COVID-19: ARE WE HEADING INTO GREAT DEPRESSION 2.0

Covid-19 has changed the world into a whole new system and impacted all people from all walks of life. This whole pandemic catastrophe affects every mankind after being considered as the first human tragedy being discovered at Wuhan wet market. The topic of the webinar discussion is focusing more on the economic struggles after the world witnessed a general lockdown of more than one hundred countries around the globe. The great depression once happened in 1930 and economists come together to put on the conclusion either the world is heading to the great depression once again or maybe towards the greatest depression. Namely known the panel speakers of this webinar are Prof. Steve Keen, the Honorary Professor, UCL &, ISRS Distinguished Research Fellow, Mr. Paul Gambles Managing Director, MBMG Group, Dr. Jayant Menon, Visiting Senior Fellow, ISEAS-Yusof Ishak Institute, and Mr. Jack Kouzi, Director of Strategy, VFS Group.

First, Professor Steve Keen presented a graph of the USA private debt and credit to put the global economic recession into depiction. Based on the graph, it shows that credit events happened to experience the worst downturn three times in history including this year. The great depression occurred when the credit events down to the negative level.

Besides, the world also facing a far too high private debt, a decade after the great recession. Then, Prof. Steve explained about the real danger that is affecting our global economic world which most of the world community are not paying attention as much as they did to the pandemic stroke. As people are so terrified about the pandemic Covid-19, they often forgot that climate change-induced the economic collapse as well. The United States of America recorded about 87 percent in sectors that are negligibly affected by climate change.

Next, Dr. Jayant Menon emphasizes two critical points on today’s discussion which are the economic and social impacts of Covid-19 within the small scale of the Asian region. The world has become a cage for every human living on the earth when most of the governments decide to announce a total lockdown as well as a restriction movement control order. Based on the IMF World Forecast – June Revision shows that China has fiercely rebound economically and currently in the state of recovery. On the other side, the rapid economic rebounding of China gives a negative impact on the global economy especially for the United States of America as the number of unemployed workers has increased. Perhaps, the world wants to see the coupling economic growth from these two powers for the global economic recovery.

The social impacts of Covid-19 start when the government begins to announce the total lockdown or restriction movement control. This new regulation gives a very huge impact especially on the people living in a poor country. Most of them do not get support from the government and strive for a daily basis during the lockdown. So, there is a need to not return to the general total lockdown as it will give more misery to some countries with a large proportion of poor.

The government is advised to take a selective target measure to control the Covid-19 infection amongst the community. For instance, Malaysia now is practicing the selectively targeted group movement control. Malaysia’s government ensures the movement control order on certain states in Malaysia such as Kedah. The deep recession from the conventional sense is there but fortunately, no depression is recorded.

Moreover, Mr. Paul Gambles pointed out the issue that possibly contributed to the global economic depression. He used a great strategy by asking a simple question such as ‘Was this the start of depression would look like?’.

To make things clear, he flew back to the history time by claiming the World War One is only detected for being a major cause of great depression in 1929, many years after the war has taken place. The connection between the example and the situation happening now is that people or economists will only recognize the depression after the occurrence of the depression itself. So, the best thing that we can do now is to look at the condition and see what could happen after and the risk that could be are in the future. One area that may be contributed to the global depression is the world trade.

World Trade Organization shows that world trade is expected to fall by between 13% and 32% in 2020 as the Covid-19 pandemic disrupts normal economic activity and life around the world. This is a significant factor but given the fact that world trade has struggled since before the global crisis, so the is no exact proof to say the world trade contributed to a global depression. The world has changed since a lot quite a time ago and the key symptom for world trade is the financialization.

Private debt seems to be the biggest concern because it was believed by the economist to contribute a lot more to the global depression. Debt deflation distinguishes depression and based on the private debt to GDP graph, the private debt was already high except the pandemic crisis of Covid-19 has pushed them higher.

The three highest relatively change jurisdictions economy are Greece, Hong Kong, and China. They are systematically important, and China has become our best hope on the global economic activity but need to keep growing. Mr. Paul also mentioned the role of the United States of America on the global economic activity that is undeniably important.

The United States of America’s consumption is also vital and will be a huge drag for where we are going in the future. As private debt increases, the distribution of income and wealth also becomes a functional economic problem.

On the other side, Mr. Jack Kouzi perhaps paying more attention to the impacts of Covid-19 in investment areas where he explained the economic regionalism decoupling reducing supply lines, globalization, and the acceleration of technology. The Covid-19 pandemic caused countries such as America, China dan Europe to regionalize economically. Despite depending on America, these countries started to decouple and that is when the supply lines reduce.

For instance, some countries contributed to supply medical equipment such as glove from Asia, hand sanitizer from Europe, and many more. Moreover, globalization and technology acceleration also changing. From two or three years ago, people from all over the world seem to be dependent on technology as it has become a part of human life but now people have become extremely needy on the technology as the Covid-19 pandemic hit us this year.

Nowadays, technology accelerates at a higher rate and has become vital for everyone to keep in touch with people. This phenomenon does not just happen within society but also in businesses and investments. In other words, it is a reality where the world is now moving forward to the Industrial Revolution 4.0 even faster and thankfully, globalization also helps us to overcome the pandemic. Mr. Jack emphasizes the world is not facing a great depression but going through an acceleration in the sense of investment instead.

The moderator, Mr. Michael in the Q&A session comes out with a good depiction of the predicted situation in the future. As far as we primary concern, America and China started to go their way and the question was what if the other part of the world agrees and working on things for example the globalization and currency while the other part does not put that into concern? What do we do if this happens? Dr. Jayant answered the question perfectly by saying that we should start to look at the equilibrium and disequilibrium and link the needs between these two powers so that we can benefiting each other strengths.

The discussion continued to the interesting question and the eye-opener situation on the world’s future prediction.

As we can see now that Asian countries especially China is working hard on globalization or may be called as industrial revolution while America does not seem to be focusing on that. America seems to be benefiting the globalization from China, Vietnam, and the rest of Southeast Asia by exporting the supply changes and expertise, the input for goods is much higher than before in the USA. The possibility for the economic regionalization is there, Europe will be uniquely European economic region, America will be one stand economic power and Asia will be an economical independence region from both with China as the center of its economy. If this happened, are people need to be retrained and the supply needs to be recreated?

We can have regionalization economic powers but still globalization because we should not give up on globalization as it also helps us for example the use of technology on spreading information, awareness, motivation, news through social media. People need to move forward and keep going as the underlying changes happen in life.

Lastly, all the panel speakers are given the chance to give closing comments on the topic discuss which is “COVID-19: Are we heading into great depression 2.0”?

Mr. Jack is very optimistic about the world is not heading into great depression as a human has become more resilient now rather than before.

Dr. Menon also agreed with Mr. Jack that there is no great depression happening but perhaps a deep prolonged recession is detected to occur. He also suggests that the world should not return to the total general lockdown as this order will affect every sector, especially the economic sector. The biggest concern from a conventional perspective is on the fate of the poor if the world returned to lockdown. The government is advised to take selectively target group restrictions instead to face the pandemic economically.

Mr. Paul comes out with the main point where he believed that economic policymakers are responsible to bring the world out. The great depression might be delayed if the economic policymakers bit the best prediction and apply the best solution or precaution.

Professor Steve also agrees with Mr. Paul by saying that economic policymakers need to understand the accounting cash flow and make the best decision about that. The moderator then thanked all the panellists and audiences for joining the discussion.

Reported by: Nik Nadiah Nik Zamri