Does the COVID-19 pandemic signal the end of “globalization?
Dear Colleagues and Friends from RG,
At present (mid-March 2020), capital markets continue to dominate emotions, i.e. psychology of financial markets over cool, fundamental analysis. Due to the increasing scale of human infection with Coronavirus SARS-Cov-2 causing COVID-19 disease, the risk of further infections increases rapidly. Since the number of coronavirus infections is still rising rapidly in many countries, the impact of the epidemic on the economy will be very high on the global economic growth rate. The World Trade Organization has announced that a growing epidemic in many countries, on almost all continents, may already be referred to as a coronavirus pandemic. The level of uncertainty regarding the scale of the negative impact on economic processes is very high. There are no precise measures that can be used to measure the level of impact of a growing pandemic on the scale of the forecasted decline in economic growth in the global economy and in the economies of individual countries. It is only certain that this impact will be large. Many transport and tourist companies will go bankrupt. Many hotels, companies offering services related to tourism, catering services, entertainment services, cinema etc. will have serious financial problems in the coming weeks and months. In many countries, governments are launching anti-crisis financial support programs for enterprises that are already reporting declining sales revenues and have financial problems due to the development of the coronavirus epidemic. In many countries, however, the possibilities of anti-crisis economic policy of offering low-interest loans or non-repayable grants to enterprises are limited because, in many countries, after the previous global financial crisis of 2008, there are still high public debts charged to public finances. Therefore, in the context of an expanding coronavirus pandemic over the next few weeks or months, the scale of the negative effects of coronavirus on the global economy may increase significantly. Unfortunately, no one is able to accurately estimate the scale of these negative effects. The inability to quantify new risk categories causes a high level of uncertainty. Uncertainty also applies to investment decisions taken by investors and shareholders operating on financial markets, mainly capital markets, including securities markets. For three weeks now, there has been a stock crash on the largest and many smaller stock exchanges, a panic sale of shares. The price of a barrel of oil is also falling. Equity and oil prices are currently the lowest since the previous global financial crisis. The problem is getting worse fast. The scale of stock price reductions on stock exchanges may suggest a strong break in the upward trends in previous years and may mean a change to a long-term, lasting for many months or maybe many years downward trend, a slump in the valuation of securities and many other assets valued on capital markets. Therefore, the following question becomes relevant: Can a coronavirus pandemic trigger a global economic crisis in 2020, including a recession lasting weeks or months in many countries?
Due to the increasing scale of human leaf infection with coronavirus SARS-Cov-2 causing COVID-19 disease, the multi-faceted impact of epidemic development on the economy, including the situation on financial markets, is increasing. In this regard, I propose a discussion on the following topic:
Impact of coronavirus on economics, including economic growth rate and financial markets.
Over the past two weeks (end of February / beginning of March 2020), the scale of sharp decreases in the valuation of securities shares on the stock exchanges and a fall in the price for a barrel of oil acquires the characteristics of a stock crash. In addition, there is a significant decline in the production of many product ranges made in China, etc. The Swiss franc is rising against some of the other economically more popular currencies. Revenues and profits in the tourism sector are falling strongly in many countries. Can this situation be interpreted in terms of signals suggesting the possibility of another global economic crisis in 2020? Can a strong sell-off of stock prices on stock exchanges still last in the following days? Could this mean a change in the long-term long-term upward trend to a downward trend and the bust on the stock markets that lasted for many months?
In this connection, the following further important question arises: What anti-crisis Keynesian socio-economic policy should governments of countries develop to counteract the deepening scale of the economic downturn, including the significant decrease in orders for various product ranges, raw materials, decrease in production, potential rapid increase in unemployment, a decrease in income and consumption? What instruments of entrepreneurship activation should be developed as part of anti-crisis socio-economic policy? Currently, a particularly important issue to be resolved is the answer to the question: Can a strong sell-off of stock prices achieving the characteristics of a stock market crash similar to that of the stock market crash, from which the global financial crisis began in mid-September 2008, lead to the loss of financial liquidity and bankruptcy of many enterprises? Such a negative scenario would be realized, i.e. if a large global company or financial institution declares bankruptcy, it would be another significant impulse to continue the sharp decline in the valuation of shares on the stock exchanges and then it would be in the full sense of the crash the beginning of another global economic crisis.
