I think it’s one year almost exactly since we last discussed the world economy. At the time, as you say, I pointed out that the major capitalist economies were already sliding towards a long delayed recession as industrial output, investment, trade, and profit growth slowed to a trickle – and some countries like Japan, as well as some large so-called “emerging” economies like Argentina, Turkey, and Mexico, were already in a slump.
Well, in the last year, the COVID pandemic and ensuing lockdowns and social isolation, etc. has led to the deepest slump in the major economies in nearly 100 years. In the case of the UK, it is the deepest slump in 300 years!
During last summer, it was hoped that most economies could make a quick recovery as COVID cases fell. But then there was a second “winter” wave of infections, and lockdowns that had been relaxed were re-imposed. In the case of the US, there was really no “second wave,” as cases hardly dropped throughout the year because many states did not impose proper restrictions and opted to “keep things normal.”
But the evidence is clear. Those countries that imposed firm lockdowns and social distancing with the support of the population had much lower death rates and had the least reductions in economic activity, incomes, and employment. There was no trade-off between lives and livelihoods.
By the end of 2020, 93 percent of all countries in the world were in a slump. The national outputs of these countries had contracted by anything between 5 to 15 percent, along with investment and employment. The US economy contracted less than others – by about 4 to 5 percent, but employment dropped by over 20 million, and unemployment rose to around 15 percent. Japan’s economy also dropped by something like 6 to 7 percent.
But Europe took the biggest hit. The UK economy contracted by 10 percent after its disastrous COVID suppression policies combined with the Brexit trade uncertainty. Spain contracted even more, while the Eurozone economies on average declined by 6 to 9 percent.
Only one major economy avoided this disaster: China. The drastic COVID suppression measures imposed by the regime along with massive state-led organization of test and trace, health systems and direction of investment, led to very fast reductions in infections. Deaths per million were the lowest among the major economies.
So, by the second half of 2020, the Chinese economy started to expand again. It was a V-shaped recovery, something that the Trump administration claimed would happen in the US this time last year and which most mainstream forecasters had hoped for in the G7 economies. Indeed, by the end of 2020, China’s economy had expanded by about 2-3 percent compared with 2019!
In my view, whatever we might think about the nature of the Chinese regime on human rights and democracy, what China’s story showed was that state-led planned investment in health systems, industry and trade proved way superior in dealing with the COVID pandemic than the market economies of the G7.