‘To be forced to lock down the economy once may be regarded as a misfortune; to do so twice looks like carelessness’

‘To be forced to lock down the economy once may be regarded as a misfortune; to do so twice looks like carelessness’
© Belga

There is finally light at the end of the Covid tunnel. Two promising vaccines – one developed by Turkish immigrants to Germany, the other by a US firm co-founded by a Canadian scientist and a Lebanese born investor – ought to enable Europeans to put the pandemic behind us at some point next year.

But for now, Europe seems set for a long, dark Covid winter, with the situation in Brussels particularly grim. As coronavirus cases have surged again, the authorities have reimposed stringent restrictions on residents and businesses. And with societies locked down again, the economy is going back into reverse. This is a disaster not just for ordinary Europeans, but also for Europe’s global standing.

For sure, some places in Europe are coping with the pandemic better than others. Economically, manufacturing powerhouses such as Sweden and Germany have experienced less severe slumps so far than tourist destinations such as Spain and Italy. Healthwise, Helsinki has had far fewer coronavirus cases and deaths per million residents than Brussels, which rivals Madrid as the European capital worst-hit by Covid-19 so far.

Shockingly, by mid-November the total number of Covid deaths per million people in Belgium was eight times higher than in neighbouring Germany. While some of the differences in measured death rates across countries may be due to discrepancies in how Covid deaths are counted, comparisons of the number of deaths this year in excess of the average for the previous five years confirm that the worst-affected European countries are the UK, Spain and Belgium.

It may be some comfort to Europeans that even the most incompetent European governments seem like models of public-health management compared to the reckless ineptitude of the Trump administration in the US. But the bigger international picture is far less flattering. While Europeans like to think that their societies are the epitome of global sophistication and progress, both their governments and their economies are dealing with the pandemic much worse than China and East Asia are.

Indeed, scarcely a decade after the 2008–09 financial meltdown and the ensuing crisis in the eurozone shredded Europe’s reputation for sound economic management and speeded its relative economic decline, the coronavirus pandemic is destroying its reputation for good governance and accelerating that economic decline.

The catalogue of failures is long. European governments were unduly complacent about Covid at the beginning of the year. Having failed to prevent the virus’s spread in Europe, they were then forced into economically devastating lockdowns to prevent hospitals being overwhelmed. Confinements were then eased before the virus had been fully suppressed.

Worse, over the summer months when infections were low, governments failed to develop effective mass testing and contact tracing systems that would have prevented a resurgence of cases. Now, in the face of a second wave that again threatens to overwhelm healthcare systems, governments are imposing painful new social and economic restrictions every week.

The contrast with East Asia is instructive. While China was slow to react to the initial spread of the disease and then imposed a particularly severe lockdown, especially in Wuhan, it has since kept the virus suppressed, quickly stamping out subsequent local flare-ups. South Korea quelled an initial upsurge of cases without an economy-wide lockdown through ruthlessly effective contract tracing and selective isolation. Taiwan also avoided a lockdown; its officials were monitoring arrivals from Wuhan even before the Chinese government had admitted it had a problem. Both Korea and Taiwan have made good use of mobile-phone technology to suppress the virus. Even Vietnam, a poor country with a long porous border with China, has managed to keep a lid on Covid.

The difference in mortality figures is vast. By mid-November Europe had recorded more than 330,000 deaths from Covid – including more than 13,000 in Germany, which is seen as a success by European standards. In contrast, China had counted 4,634 deaths, Japan 1,903, Korea 496, Vietnam 35 and Taiwan 7.

For sure, East Asia had more recent experience of dealing with a coronavirus pandemic, having suffered from SARS in 2002–04. But there was nothing to stop European governments learning the lessons from SARS too. And while it is perhaps excusable that they were overwhelmed by the initial exponential spread of Covid-19 in Europe in February and March, it is inexcusable that they haven’t used the time since then to develop suppression measures as effective as East Asia’s. To paraphrase Oscar Wilde, to be forced to lock down the economy once may be regarded as a misfortune; to do so twice looks like carelessness. So much for the supposed superiority of European governance.