In such a situation, central banks’ intervention would also be necessary to ensure liquidity in the financial sectors. In recent days (beginning of March 2020) the US central bank, i.e. the Federal Reserve Bank, reduced interest rates, however, this has not caused significant calming of investors operating on capital markets. Calming activities of central banking are fully justified because the reactions of investors operating on financial markets, including mainly capital markets, are already becoming panic, the advantage of psychological fear of potential financial losses, although it is not yet known how large these losses can be. Below I have described my proposals regarding anti-crisis, Keynesian socio-economic policy, which governments of individual countries should develop in order to counteract the developing economic downturn in individual countries and the emergence of another global economic crisis.
A lot of economic data and the situation on financial markets indicate that coronavirus may be the main driver of economic growth in the global economy in 2020. A significant decline in economic growth is forecast in many countries in 2020 due to an increase in human coronavirus infection. According to many healthcare centers and institutions, an effective, tested coronavirus vaccine may not appear until mid-2020 or later. Until then, the number of coronavirus infections may increase significantly. In China, many companies have stopped production due to an increase in coronavirus infection. In many countries, tourist traffic is already falling, the number of tourists is rapidly decreasing. Countries in which international tourism constitutes a significant share of Gross Domestic Product are particularly vulnerable to the decline in economic growth. A significant decrease in international trade is also forecast in countries where many cases of human coronavirus infection have been diagnosed. In recent days (beginning of March 2020) there have been major drops in the valuation of securities on stock exchanges, which is also a signal confirming the forecasted next wave of decline in economic growth in 2020. Until recently, in 2019, the so-called trade wars conducted between the largest economies of the world, i.e. between the USA, China and the European Union. However, this factor is apparently already becoming less relevant to the global growing problem associated with the continuing (early March 2020) increase in human coronavirus infection. Therefore, in 2010, coronavirus will be the most important factor slowing down economic growth.
Due to the growing problem of coronavirus in 2020, economic growth will significantly slow down globally and in many countries. Since the end of 2018, the pace of economic growth has slowed down in many countries due to the so-called so-called major economies run by major economies, including Trade wars. Contrary to the concept of free, market, international capital flows and goods, products and services within cross-border trade, barriers imposed by individual countries, e.g. in the form of prohibitive duties, generate a global slowdown in economic growth. In recent months, another significant factor has appeared that increases the scale of the forecasted economic slowdown in 2020. This factor is the growing problem of coronavirus, because of which many factories in China have ceased to operate, income from tourism is falling, from tickets in cinemas and other mass events in countries where the most cases of coronavirus infection have been diagnosed. Therefore, the importance of planning and implementing pro-development, anti-crisis, Keynesian socio-economic policy is growing.
My research suggests that perhaps credit risk management procedures and systems have already been optimally improved, and now commercial banks mainly deal with the improvement of IT systems, cybercrime, data transfer on the Internet, and development of electronic internet and mobile banking. Over 10 years have passed since the appearance of the global financial crisis in September 2008. For several years, the economies of many countries have already returned to post-crisis balance, to optimal levels of economic growth. The situation on the stock exchange markets has also improved significantly after a few years since 2008. Recently, however, more threats and factors are slowing down the economic growth of the global economy. These factors currently include the so-called trade wars waged between the largest economies of the world, including primarily the US, China and the European Union, and the growing problem (currently beginning of March 2020) of the increase in coronavirus infection. For these two reasons alone, a significant decline in economic growth is forecast in many countries and globally in 2020. As a result, the economic and financial situation of many enterprises will deteriorate.
For example, the economic and financial situation of enterprises producing mainly for export and tourism companies may deteriorate significantly. If companies are in the process of paying back loans and their finances are burdened with a high level of debt, then there is a possibility of an increase in financial liquidity risk and an increase in systemic credit risk, i.e. not timely repayment or suspension of repayment of bank loans. Are commercial and investment banks prepared for this possible negative scenario? Did the banks, after negative experiences from the global financial crisis of 2008, improve their standards and procedures for managing credit risk and do not have to fear a significant slowdown in the economic growth of the global economy in 2020?
Since the end of 2018, there have been symptoms of a slowdown in global economic growth. In 2018-2019, the so-called so-called trade wars waged between the largest economies of the world, including in particular the US, China and the European Union. However, at the beginning of 2020, another important determinant appears to be the continuation of the slowdown in the global economy’s economic growth, i.e. the development of human coronavirus infection. At the moment (early March), many economic data indicate that the two factors mentioned above will significantly reduce the rate of economic growth in the economies of many countries. Currently, mainly in China, production has stopped in many factories. A significant drop in economic growth is expected in 2020 in China. As a result, the scale of international economic exchange will fall. The level of economic growth in the global economy may drop significantly. Whether the already noted significant scale of the slowdown in the global economic growth may cause serious financial problems in some large enterprises, corporations and / or financial institutions in 2020. Can the currently forecast decline in the economic growth rate of the global economy cause a large decrease in sales revenues and a strong increase in the level of liquidity, debt, investment risk, etc. in many business entities and financial institutions, commercial banks? Is it possible in 2020 to declare bankruptcy of a large corporation or a large bank, which could trigger the emergence of another financial and / or economic crisis? Is this highly likely or rather unlikely? Have credit procedures and credit risk management processes been improved in banks after 2008 and the risk of another financial crisis occurring is low or rather high?
