- Date published:
9:16 am, April 11th, 2020 - 126 comments
Categories: australian politics, China, Economy, election 2020, Free Trade, International, trade, uncategorized, unemployment, workers' rights - Tags: covid-19, Covid19
Covid 19, as BBC analyst Emily Maitlis explained clearly yesterday, is not some great leveller.
The families who are going to be most damaged by this massive growing recession are those who face the disease every day, who are as she notes are “bus drivers, shelf stackers, nurses and care home workers” as well as the freight drivers, utility maintenance workers, shop workers, and security guards – in short some of the poorest paid of our society as well as those at high exposure risk.
Emily Maitlis has done a really good, cold intro and a service to us all.
This coming economic crisis has already hit our working poor the worst. Such workers are the ones without savings to tide them over. They were already living hand-to-mouth. They don’t have the time or unlimited digital bandwidth to blog their problems, or have Zoom or Team meetings and work from home.
It is also hitting the middle classes with a previous semblance of stability as flagbearer companies like Air New Zealand who has now fired thousands of pilots, air crew, most of our opinion-leader magazines, tour operators, ports and airports, sports athletes and stadiums, and more. Wave after wave of employment death is coming.
It’s how it hits the poor, thought, that’s telling this time. In the Global Financial Crisis over a decade ago, the people it hit the hardest in the first 6 months were those with mortgages. Middle class or aspirant. Not this time.
In that 2008-9 crisis the peak-to-trough economic fall took over a year to eventuate and it was a fall of about 6% of GDP.
In the Covid-19 crisis happening now, it’s occurring over just two months so far and will be a fall of over 10% of GDP.
And this time, there’s no finance and bank executives to blame.
The depth of this is so severe that there is no point scrambling around with bullet points about how to save one economic sector or another. Way too early.
Those who were poor, with poor children, anxious and precarious, undernourished, and poorly housed, will likely be even poorer as a result of this.
Similarly, small countries like ourselves are small boats finding themselves in a weaker overall position in a gradually post-Covid19 ocean. The pattern of Chinese economic growth will change, as will the force of political will upon economic organisation. Since our fate is tied to that of Australia, our part in that economy will change.
My current bet is that China’s leadership has completely understood that their fate lies in doing everything within their power to ensure a rapid normalisation. You get a sense of how their companies are doing that here.
China’s economy will recover faster than that of the United States because China has controlled the recovery from the virus better. Six weeks after the initial outbreak, Chinese supply chain congestion is averaging at 73%, up from 62% at the worst. That means 73% of their goods are getting onto the store shelves. Overall confidence is also climbing. A stat that shows how deep the hit is, and how the bounce is also strong: real estate transactions fell to 1% of 2019 at shutdown, and are now back to 47% of 2019. That’s still a mighty fall.
Such a scenario gives a huge global advantage to China. What we supply now to China with tourism gone, mostly, is services like education and consumer goods like food and beverage. China’s consumers will reward the countries who responded the fastest and made themselves at least as safe as themselves. So China’s likely fast recovery also benefits fellow fast-recoverers Australia and New Zealand.
If China is smart it will accelerate the RCEP trade talks as an unambitious first step in building on the much more comprehensive CPTPP. Both exclude the United States, and both include New Zealand. A really bold China would rapidly build upon a successful RCEP and a revived Belt and Road into an Asia-Oceanic version of the Marshall Plan.
We’ll know if China’s up for that kind of macro-regional leadership as it celebrates the centenary of the Chinese Communist Party. It was the poor that formed them.
The stated objective of their 2021 centenary is to “build a moderately prosperous society in all respects.” Seems a modest goal for New Zealand to aspire to something similar.
In 2019 58.3% of our exports by value went to Asia led by China, and a further 15.5% to Oceania led by Australia.
So about 74% of our trade is led by Australia and China. Those two hold our fate.
As New Zealand’s state massively increases its reach and force over the next year to cope with the near-death of its tourism, air passenger, airport, and related industries, it will resemble the responses of massive states such as China who have the capacity and the assent of their citizens to be orchestrated out of poverty and towards prosperity.
New Zealand also has a looming date on its horizon – the 2040 bicentenary of our founding – which will be marked by 2020’s events.
Nine years after 2040, China has the centenary of the People’s Republic of China, for which their goal is the stronger “build a modern socialist country that is prosperous, strong, democratic, culturally advanced and harmonious.” We just don’t do statist rhetoric like that anymore. It was the poor who fought and successfully rose up to form that new Chinese nation.
For the poor of us – who are mostly working poor still – the government started off last year with some reasonably mild goals to massively decrease poverty across a series of measures. They are a whole lot more real in this 2020 crisis.
The month from now until our budget – and for the four months to our September 19 election – are the only window New Zealand will have for at least a century to do what Labour did in the 1930s. Labour’s courage to profoundly transform social and economic policy was a key part of its continuing electoral success: people bought the vision and voted on the results. In 1935 – as now – Labour displayed a high level of cohesion and discipline (sure it never lasts, but let’s use it). It was the working poor that formed Labour ,and the working poor who elected them.
What is at stake is the ability to completely redirect the economy and our society toward raising up the working poor bus drivers, shelf stackers, nurses, care home workers, freight drivers, utility maintenance workers and otherwise all those who are increasingly ground down – as they were from a different crisis 90 years ago.
Five months from now in September will determine if New Zealand leads itself, or if it’s going to sit and wait for Australia and China to tow us in their wake.