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The Wuhan Virus Pandemic has cleaned the slate for a new world order, one where India plays a crucial role

The path ahead

Satyakam Sudershan
by Satyakam Sudershan
28 March 2020
in Opinions
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As we speak, the world is still in its early stages of fighting the Wuhan virus. The viral infection curves are still in the rising phase for most countries, and as any and all data from China is currently completely untrustworthy, neither is the prognosis clear. It is not clear what the end game will be. In such a situation, to discuss economic impact much less its mitigation may seem premature. After all, if the entire focus of various governments are towards managing the immediate crises, and making sure that as much of the population that can be protected, is, we will need to first get through the next few months before we can imagine what the future will be.

While such an approach is understandable, and there are merits of the same, we would still be making a huge mistake if we were not to start planning for the pandemic’s aftermath right now. If we don’t, we will be caught completely unprepared for the economic meltdown that will rage through, and we will be left scurrying to flatten the curve of the viral economic flu outbreak as we are struggling with the current biological one. Just to be clear, we will have an heavy economic cost of the current scourge, whether or not we opt for a lock-down. The disease is real, and widespread, and any means of controlling it will cost. Not controlling it will have an economic cost too. Deaths are never free, even of older people, as they take resources to manage the fall out, and the fond hope that the deaths will only stay at the elderly is already belied, meaning the economic costs of death will be severe. Not to mention that men and women in the prime of their economic abilities spending months in hospitals has not been known to engender building surplus.

We need to note, that unlike the case of outbreak of COVID-19, we don’t have to be blindsided in terms of the coming tsunami. The Wuhan virus was virulent chiefly because we were lied to, and the virus spread from China unchecked for nearly two months before most nations even realized what was heading their way. This is not the case with economic disaster heading our way. We know its coming and different models are already being discussed. We therefore have no excuse for being unprepared. Singapore just announced a contraction of 2.5%, and estimates between 1-4% for full year. Indian GDP growth is expected to dip to 2.5% from 6% projected growth. While we have no exact numbers for other countries yet, a world wide recession is a certainty, the estimates are horrifying, ranging from anywhere between 0% growth at the least, to likely drop of -2 to -5% to even worst case statistics going up to 10-30%. This would be the worst economic downturn in modern human history, comparable to the impact of Huns, Mongols or Islamic invasion of India in the pre-modern phase.

Such a deep and brutalizing impact goes far beyond the standard macro-economic models known, no Keynesian economics is going to save us. This means the entire economic system has to be re-imagined. It is not merely enough to address the symptoms but solve root cause of the problem, and that problem is China. China with its totalitarian government systems, China with its racist views on all non-Chinese people. China with closed approach to the world. China with inhumane treatment of Chinese populace. China with lack of care of environment. China which prioritizes impression over reality. Mao’s China and its undue prominence in the global economic systems have to be taken a hard look at and that problem fixed.

Thankfully, some in the world are already thinking about it, and it is good to know that Indians are leading the charge. In a brilliant article, Kapil Komireddy writes that achieving independence from China is going to be critical. He is not alone, many are asking for a fundamental change in the global economic structure and moving most supply chain dependencies from China. However, world’s addiction to the Chinese produce has taken 40 years since Nixon shook hands, and will be impossible to change overnight. That is if we rely on regular economics. However, there have been geo-political moves that have achieved exactly the same in the past, and can provide a template. That template is that of the tea.

Tea, while first originally encountered by British in India, was sourced in immense quantities from China by the English for volume consumption. This was due to the fact that volume production of tea was already established in China, where as in its original homeland of eastern India, tea’s popularity was limited to a few specific tribal groups. This need for tea, created a massive trade imbalance in favor of China, which then was sought to be addressed by export of Indian opium by East India Company, and the rest is history. However, while the Opium wars are the highlight, the story of tea gets forgotten. While Opium continued to be sold in China, the British soon enough changed their supply chain of tea. Tea now came from India and Ceylon, and since they were under colonial rule, in place of balance of payment being an issue, additional economic produce and hence surplus was added to British books.

Now, of course, the above template is not a call of reverting to Colonialism, but of course. The idea here is that massive structural economic changes are NOT made with economic tools. They are made with geo-political tools. Further this idea here is to highlight, how, in the past, India has been the only country which can provide a fall back, and is the original homeland of all international production, both in terms of origin and scale, even though there may be temporary usurpers. The idea is to highlight that only the use of force may be needed to provide a solution.