In the last week of February 2020, stock exchanges experienced the largest, most strong and dynamic drops in share prices since the stock market crash of mid-September 2008, i.e. the stock market crash from which the global financial crisis began. The stock market crash of mid-September 2008 was triggered by the bankruptcy of the fourth largest investment bank in the world, a bank with over 100 years of Lehman Brothers history. Are the strong declines in stock prices from the end of February 2020 a symptom of the onset of a major, medium or long-term stock market downturn and a significant deepening of the decline in global economic growth in 2020?
In addition, it has recently been discovered that melting glaciers have released many new types of viruses that have been frozen in glaciers for millions of years. In addition, recently the World Health Organization indicates that in recent years many new strains, types of viruses and bacteria for which there are no drugs have been created. This is due to the fact that in the situation of widespread use of certain types of drugs, bacteria become resistant to antibiotics. Is the significance of natural medicine growing in this connection? How to protect yourself against infections of new types of viruses and bacteria? In addition, there are also economic effects. Due to the development of coronavirus infections in China, production was stopped in many factories. A significant drop in economic growth is expected in 2020 in China. As a result, the scale of international economic exchange will fall. The level of economic growth in the global economy may drop significantly.
Currently, there is basically full agreement of researchers and scientists on the need to increase entrepreneurship activation and innovation in many countries, both developing and highly developed. Systemic, state-run activation of entrepreneurship and innovation is one of the objectives of interventionist, anti-crisis, national socio-economic policies. However, many studies show that the mere increase in financial resources from the state budget does not ensure high efficiency of the process of distribution of these subsidies and loans and does not ensure high efficiency of the entire policy of activating innovation and entrepreneurship. Therefore, how should the institutions and processes of distribution of grants and loans be improved, which aim is to finance the development of new micro-enterprises, new innovative start-ups and more innovative development or research projects implemented also by other types of business entities?
Activation of entrepreneurship is one of the objectives of interventionist, anti-crisis, national socio-economic policies in the situation of deepening recession in national economies. Currently undergoing trade wars, including additional barriers imposed to reduce international trade are causing a decline in economic growth in many countries. In addition, the development of human infection with coronavirus will also contribute to a significant decline in global economic growth in 2020. Therefore, the importance of pro-development, interventionist economic or socio-economic policy of the state is growing.
As part of a more pro-development, interventionist economic or socio-economic policy, the state should act as an investor financing from the state budget funds investments in the development of public goods infrastructure in strategic business sectors, i.e. investments in the development of communication, road and bridge infrastructure, energy and security , construction, etc. In this way, new jobs are created, citizens’ incomes increase, consumption increases and the effect is an increase in production and improvement of economic growth. In this way, thanks to a more pro-development, interventionist economic or socio-economic policy, the state helps the economy recover quickly from the phase of economic slowdown and / or from the phase of the economic crisis.
In recent years, the importance of planning, shaping and implementing pro-development socio-economic anti-crisis policy, which will provide an antidote to the forecasted slowdown in economic growth, has been increasing. Public policy, including social policy should ultimately aim to meet the needs of citizens. In countries where a prosocial democratic system works efficiently and thus the participation of citizens in shaping public policy enables the design and implementation of such public policy as citizens and voters expect. However, not always planned as a pro-social public policy is properly conducted by the government. This can happen in the situation of a significant global recession, i.e. a strong slowdown in the global economy’s economic growth, which has a significant negative impact on economic processes in a given country. However, the extent to which economic growth will slow down in a given country depends on many domestic factors, such as the level of public debt of state finances and the deficit in the central budget of the state.
In addition, the level of domestic productivity, investment, unemployment, citizens’ incomes, consumption, inflation, interest rates, etc., which directly and indirectly determine the financial, material, housing etc. of the citizens is also important. The state, having the instruments of pro-development economic policy, tries to activate economic processes, activate entrepreneurship, innovation, investments, etc. so that the economy develops effectively and citizens receive high remuneration, to improve the material and financial situation of citizens, etc. citizens expect this and in a country with a democratic system they choose a government that implements just such a plan to shape pro-development socio-economic policy to build a state of economic and social well-being. In a state of economic and social well-being, citizens should feel happy. In the publications available on the Research Gate portal I described the instruments of pro-development socio-economic policy on the example of the Family 500 Plus Program and the Flat Plus Program (Mieszkanie Plus Program). I invite you to cooperate in the study of this issue.
