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COVID-19: Large unintended consequences

Concluding a four-part series on the COVID-19 crash

Imtiaz A. Hussain | March 26, 2020 00:00:00

Behind all the visible and direct COVID-19 impacts lies a range of unintended consequences. It would be helpful to connect them from our minds to other major COVID-19-related news if and when they hit future headline news. They may tantamount to nothing, but then, if they do not, then we would have a clearer picture of COVID-19's sprawling tentacles. Many of them paint China as standing more open to global collaboration on a more symmetrical plane than before, and giving China a more collective leadership basis, as if, for example, learning lessons that a punctured tire might summon. Yet, China does not represent the emergent phenomenon's full unknown reaches. Nor to these reaches have a sordid ending.

We could begin by returning to one of the first pieces of news the pandemic produced: the air above China, as seen from outer space, clearing up so much one can now actually see through the clouds of smog that once typically prevailed. One particularly eye-raising piece of news about the permanently besmirched Beijing air was, indeed, how Beijing was rated worldwide as among the smoggiest of cities. There is no doubt the closure of factories during the COVID-19 growth-phase led to this cleaner outcome, suggesting, and actually demonstrating what Beijing could look like if some air-controls were strictly enforced, broader still, of what China could look like now that the urgency of rapid mass factory production had been eased by a lockdown. A different China could emerge along at least two dimensions.

The first would be as a global environmental leader. Several mid-tiered developed countries (DCs) across North Europe have been serving this role, effectively on the home front, but constrained abroad. With a more robust partner and catalyst nearer the upper perches of wielding more resources to distribute globally and clout to go with it, their cause would be significantly boosted. Embracing that role necessitates first fixing up the domestic front. Any visible change in how metropolitan air and general water pollution, especially evident in the massive artificial dam construction previously displayed, would earn China a new fan-base, and its leadership a wider global acceptance, even against Scandinavian competition.

Should that happen, a second feature might come to light. This is the migration, on a far larger scale, of Chinese factories off-shore. In recent years, under trade pressures, China had been forced to start relocating these abroad, but pushed by economic and competitive rationales. China displaying an environmental face would strengthen this outflow, and indeed, shift ample resources to other less-advanced countries, such as Bangladesh, which might benefit more, at least economically, until their time to turn the environmental/renewable tap comes. Nevertheless, China turning renewable wheels now would become a critical globally disseminating catalyst.

Perhaps the most dramatic feature may be how COVID-19 has resulted in slashing coal production and consumption because of truncated Chinese demand. Just in China, coal consumption has been cut by more than half. Since China consumes half the world's coal annually, exporting countries face an opportunity window to shift to renewable alternatives at low costs. Australia, Indonesia, and Russia have increasingly satisfied China's sprawling imports, but the longevity of the COVID-19 crisis invites renewable game-changing options.

If not on the coal front, the United States might face some such a predicament with oil, especially as it rose to becoming the world's top producer and returned to being the largest exporter because of environmentally damaging and high-cost shale oil production. Though a significant unintended consequence of the COVID-19 outbreak, one must bear in mind how this force was gathering momentum independently. At stake are the falling petroleum prices, driven by the increasingly tussling second largest producer and exporter, Saudi Arabia, and Russia.

Per barrel petroleum export must be $50 or more for profitable shale production: whereas Saudi per barrel oil-production cost is about $8.0, for US shale it is $25. For the last two years or so, oil prices were, indeed, higher. Today it is $35 or lower, even plummeting below the $20 range because of the Saudi-Russia price war. Thwarting the US shale leverage is a key Russian goal. Keeping low oil price fits well since its reserves are second only to Saudi Arabia's.

Yet, Saudi Arabia also needs oil prices to be above $50 to fulfil all of Crown Prince Mohammad bin Salman's massive reforms, and so a production cut, proposed in recent OPEC (Organisation of the Petroleum Exporting Countries) members, was cardinal. Russia's opposition prompted the Saudis to retaliate by flooding the global oil market from its infinite pool to coerce Russia to cut, calculating it can go longer than Russia. Russia has not yet blinked, but US shale production has been decimated. Environmentalists cheer, as too for the COVID-19-driven factory lockdowns reducing oil demands and shipments, which also elevate the environment.

One only hopes better post-COVID-19 policy senses will prevent key trading country-leaders from regressing into past preferences and instincts. Brewing pent-up sentiments to reactivate transactions can only accelerate, quashing controls, leaving COVID-19 as the defining line between reckless and responsible, non-renewable and renewable, energy consumers.

One other unintended COVID-19 consequence must only be hypothetically considered. It is about that fluid subject, politics, particularly the contested elections variety. Mature democratic countries have shifted too far in the populist direction for democracy to remain attractive to non-democratic countries, while too many upstart democratic countries have taken the shine off democracy. Yet, how domestic dynamics have been increasingly influential externally, could complicate inter-state relations negatively.

With the United States and several north-west European countries belonging in what may be dubbed the fraying mature democracy fold, and countries like Argentina, Brazil, Malaysia, Mexico, Pakistan, Thailand, Turkey, and the likes, in a growing list representing the makeshift and lip-serviced democracies, perhaps a US template may better illustrate what is at stake.

Donald J. Trump first denied the COVID-19 threat, branding it as 'Chinese virus' to fit his China-bashing tariff policy-orientation. Now he has had to initiate a trillion-dollar domestic rescue plan, of the type such Democrat presidents as Franklin Delano Roosevelt's New Deal in 1934 and Lyndon Baines Johnson's Great Society Program of 1965 did, abandoning party principles for expedient circumstances to serve electoral purposes. Voters may reward him for intervening so massively if the COVID-19 crisis ends quickly. If not, bedlam may ensue, wrecking both markets and mindsets, and turning voting booths into war-mongering laboratories.

Until the COVID-19 crisis, Trump and the Republicans enjoyed a rather favourable electoral stand, given how fissiparous the Democratic Party. Yet, those at the political center may feel, as the crisis procrastinates, Trump and the Republicans to be the wrong person and party to conduct socio-economic recovery. Since two past recessions stemmed from business-friendly Republican administrations, one COVID-19 outcome could find the party being punished by the public. Similar deductions of policy responses elsewhere make our political inheritance even more fragile.

In short, the opportunistic shift of COVID-19 denial turning into COVID-19 exploitation could spawn a massive political-landscape change. As the COVID-19 crisis opens mental horizons in many such ways, how one navigates one's way should also become the subject of both social and political scrutiny,

Dr. Imtiaz A. Hussain is Dean (Acting), School of Liberal Arts and Social Sciences SLASS) and Head, Global Studies & Governance Program at Independent University, Bangladesh


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