February 25, 2021

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The ‘Black Swan’ Govt disaster shows how weak our world is | Larry Elliott | Business

D.Here are three characteristics of the “black swan” phenomenon: rarity, extreme impact and backward predictability. In retrospect, it is always easy to detect the warning signs of an accidental disaster, but few see them.

The financial crisis of 2008 is an example of a black swan, and the Covit-19 is one of the best. At this time of year, economists tend to predict what the next 12 months will be. Some people like to think outside the box, which can lead to bad predictions of impossible events.

Suffice it to say that even a crystal-ball eye a year ago was enough to predict that by December 2020 the Christmas government would have closed pubs and banned Premier League football from playing on a non-spectator field. No one is saying 2020 is going to be a plague year 1.8 million deaths Globally and after the Great Ice of 1709 the UK is bringing the largest annual contraction of the economy.

The collective failure to anticipate the variant of the corona virus first detected in China in late 2019 suggests that we should all be careful in issuing bold statements about what will happen next. Perhaps, as financial markets signal, the ongoing mass vaccination programs will allow life to return to normal by the middle of this year. 2020 is likely to be recorded as one page in the history books, which does not mean anything. Despite optimistic predictions that there will be a political change on the left as a result of the approach to the global banking system in 2008 – it is worth remembering how small the change is.

There are reasons to think that 2020 will be different, and eventually those years can be considered as one – like 1789 and 1914 – proving that they are important. For one, the epidemic has accelerated the technological change that was already taking place, because social distance and locking are many more things we do from home via computer screen or mobile phone. People have browsed the web more and more; They are in touch with their friends in the distance; They are purchased online. As a result the digital transformation of economies has accelerated. Google, Amazon, Facebook – companies already in crisis have strengthened their market dominance. Working from home is terrible for the commercial property industry, but it is better to magnify.

There has been talk for years about how biotechnology will emerge as an important part of the Fourth Industrial Revolution. Its response to the epidemic has proven that this is not just hype. It is shocking how quickly vaccines were developed and produced. Genome sequencing was able to identify mutations in the corona virus.

Running with accelerated technological change is moving towards bigger states, which have spent a lot, borrowed a lot more, and many more have come around. Before the crisis erupts, Rishi Sunak is expected to borrow about $ 60 billion in the current financial year. If that figure is less than $ 400 billion he is lucky. In fact, the Chancellor – along with other finance ministers – has no choice. Governments have deliberately decided to shut down large parts of the economy and are therefore forced to take unprecedented action to prevent mass unemployment and widespread poverty. Sunak talks a lot about how he has a moral obligation to balance the budget, but is an incredible Iron Chancellor.

Some governments have faced better crises than others. Paradoxically, the country that delivered the Govt-19 – China to the world is the only major economy to record positive growth this year. Neighboring countries – Taiwan, South Korea and Vietnam – were better prepared for the epidemic than Europe or the United States. In recent decades the global balance of power has shifted from the West to the East, and that trend continues. The United States has been relatively weak since 2020, while China has been relatively strong. Donald Trump’s bad path to Beijing Not likely to soften Much more when Joe Biden comes to the White House this month.

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The story of globalization over the past three decades is outsourcing production to places where wage costs have been low in developed countries. Reliance on China for BPE and other medical equipment was very wise as the crisis erupted. There is now recognition that there is a price to pay for long and complex supply chains because an economic model pays very little attention to sustainability. In the past, deep recessions have tended to push green issues below the political Peking order, but this time it was different. Strictly speaking, if 2008 is a financial emergency and 2020 is a medical emergency, the next time – assuming it will be next – it could be a climate emergency.

There is a longing for life to return to normal, and once the struggle against Govt-19 is finally over, people will enjoy doing everything that locks and social distances currently prevent or control. It will be time for the high street boom; Restaurant bookings can be difficult to obtain; Low cost airlines operate at full capacity. In the short term it will be as business as usual.

But Covid-19 has compelled us to reconsider the way we work, how we shop, the role of government, and how the economy operates on a national and global scale. After all, it shows us how fragile everything is.