In my scientific work, I also examine the issues of specific concepts of pro-development housing policy as an important element of anti-crisis socio-economic policy. I am investigating the impact of the Flat Plus Program conducted in Poland for 4 years as an important instrument of pro-development housing policy on the activation of economic growth, including the creation of new jobs, improvement of citizens’ housing, improvement of the housing situation and as an instrument whose long-term goal is to be to counteract the processes of demographic change society defined as aging of the society. Research shows that in many situations, economic problems cause social problems and vice versa. Accordingly, social and economic problems are interdependent. Key social problems in many countries include the poverty of a significant proportion of the population, i.e. low income for some citizens. Poor income, material, financial, housing, etc. situation of citizens is associated with poverty. In addition, high levels of poverty are often associated with low levels of education, high levels of unemployment, low consumption, lack of financial savings, limited access to many basic services offered by both commercial enterprises and those offered by public sector institutions. Therefore, the high poverty scale of a significant part of society is a factor limiting the country’s economic development. In such a situation, within the framework of social and socio-economic policy, the State should support citizens in order to reduce the scale of poverty in society. I described this type of socio-economic policy in my publications on the example of the Family 500 Plus Program and the Flat Plus Program (Flat Plus Program) used for 3 years. I invite you to cooperate in research on this subject. In addition, other social problems also include negative processes for the economy of changes in the demographic structure of society, i.e. aging of the society. Social problems also include an increase in school violence and youth crime, an increase in the use of certain categories of drugs, etc. The state incurs high costs in programs to combat the negative effects of these social problems, e.g. in cases of accidents caused by people under the influence of drugs, intoxicants . It is necessary to conduct prevention and prevention programs consisting in raising public awareness through social campaigns conducted in various media, including new online media and social media portals. This is necessary because all these social problems generate high costs for the state and contribute to the slowdown of economic development.
In view of the above, it is important to define the main strategic challenges that are implemented as part of long-term economic policy. Strategic goals to be achieved should be defined in each developing country, i.e. goals that will be implemented over a period of several or more years. Strategic goals include mainly development projects whose task is e.g. to improve communication and technological infrastructure, and to develop systems that provide citizens with security in various categories, including, e.g. diversification of energy sources and gathering the necessary resources of production factors for the development of industry in subsequent years . The implementation of large developmental infrastructure projects that improve land, air and other communications, transport logistics, electronic communications and energy infrastructure, etc. on the one hand, improve the conditions for the functioning of citizens in the economy as well as create better conditions for the development of enterprises and thus economic growth.
As part of shaping socio-economic policy, the state may adopt as strategic goals to achieve improvement in living conditions, improvement of the material, financial and housing situation of citizens as a minimum for a few years. In this way, the scale of leaving the country by young, educated people who go to more developed countries in search of an interesting, better-paid job. The improvement of living conditions, the improvement of the material, financial and housing situation of citizens is also a pro-development, pro-economic and anti-crisis factor for the national economy, because then consumption increases, which generates an increase in production on the domestic market. The implementation of this type of strategic goals of the state was described on the example of pro-development, interventionist and anti-crisis socio-economic policy programs conducted for over 3 years. In my publications available on the Research Gate portal, I described the principles and strategic goals of implementing and implementing socio-economic policy programs such as the 500 Plus Program and the Flat Plus Program (Flat Plus Program). The key strategic, long-term goals of these programs are to improve the material, financial and housing situation of citizens to the extent that the fertility rate in families is successively increased, and thanks to these pro-development socio-economic policy programs to counteract the adverse processes of rapidly changing demographic structure of the society involving the aging of the society . Other types of strategic goals planned to be implemented on a multiannual scale in many countries include reforms of the energy sector consisting in replacing classic energy sources based on burning minerals with renewable energy sources. Unfortunately, these pro-ecological strategic goals in some countries are implemented to a very limited extent.
I described these issues in my scientific publications on the example of pro-development programs of active socio-economic policy currently used with good results, which is part of the program package referred to as the Plan for Responsible Development, i.e. the Family 500 Plus Program and the Flat Plus Program (Flat Plus Program). In addition, maintaining a high quality standards in the field of financial system security, credit risk management, financial transaction procedures and customer service at financial institutions, including commercial investment banks, is a key issue for maintaining long-term high economic growth in the long term. I have also described these issues in my publications, which are available on the Research Gate portal. I invite you to cooperation.
