The Unseen Enemy: COVID-19 and the Economic Crisis

5th March 2020

The COVID-19 pandemic strikes unexpectedly, sending global markets into turmoil. What will this crisis mean for the future of economies around the world?

The world has faced countless economic challenges over the centuries, yet few have arrived with the ferocity and speed of the COVID-19 pandemic. Much like a sudden storm on a calm sea, the pandemic has sent global markets into disarray, leading to widespread disruptions in both supply and demand. What began as a public health emergency has rapidly transformed into an economic crisis of unprecedented proportions, one whose effects will reverberate for years to come.

It is essential to approach this crisis with a clear mind, acknowledging that it has exposed deep vulnerabilities within the global economy. Yet, at the same time, it offers a chance for reinvention—a chance to rebuild in ways that may ultimately strengthen the world economy, provided the right decisions are made.

In much the same way that Charles Dickens’ A Tale of Two Cities opens with the famous line, “It was the best of times, it was the worst of times,” the COVID-19 pandemic presents us with a paradox. In the face of economic contraction, we also have an opportunity for long-term growth—if only we are wise enough to navigate the storm. The paradox of crisis and opportunity is not lost on history, as such events often lay the foundation for transformative change.

The Economic Fallout

As of early 2020, the COVID-19 virus has spread across continents, infecting millions and prompting countries to take drastic measures to contain its spread. The closure of borders, the cancellation of travel, and widespread lockdowns have created a shock to the global supply chain that we have not seen in modern times. For economies reliant on international trade and commerce, the immediate impact has been felt across nearly every sector.

Yet, while the pandemic has laid bare the fragility of globalisation, it is essential to remember that crises—however severe—often lead to resilience. After the Great Depression, global economies rebuilt stronger systems. The post-World War II recovery period witnessed unprecedented growth in the western world, thanks to an international framework of cooperation, the Bretton Woods Agreement, and policies designed to prevent another depression.

In this way, the current crisis might offer a similar opportunity to strengthen the systems that we now depend on. But only if governments, businesses, and individuals act with foresight and cohesion. Many of the world’s leading economies, including the United States and China, are already implementing large-scale fiscal stimulus packages in an effort to mitigate the damage. These interventions echo the actions of Franklin D. Roosevelt during the New Deal or the post-World War II reconstruction efforts that laid the foundation for decades of economic stability.

However, there is an important distinction: This time, the crisis comes not from an external war, but from a biological threat, highlighting the limitations of our current models of economic development. As the world grapples with the immediate health concerns of the pandemic, the longer-term implications on global trade, unemployment, and inflation remain murky.

Protectionism and Trade Wars: A New Age?

While the pandemic is undoubtedly a global issue, the political climate before the crisis was already one of rising protectionism. In recent years, the United States and China have engaged in a trade war, raising tariffs and imposing economic barriers that have disrupted global trade flows. The COVID-19 crisis has, in some respects, amplified these concerns, with countries retreating into self-sufficiency as the virus spreads.

At its worst, this could signal the end of an era of free trade and global interconnectedness. The protectionist rhetoric that had been gaining traction worldwide—particularly in Western democracies—could become entrenched. For example, the EU has already moved to restrict the export of medical supplies, and the United States has imposed tariffs on certain Chinese goods. These moves might offer short-term benefits to certain domestic industries, but they undermine the broader system of open markets and global cooperation.

The history of protectionism is far from new. In the 1930s, in the wake of the Great Depression, many countries turned inward and adopted isolationist policies, most notably through the Smoot-Hawley Tariff Act in the United States. This action deepened the global downturn and delayed recovery. In the context of today’s pandemic, the lessons from this era are clear: Economic isolation can stifle growth and prolong economic hardship. Protectionism could, quite ironically, hinder the global response to COVID-19 by impeding the flow of essential goods such as medicine, protective equipment, and food.

Yet, not all aspects of the trade landscape are so bleak. It is possible that the crisis will force governments to take a step back and reconsider the extreme dependencies they have on foreign suppliers for critical goods. This introspection could lead to new models of economic sustainability, focusing on more resilient and diverse supply chains. In this way, the crisis may spark a return to the idea of "supply chain sovereignty" that had largely faded in recent decades.

In literary terms, one might liken this shifting landscape to the final chapters of The Great Gatsby—when the gilded promises of the past begin to unravel, and the reality of human ambition and fallibility is laid bare. The future of global trade, much like Gatsby's dreams, may require recalibration and a new understanding of the value of interconnectedness and cooperation.

A New Economic World Order?

As the crisis continues to unfold, economists will be faced with one of the most challenging questions of our time: Will the post-COVID world be one of globalisation, or will it lead to fragmentation?

The pandemic may signal the need for a shift in how economies function on a global scale. What if, after the dust settles, countries around the world turn inward and focus on self-sufficiency? Perhaps this is a lesson that will be hard-earned—a new appreciation for the balance between interconnectedness and independence.

However, unlike during the Great Depression, where economies were forced to recover from the shock of both a stock market crash and mass unemployment, today’s crisis could offer a more promising path forward. Advances in technology, greater access to information, and the potential for digital currencies and blockchain technology could foster a new economic order. This future might look very different from the globalisation that has characterised the last few decades.

Like the restoration of the English monarchy after the chaos of the English Civil War, perhaps the aftermath of this crisis will involve a renewed commitment to collaboration, tempered with the awareness of the dangers of unchecked centralisation.

Conclusion: Embracing the Storm

The COVID-19 pandemic has forced the world to confront its vulnerabilities. But as history has shown, the most devastating crises often lead to the most significant transformations. Whether the world emerges stronger or more fragmented depends largely on how nations, businesses, and individuals respond.

This moment could very well serve as a crucible for the global economy—a test of resilience and foresight. But it also represents a unique opportunity. As we face the aftermath of this crisis, we must remember the lessons of the past: crises may knock us down, but they also have the power to elevate us to new heights. The choices we make now will shape the economic world of tomorrow. Will we return to an interconnected global economy, or will we retreat into isolationism? Only time will tell, but the future lies in our hands.