or introduce mass surveillance employing technologies that heretofore were the strict domain of military or anti-terrorist intelligence! Generally speaking, these measures introducing restrictions on public freedoms have been rather well-received and even welcomed by citizens who see in them an arsenal protecting their security. The fact that governments are giving priority to effectiveness is not particular to the health crisis. The fact that citizens are being less mindful of safeguarding their fundamental rights is undoubtedly more indicative of their newfound anxiety from dealing with this new scourge after an absence of any collective adversity for decades. These measures adopted on an exceptional and provisional basis must remain so. However, it cannot be overlooked that, in recent years, other measures introduced in the name of the fight against terrorism have had their special and temporary status upgraded to that of ordinary law amidst the almost complete indifference of the general public. We must ensure that the rule of law is not permanently weakened in our urgent haste to combat the virus. Just last autumn (which already seems impossibly remote), François Sureau recalled that “the rule of law, in its principles and in the institutions adhering to it, was conceived to ensure that neither the wishes of the government nor the fears of the people should override the foundations of public order, and liberty above all.”24 How can we ignore the risks to public safety? The combination of a weakening of the legitimacy of power and a restriction of freedoms can quickly degenerate into a major social crisis if, at the same time, living conditions were to deteriorate and basic services that the population has come to expect (education, health, etc.) were suddenly lacking. The restriction of civil liberties also jeopardizes the informal sector of the economy. Yet, ironically, it is this informal sector, which manages to slip through the cracks of the policed market, that often allows society to survive. This is very apparent in developing countries, particularly in Africa, but it also holds true in the more developed economies. When the entire system stops working, the threat of social explosion looms 23 Julien Benda, “La trahison des clercs” (The Treason of the Intellectuals), 1927, Les cahiers rouges, reprinting, Grasset, 2003 24 François Sureau, “Sans la liberté” (Without Liberty), Tract, Gallimard, 2019
  14. 14. 14 We can therefore expect there to be many political questions in the crisis’ aftermath. Which systems of government will be deemed to have managed the crisis in an efficient manner? Should there be a transitional period regulating the shift from special measures back to normal life? In the event where democratic regimes are unable to act in unison during the health crisis, does this imply that they have lost any credibility for handling other crises such as the challenge of climate change or the issue of migration? Furthermore, if national self-interest prevails during the tackling of the health crisis, how then can we forestall any subsequent tidal wave of national populism from wiping away everything in its path? In this respect, international cooperation is not only an essential element for effective crisis management, it is a requirement to ensure that democracy can withstand it intact and whole. We are on the Threshold of a New World A different economy? Will we see a return of regulations? The present period is one of disorder and the question of course arises of where we are headed once the health crisis has been checked. For the last thirty years, this question was considered answered and closed. We witnessed the unadulterated victory of economic liberalism as described in Francis Fukuyama’s the End of History25. But those who use a long lens to look at history now find reason to reconsider the idea that liberalism has definitively come out on top. The lesson divulged 75 years ago by Karl Polanyi26 is that economic liberalism is a phase of disorganization sandwiched between two more regulated periods. It asserts itself from time to time, almost as a parenthesis, until such time as the need for new regulations arises, on account of the fact that economic phenomena are not impervious to other changes that society may be experiencing. Over a 150-year period, we have known three major cyclical phases regulating capitalism. The first covered the end of the 19th century and culminated with the end of the First World War. This was followed by a second regulatory correction structured around mass production in a world tormented by nationalism and preoccupied with building democracy. Then, a third phase began because, contrary to what Polanyi foretold, the market did not collapse after Black Friday in 1929 nor in the aftermath of World War II. In fact, after 1945, the welfare state became the established standard, American domination largely went unchallenged and fascism was defeated, all which left their mark on the new regulations that took hold over the new few decades. Towards the end of the 1970s, a new fracture erupted. It affected the world of production, political ideas and the international stage. The rise of information technologies, the liberal wave refusing to pay taxes and the collapse of communism foreshadowed the end of the social-democratic period. Thus, for nearly two centuries, we have experienced a succession of organic phases, during which time one mode of organization of the economy and society has been dominant, as well as critical phases during which time regulatory effects have blown every which way and then die off, allowing others to rise in their place. The last major collective regulation involved the welfare state. Its exhaustion is now a foregone conclusion and, despite its giving one last gasp after the subprime crisis, nothing has been introduced to take its place. 25 Francis Fukuyama, The End of History and the Last Man, The Free Press, 1992 26 Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time, Gallimard, 1944
  15. 15. 15 Between these regulatory phases, old patterns have fallen apart, collective organization has declined and individualism is once again starting to run rampant, that is until such time as a massive shock comes along that allows history to reassert itself, in anticipation of a new framework of society being carved out. This type of framework is what is needed to rebuild today. These regulations do not spare any type of human activity, but outside of the traditional domain of economic cooperation, there are several areas where regulation is needed. Presently at the top of the list is of course the field of health organization. Ironically, this is where the first successful example of international cooperation can be found, with the establishment of the first International Health Regulations in 1851. Reforms introduced in 2005 reinforced the independence of the Director General of the World Health Organization, but much more needs to be done, particularly when it comes to coordination with the World Trade Organization. In particular, the WHO can take on the critical role of implementing more active prevention policies. From the moment when a pandemic can no longer be considered a negligible risk or, to use the preferred term in risk management, becomes a black swan, the need to take these policies into account in decisions affecting the public becomes incontrovertible. Donald