The incompetence of European governments has not just led to painful restrictions on personal freedom along with many avoidable deaths. It is also hammering European economies.

The pandemic will leave scars

The gap between West and East is glaring. While even Germany is facing the worst recession since the 1930s, China is the only major economy in the world that is likely to grow this year. Output per person has plunged in France but has scarcely fallen in South Korea. While governments in the eurozone, the UK and the US are running up huge debts to try to cushion the blow of the Covid collapse, Taiwan’s scarcely needs to borrow at all. And that huge divide in economic performance is set to grow as the second wave sweeping through Europe this autumn and winter takes its toll.

Worse, European economies are likely to take years to make up the lost ground. While economic activity will bounce back next year if a vaccine is forthcoming and a semblance of normal life resumes, the pandemic will inevitably leave scars – not least on young people’s education and job prospects.

The structural shifts that the pandemic has accelerated – notably the increased adoption of digital technologies – will accentuate the economic disruption. The likes of Zoom video conferencing and online shopping are a boon, but in the near term the digital transition may cost jobs as airlines shrink and physical stores shutter faster than new jobs are created.

When the pandemic finally passes, many workers will have outdated skills, either because they have languished unemployed or because governments have subsidised them to remain in jobs that are no longer viable. Many businesses will be lumbered with huge debts that may be bearable while interest rates remain very low but which prevent them investing in become more productive. While governments with high debts may have greater latitude to continue borrowing, especially if central banks continue to snap up their bonds, they will eventually face pressure, both domestically and at EU level, to tighten their belts.

The upshot is not just that Europeans face a long period of economic misery. It is that Europe’s weight in the world will plunge – again. Consider that when the financial crisis struck in 2008, the eurozone’s economy was more than three times bigger than China’s in euro terms. A decade later, China had overtaken it. This year, China is set to surpass the EU as a whole.

Relative economic decline has wider repercussions. The EU is a geopolitical pygmy. It lacks a cohesive foreign policy, let alone military might. So its power to defend Europeans’ interests both within Europe and elsewhere depends largely on its economic clout.

It is because the EU has a huge single market – worth €16.4 trillion in 2019 – for which it takes collective decisions on trade, regulation and competition policy that it can stand up to President Donald Trump’s bullying on trade, develop tough rules to protect the environment and data privacy that are emulated globally, and curb the monopolistic excesses of big tech companies. Thus, if the EU single market’s global importance diminishes, so does the EU’s scope to shape the world.

As well as eroding Europe’s economic heft, the coronavirus crisis is undermining its cultural appeal. German cars and appliances are associated with high quality, Italian fashion with luxury, French food and wine with good taste. More broadly, European societies seem to offer an enviable combination of freedom, security and quality of life. But now they are also associated with an unenviable mix of shambolic governance and draconian lockdowns, of creaking public healthcare systems, individual irresponsibility and unnecessary deaths. That tarnishes the European brand internationally in all sorts of ways.

Last but not least, Europe’s failure to get to grips with the Covid pandemic casts aspersions on its political system. While liberal democracy has intrinsic appeal to many people – because it offers individuals greater freedom and citizens collectively greater power – it has also been popular because it was associated with economic success and good government.

Liberal democracy had already taken a battering from the financial crisis, which made governments seem both incompetent and corrupt. Now, European governments can’t even manage the basics of keeping people safe.

For sure, South Korea and Taiwan, both boisterous democracies, have successfully suppressed the virus. And yes, the pandemic has exposed the bungling of illiberal populists such as Trump. But it may also bolster the global appeal of effective authoritarian governance. Another reason why Beijing may benefit from the Covid failings of Brussels and Berlin – not to mention those of London and Washington DC.

Philippe Legrain

Copyright © 2021 The Brussels Times. All Rights Reserved.