So how do we apply these ideas in our current context, and what do they mean today? Well a few are self explanatory and tie into the other calls being made, for one India must replace China as the world’s factory. The chemicals, electronics and most critical components the world depends on, must now start being sourced from India. This can only happen with extra-ordinary measures.

To kick this off, there need to be trade blocs excluding China. An India-East Asia trade bloc which excludes China needs to be supporter as counter weight. The reason for having trade blocs to replace China is twofold, for one, India is not in a position to replace China in short term just simply due to current installed production capacities. However, in collaboration with others, it should not be so difficult. Secondly, a trade bloc provides a multi-lateral approach, which will act as an attractive alternative to unilateral China. The world would not be ready to replace one point of failure in China with another, and having a somewhat distributed footprint will help allay the fears. In addition, there is a hidden advantage of getting a “free” one-belt-one-road type connectivity matrix, however this time, not top driven, but built together in partnership. This network, would also help carry Indian influence overseas and provide other advantages for us that China hoped to gain from OBOR. To drive the India led world factory, tariffs against Chinese products must be put on an escalatory climb by rest of the countries, and this needs to be accompanied by agreements with alternate trade blocs to reduce tariffs on them. This would in short order provide quick replacement ramp for Chinese goods that the world has come to depend on.

It is quite likely though, that China is not going to sit back and watch for the change in world order without pushing back. We have already seen various signs of the same, with massive spend on media management, threats of disruption of medicines, using medical supplies to the virus ravaged nations as collateral for obedience on Chinese diktat. It stands to reason that China will deploy its usual playbook of price gauging, increased government support for Chinese firms (which are essentially owned by communist party oligarchs and are party and nations property), industrial espionage, bribing of government and industry heads to listen to them and so on.

Given the massive war chest that China has, it’s not going to be easy to take that on. In fact, it’s going to be near impossible. The solution then naturally is to remove Chinese ability to do so, which in turn reduce its economic heft. The short term solutions for that are either war, or economic sanctions. Assuming that none are interested in a war with China, that leaves the option of sanctions on the table. It would of course not be possible to have UN mandate a uniform sanction, which then means that the countries which have paid in blood for the Chinese virus would need to band together and impose them. Of course typical sanctions which need all countries to work together to blockade the culprit will not be an option here. What then needs to done is use unconventional means, even if drastic. These would include nationalizing assets of Chinese companies in countries where they operate, blocking Chinese banks from operating in countries outside. However, these would still not be enough.

What is needed, and what is critical, is that the various debts that China has bought from governments across the world be nullified. Normally a case of non-repayment of sovereign debt would be considered a failing government, but in this case what is needed is to single China out, and refuse payment to it. If done now, the world will understand. As US is its biggest patron, the move must be led by them. This is a nuclear option, but that is what is needed, as this is WW III.

Trump must cancel all the Treasury Bills held by China.

This would destroy China’s ability to meddle with the world, and would start of the chain reaction that would take down CPC. Possibly a new Chinese government may then be allowed back into global comity of nation, and then be given back its sovereign debt. But not till a democratic, liberal government is established which provides for freedom for all ethnicities including Tibetans, with China offering exactly same freedoms and opportunities of other nationalities doing business in their country as they expect from other countries. The time that takes will give the world the space to restore the economic systems and fight off recession.

Technical note: The reason why the above steps fight off recession is because, at its core, economic activity is about creating a supply to match a developing demand. The demand comes from propensity to consume and the ability and the capital to consume. Supply comes from human endeavors to produce goods and services to meet the demand. Many countries have the ability to provide the human endeavor, but are behind the capital curve, the western nations have the demand appetite coupled with technical and resource capital but lack the human effort needed due to limited population base and also the economic capital (due to massive loans their government have). Isolating China, would enable the Indian and other Asian human capital currently blocked by Chinese skulduggery to be available to the global pool and draining its capital for both investment and consumption would create a new new deal at global level.

Of course, this would be hard on China, but as the chief perpetrator of the holocaust on the world it is fitting they foot the bill for fixing it. In any case as an already developed country with massive infrastructure, their current focus should be internal. Well-being of their citizens in a holistic manner including healthy social and political systems rather than a brutal exploitative extractive model. Helping them turn their focus inwards would be the best thing that would ever happen to the Chinese, who have been used as machines rather than human being.

Let’s bring humanity back, while restoring a good economic system for the world.

Tags: ChinaCoronavirusIndiaWuhan Virus
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Satyakam Sudershan

Satyakam Sudershan

Past IITian/IIFTian electronic design person, keenly interested in geo-politics, long term strategy, history, present and future of warfare. Mega trends and civilizational continuity

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