Trump’s dismantling of the governmental unit in charge of health security shows that we are a long way off. The health crisis may provide a new unexpected opportunity to mobilize again to tackle climate change. Looking beyond the obvious links between climate and public health, the measures taken to fight the pandemic are transforming the debate on budgetary constraints that we ourselves prescribe, much like the controls we place on individual behaviour. This can also be tied into other fields of environmental conservation and the preservation of biodiversity in particular. The destruction of ecosystems from pollution, the progressive shrinking of habitats and rollbacks of restrictions on wildlife trade facilitates the rise of zoonoses, as many recent examples have shown. Yet, even if one accepts the plausible hypothesis of globalization becoming fragmented, any policy response still needs to be global in scope. This takes us back to the nagging question that comes up in any discussion of the consequences of the health crisis: is there a place for multilateralism? Not only that, but is it conceivable to develop multilateral actions that are not reliant on States but which can be carried out between regions or even the major metropolitan areas? Another paradigm a) A change in relations between States: what will the new geopolitical balance look like? While maintaining the hope that the crisis will lead to a renewal of cooperation actions at the global and European levels, it is important to delve into its more immediate implications for international relations. The first involves the resulting power vacuum, which will become more apparent each day as the major governments continue to focus on the health crisis. Given that armed groups are
  16. 16. 16 beleaguered by the pandemic like everyone else, they seem to have opted to withdraw for the moment. However, as soon as conditions permit, conflicts will undoubtedly resume even though the major players will be mainly preoccupied with their domestic situation. This is sadly what is to be feared in Syria, Libya, the Sahel and Yemen. What is even more worrisome is that many States, weakened by the crisis, will face even greater difficulties afterwards in exercising their sovereign duties. In this respect, certain States will most likely be very tempted to increase their international influence. China, and Russia to a lesser extent, have already seized this opportunity by delivering on medical assistance, primarily in Europe. At the end of the health crisis, ideological competition will actively resume in countries whose populations may have a predilection at times for state intervention and strong power. Hampered by their reluctance to take up any multilateral actions and their confrontation with Beijing, the United States will find it difficult to avoid the cards being redealt, but of course a great deal will depend on the elections in November. China is not in a position to exercise leadership at the global level, but it is far from certain that the US is still able to do so. It is therefore reasonable to expect a fragmentation of globalization, which represents an opportunity for Europe if it can get its act together. b) Will the crisis of being lead to a change in human interaction? For a true redistribution of the cards, the pandemic risk must permeate deeply into the global collective consciousness in a way that is lasting. The metaphor of war, which has been widely used, only comes into play during times of mobilization: most studies27 suggest that there can be no armistice, let alone any liberation. This therefore calls for not only a long-term war effort, but also the need to incorporate into our mindset the reality of a permanent risk of an infectious pandemic. Faced with such an underlying and universal threat, there is a strong possibility that we will soon witness a profound change in our collective preferences. The first way in which our collective preferences will likely change is in our relationship to temporality. Suddenly finding ourselves in a world marked by the vagaries of infection requires us to address our shortcomings and face up to our inability, especially in Europe, to transform the precautionary principle into reality and to cultivate the preventive approach. The increasing paralysis of healthcare systems in the developed countries is only one symptom of a short-term political vision that neglected to guard against any contingencies affecting supply simply because interconnected and responsive markets for goods and services had been the existing norm. Any future decisions must take a long-term perspective into account, particularly in budgetary terms, and adopt a systematized strategic approach to broadly cover all swathes of the population, especially vulnerable groups. In addition to this first aspect, the lethal nature of the infectious risk has been a horrifying reminder of just how interdependent we are as individuals. This is the extreme irony of the current lockdown: as individuals isolated in our homes, we have never strived as hard to restore our collective lives. The health of each individual is no longer the consequence of individual behaviour, as in the case of cardiovascular and degenerative diseases: it falls to each person to exercise responsibility as part of the collective, and, conversely, on the collective's ability to look after the health of each and every one of its members. This pandemic reminds us that, by 27 Gideon Lichfield, “We’re not going back to normal”, MIT, 2020
  17. 17. 17 their very nature, viruses do not recognize borders of any kind, neither social nor political: there are no barriers or walls that can shield societies for long from the risk of infection or a cluster swarm of disease. In addition to the need to strengthen the WHO’s role in implementing active prevention policies, this newfound realization of interdependence must be nurtured to avoid the rise of a society rooted in widespread mistrust. A recent survey28 regarding the acceptability of a telephone app that traces the contacts of carriers of Covid-19 revealed that nearly 75% of respondents would likely install this type of app if it existed. What would be the social response to an individual’s refusal to install such an application? Should any refusal simply be overruled in cases where it would likely endanger the collective? It is likely that this health crisis, and its subsequent permeation into the collective psyche, will foster the development of a society of medical transparency: for example, it is possible that people’s movements will in future be subject to their being able to produce immunity records, much like how an international certificate of vaccination is currently required by the border customs of many States. However, there is a world of difference between a simple notebook and the data contained on one’s phone. In order to ensure that any individual transparency system in the works does not degenerate into a society of mistrust, the public authorities must play an active role in order to guarantee not only the anonymity of users but also the deletion of data records29. This inviolable public position must form the basis of a new "welfare system" built on trust and a renewed citizens’ pact. 28 https://045.medsci.ox.ac.uk/user-acceptance, Oxford University, 31 March 2020 29 What Europe had the foresight to set up with the seminal adoption of the GDPR