The political dynamics of Washington in recent years have been like an ’80s aerobics routine: full of thrashing and contortions, but with little actual movement. An endless succession of pseudo-“bombshells,” frenzied two-week scandals, and Twitter rampages created a jaded intensity — the perfect spectacle for the smartphone era.
But the past ten days or so have undone that exhaustion-through-micro-titillation. Now, things are moving fast, so fast that perhaps no one understands what’s really been done, let alone where we’re going. On cable news, some talking heads try doggedly to slip back into the accustomed pattern, as though whether we call COVID-19 the “Chinese virus” is really the most pressing issue facing the country. And that’s understandable; the feuds we know might be more comforting than challenges unsolved.
It’s hard to say what this change will ultimately mean, in part because we don’t know exactly how high COVID-19’s ultimate costs in both lives and GDP will be, how long it will last, or what eventual steps the United States will take to face it. However, some possible consequences stand out.
The Effects of the Coronavirus on the Indo-Pacific Region
The coronavirus is both a public health and global financial crisis. But it is also a strategic challenge to America’s power and influence in the Indo-Pacific. Without knowing the full impact of the virus, it seems probable that the shock will amplify several existing economic, technological, and security trends already underway in the region.
First, the post-coronavirus environment will fuel rather than defuse U.S.-China geoeconomic competition. Although pandemics call for international cooperation, the virus that gripped Wuhan and spread globally will exacerbate preexisting tensions between the world’s two largest economies. COVID-19 has damaged China’s already slowing economy. The Communist Party of China (CCP) will likely put off painful economic reforms and look for short-term stimulus. President Xi will further abandon the economic and financial liberalization reforms accompanying the 19th Party Congress. Toxic debt and the misallocation of capital to state-owned enterprises will mount. At the same time, the CCP will need to shift more resources to deal with a brittle public health system and an aging population. The resulting demands for sustained Chinese growth will ensure that Beijing’s variant of state capitalism will further exploit free-market vulnerabilities through state-backed intellectual property theft, subsidized national champions, and other means. Expect China to deepen investment in the digital technologies that advance both its economic and security interests.
At the same time, the United States economy will also face headwinds. The virus has already disrupted the economy and daily life in the United States. Trends suggest the U.S. may experience a recession. Russia’s bid to crush America’s shale-oil may fail, but it adds more stress to a key pillar of the U.S. economy. China may take advantage of relative U.S. weakness or distraction to back-pedal on its agreement to purchase up to $200 billion in additional U.S. goods, including LNG (liquified natural gas), over the next two years. Meanwhile, as nations turn inward, expect China to fill the void and build out its network of CCP-compliant or U.S.-independent regional and international institutions.
Second, U.S-China techno-nationalism and protectionism will sharpen. The CCP leveraged Big Data, Artificial Intelligence, facial recognition technology, and drones to police its Wuhan crisis. The positive results will only further accelerate Beijing’s plans to advance its surveillance state. It will also prompt Beijing to double down on investments in Made in China 2025 technologies vital to achieving information superiority and the China Dream. As a result, America and selected allies are likely to accelerate plans to disentangle critical technologies and reduce strategic dependencies on China. Other countries will also step up plans to relocate manufacturing and business hubs outside of the Mainland. For the United States, the great disentanglement will take time, leadership, and the ability to mobilize the private sector and coalition partners. One challenge might be called the Microsoft problem. That is, how can a large U.S. company wholly cut itself off from Huawei, ZTE, and other Chinese national champions without reducing its market share and thereby starving itself of necessary R&D for future innovation? The virus is also likely to hasten competition for setting international technology standards and rules.
Third, the coronavirus will create new fissures in the CCP and a potential leadership crisis in North Korea. China’s initial cover-up on the severity of the outbreak created a moment that could be Xi’s “Chernobyl,” especially in the wake of revelations regarding the brutal crackdown in Xinjiang, heavy-handedness in Hong Kong and harassment of Taiwan. The persistent criticism of Xi’s early attempts at covering up the scope of the outbreak, and his call for the Chinese people to follow him in a “People’s War” is instructive of both enduring CCP legitimacy problems and Xi’s preferred theory of victory narrative.
Meanwhile, a full-blown health crisis in North Korea could produce unpredictable outcomes for the hereditary Kim dynasty. Just as North Korea’s Sixth Army Corps reportedly mutinied amid the 1996 famine, an overwhelmed public health system could trigger a coup or, even worse, propel Kim Jong Un into initiating a conflict to unify the population behind him. The virus also is likely to reify other existing security flashpoints. These include tensions over Taiwan as well as between the United States, its allies, and security partners. Pressure on U.S. allies and partners will grow, even as they seek to resist demands to share more significant burdens and risk getting caught in a potential major power conflict. Expect China to prey upon alliance tensions.
Fourth, the threats emanating from synthetic biology will multiply. The coronavirus most likely started in an illegal wet market, not a biology lab. However, the demonstrated impact of a dangerous new virus could encourage CCP authorities to set in motion new plans to weaponize synthetic biology. A range of future biothreats may emerge from clandestine laboratories through the use of CRISPR, DNA printing, and other synthetic biology advances. The CCP’s technological gains could encourage it to think the unthinkable: namely, how it might surreptitiously plant a future virus for economic, political, and strategic impact, perhaps amid a crisis or conflict.
The Coronavirus and Europe
The central problem of the European Union (EU) today is that the primary allegiance of its people is to their home countries, not the EU. To overcome this shortfall, the EU essentially buys support for its agenda: in return for the free movement of people, EU members receive unfettered access to the European single market. The coronavirus, however, threatens not only the European populace but the idea of the EU itself.
The EU proved an attractive arrangement so long as Europe’s economy expanded and globalization (read: immigration) remained manageable. The twin blows of the Great Recession and the war in Syria hit Europe hard last decade, however. As the European economy slowed, the structural imbalances between northern and southern Europe grew wider and deeper. Just as the EU’s biggest asset— its economy—lost some of its attractive value, a surge of Arab, Afghan, and African immigrants further overwhelmed authorities. The upshot has been a wave of anti-establishment sentiment in elections across the continent. Nationalism, not supranationalism, is the ideology with momentum today.
Into the breach now steps the coronavirus. It is wreaking havoc on an already brittle and unequal European economy while highlighting the downsides to globalization, such as the accelerated transmission of disease. This will further embolden nationalist parties, especially as leaders grasp for national, rather than European, solutions. To date, for example, the German government has promised to do whatever it takes to maintain stability but has provided minimal support (and supplies) to Italy; meanwhile, China is reportedly selling Rome key equipment. The European Central Bank is now undertaking emergency measures, but for Mediterranean countries that are already grappling with weak economies and high incidents of infection, the intervention comes late. The result will be a further erosion of confidence in the EU.
The coronavirus may also accelerate a shift in the global political economy. In decades past, the U.S. acted as the importer of last resort, absorbing huge European surpluses. Over time, this has created a European dependency on exports to America. Now, Europe is equally addicted to China. If the coronavirus substantially slows global markets or leads to a Sino-American standoff, the export economies of Europe (especially Germany) will be hit hard. The coronavirus may very well signal the beginning of the end of Europe’s export-led economic model.
As the economies of Europe suffer and the downsides of globalization become apparent, anti-establishment leaders will have an opportunity to seize the advantage. This is the setting in Europe as we barrel toward the high-point of the coronavirus pandemic.