Do you agree with me on the above matter?
I conduct research in this area. The conclusions of the research I published in scientific publications that are available on the Research Gate portal.
In view of the above, I am asking you the following questions:
– Is the importance of natural medicine due to the fact that bacteria become resistant to antibiotics?
– How to protect yourself against infections of new types of viruses and bacteria?
– To what extent can coronavirus lead to a significant slowdown in the growth of the global economy?
– In which countries can we present examples confirming the existence of correlations between the long-term ongoing processes of changes in the demographic structure of the society and economic growth, as well as between the applied Keynsian, pro-development socio-economic policy and the change in the demographic structure of the society?
– What instruments of long-term pro-development Keynesian socio-economic policy are used to revive economic processes, improve income, material and housing situation of citizens, which also results in an increase in consumption, improvement of economic conditions in life and often also an increase in fertility and changes in the demographic structure of society?
– Do the Family 500 Plus and Flat Plus program significantly increase the country’s GDP?
– Do you think that the Family 500 Plus and Flat Plus Program as key socio-economic policy programs significantly increase the country’s GDP?
– Do you think Family 500 Plus and Flat Plus programs are mainly social or investment in the context of long-term, long-term socio-economic policy?
– Will these programs, after their many years of use, contribute to a significant increase in fertility and thus slow down the economically unfavorable progressing process of changes in the demographic structure of the society referred to as aging (and thus reduce the risk of a strong future increase in the deficit in the financial of the participatory pension system operated by the Institution) Social Security)?
– In your opinion, how many years should these programs still be conducted as part of an active socio-economic policy so that it is possible to fully objectively diagnose their real effectiveness in terms of slowing down, stopping the aging process of the society and assessing the scale of the investment function of these programs in macroeconomic terms?
– How should coordination of the system credit risk management process be conducted in central state institutions managing budgetary and monetary policy in order to avoid a financial crisis?
– How should the pro-development Keynesian socio-economic policy be conducted while maintaining a high level of security of the financial system?
– How should the credit risk management system be improved at the macroeconomic level in the context of the state conducting a specific pro-development, Keynesian socio-economic policy?
– Is it possible to conduct integrated pro-development socio-economic policy and stimulate economic growth through effective coordination of fiscal and monetary policy?
– How should one improve the conduct of integrated pro-development, Keynesian socio-economic policy and activation of economic growth?
– What kind of pro-development economic policy should the government use as an antidote to slowing economic growth?
– Will coronavirus be the main source of economic slowdown in 2020?
– To what extent may the level of economic growth in the global economy drop in 2020 due to the development of coronavirus infections?
– Will coronavirus become a more important factor in economic slowdown in 2020 than the so-called trade wars?
– Are countries forecast to decline in economic growth in 2020 due to an increase in coronavirus infection?
– Can the situation of strong price declines over the last two weeks (end of February / beginning of March 2020) be interpreted in terms of signals suggesting the possibility of another global economic crisis in 2020?
– Can a strong sell-off of stock prices on stock exchanges still last in the following days? Could this mean a change in the long-term long-term upward trend to a downward trend and the bust on the stock markets that lasted for many months?
– In connection with this, the following next important question arises: What anti-crisis Keynesian socio-economic policy should governments of individual countries develop to counteract the deepening scale of the economic downturn, including the significant decrease in orders for various product ranges, raw materials, decrease in production, potential rapid increase in unemployment, decrease in income and consumption? What instruments of entrepreneurship activation should be developed as part of anti-crisis socio-economic policy?
– Currently, a particularly important issue to be resolved is the answer to the question: Can a strong sell-off of stock prices resulting in a stock market crash similar to that of the stock market crash, which started the global financial crisis in mid-September 2008, lead to the loss of financial liquidity and bankruptcy of many enterprises?
– Is central bank intervention also necessary to ensure liquidity in the financial sectors?
– Do you conduct scientific research in this field? If so, I invite you to cooperation.
– Can a coronavirus pandemic trigger a global economic crisis in 2020, including an economic recession lasting many weeks or months in many countries?
– What do you think about this topic?
– What is your opinion on this topic?
I invite you to discussion and scientific cooperation.
Thank you very much.
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Does the COVID-19 pandemic signal the end of “globalization?
SCUC-CCP :: Selective Cause Until it is Concluded : Coronavirus Covid-19 Pandemic