The Wall Street Journal - 21.03.2020 - 22.03.2020

C2| Saturday/Sunday, March 21 - 22, 2020 **** THE WALL STREET JOURNAL.

The U.S.

came

together

after

9/11.

Covid-19

demands

the same

kind

of unity

and

purpose.

MANY OF US CANremember

both the initial paralyzing hor-

ror that 9/11 brought and the in-

vigorating spirit of national

unity and purpose that immedi-

ately followed. Unfathomable

grief gave way to awed admira-

tion at the acts of compassion

by emergency workers, fire-

fighters and police. Fear of what

might come next ceded to fierce

pride as we learned of the hero-

ism of those who’d fought back

on Flight 93. Shame and shock

that a great country could be so

sucker-punched by a few fanat-

ics with box-cutters dissolved

into a grim determination to

bring the perpetrators to justice

and right this despicable wrong.

And (forgive me, but this is The

Wall Street Journal after all) an

economy-stalling hunkering-

down for weeks afterward gave

way to that all-American com-

pulsion to go out and spend.

We’re in the first phase of

this trauma now: shock, fear,

uncertainty. The horror un-

leashed by the Covid-19 pan-

of Republican victories for years

and even more so of late. In

much of the disordered political

discourse of our time, this fact

is treated as some kind of politi-

cal pathology. The caricature of

older voters we get in much of

the media is of Blimpish bigots.

Yet one of the more distress-

ing spectacles in the last week

or so has been that of younger

people—potential carriers of the

virus—partying on and express-

ing disdain for the idea that

they may have a particular re-

sponsibility to prevent the

spread of infection to the el-

derly. Who looks more socially

responsible now? Can you imag-

ine if there was some kind of vi-

rus carried by the elderly that

did them no harm but threat-

ened the young?

One more thing we are likely

to be able to welcome at some

point: a reminder of America’s

unique innovative capabilities.

Necessity is the mother of in-

vention, and emergencies accel-

erate the creative process.

Sometime soon it’s probable

that some scientist or entrepre-

neur will produce therapies and

ultimately a vaccine to alleviate

and eliminate the viral threat.

It’s a pity that it seems to

take wars, disasters and crises

to bring out the best in Amer-

ica. But it’s a curious comfort in

these unsettling times to know

that’s true. ANGELA ROWLINGS/MEDIANEWS GROUP/BOSTON HERALD/GETTY IMAGES

EDITOR

AT LARGE

GERARD

BAKER

demic may be

much greater

than what we

felt then: the

death toll

larger, the

psychological damage more per-

vasive, the downturn deeper

and more destructive.

But it surely isn’t overly Pan-

glossian to think that the sec-

ond phase will follow just as it

did then and that soon enough

the fear and alarm will turn to

resolve, pride, determination—

and yes, a desire and an ability

to go out and spend again.

I am not so sanguine as to

think that these positive

changes will necessarily endure.

Within a year or so of 9/11,

you’ll remember, Americans

were back at each others’

throats; in ensuing years the

partisanship and ideological

self-distancing only grew. But

there are still some things that

will remind us what’s best about

America.

We can surely expect, and

a larger sense of

national unity, as

previous emer-

gencies have

done. A universal

recognition that

this epidemic

threatens all

Americans might

remind us that

this is, after all,

one nation. To-

day’s menace tar-

gets almost indis-

criminately.

Americans have

been consumed

for a long time

with privileging

some aspect of

themselves as

their defining identity: black,

Hispanic, white; women, men;

gay, straight, transgender. This

epidemic respects no such iden-

tities.

There is one group the virus

does seem to target. Older peo-

ple are disproportionately at

risk. Estimates vary, but data

from a number of countries

suggest that the fatality rate for

those over 60 ranges from 4%

to 10%. For those under 60, it is

much less than 1%.

This specific age-related vul-

nerability might perhaps cure

us of another modern political

vice. We know that older voters

are more conservative; they

have tended to be the bulwark

are already seeing,

extraordinary hero-

ics and simple acts

of humanity—from

health care workers and the

emergency services but also

from millions of individual

Americans who will once again

demonstrate their capacity for

charity and selflessness.

We might—perhaps—see a

divided nation come together as

it did in 2001. In Washington,

while the usual name-calling

continues as a kind of back-

ground noise, there seems to be

a resolve now to rally around

action to supply the necessary

materials to tackle the crisis: re-

sources for testing and treat-

ment, and an economic stimulus

package to alleviate the finan-

cial pain.

The crisis might even induce

Volunteers prepare

meals for children in

Boston, March 18.

REVIEW

FROM TOP: STEFANO MONTESI/CORBIS/GETTY IMAGES; KRISZTIAN BOCSI/BLOOMBERG NEWS

is almost five times what it was in

2001. In short, even after two years
      of trade war and diplomatic acri-
      mony, the key axis of globalization
      was dented, but only barely.
      As the U.S. was erecting tariffs,
      the Chinese government, for its part,
      was ramping up spending abroad.
      Since 2014, China’s Belt and Road
      Initiative has invested almost $1 tril-
      lion in Latin America, Africa, the
      Middle East, Southeast Asia and else-
      where. According to the consulting
      firm Gavekal Dragonomics, the rate
      of new Chinese investment slowed to
      just over $100 billion last year, but
      the initiative remains an incontro-
      vertible example of China-driven
      globalization.
      Nor is the coronavirus likely to re-
      verse that trend. A recent report
      from the Carnegie Endowment notes
      that, as China emerges more swiftly
      from the crisis than other parts of
      the world, its leaders are hinting that
      they plan to increase investments
      abroad in a world that will be hungry
      for capital. In recent weeks, Beijing
      has delivered medical supplies,
      equipment and doctors to Italy and
      other EU countries. As the crisis ex-
      pands, China appears committed to
      more engagement with the outside
      world, not less.
      The same has been true for the
      private sector in the U.S. Even before
      the eruption of the coronavirus,
      there was considerable discussion of
      the need for economic decoupling
      from China. But dis-
      pleasure with the bi-
      lateral relationship
      hasn’t meant any real
      retrenchment away
      from globalization for
      American firms; they
      have instead tried to
      diversify and establish
      connections to other
      parts of the world.
      Apple, for instance,
      had bet heavily on
      China as a manufac-
      turing and distribu-
      tion hub as well as a
      burgeoning market,
      which made the com-
      pany vulnerable when
      tensions and tariffs
      flared. As The Journal
      recently reported, Ap-
      ple is now looking to
      move some of its
      China-based opera-
      tions elsewhere, in reaction to both
      the trade war and the supply chain
      havoc caused by the coronavirus. But
      the company’s likeliest move will be
      to other locations in East Asia, not to
      American shores.
      The recently rejiggered North
      American free-trade agreement is an-
      other instance of continued U.S. com-
      mitment to globalization, even on
      the part of the skeptical Trump ad-
      ministration. The agreement is de-
      signed to facilitate more trade, and
      the scale of continental trade is in-
      deed increasing. Mexico is now the

Continued from the prior page largest U.S. trading partner, outstrip-
ping both Canada and China.
Data compiled by the Organization
for International Investment show
that foreign direct investment in the
U.S., although down in 2019 after
reaching a peak in 2015 and 2016 of
$500 billion, was still above the level
of every other prior year. On the
other side of the equation, U.S. in-
vestment abroad decreased to just
under $6 trillion at the end of 2018
(the last year for which data is avail-
able) due to repatriation of earnings
held by companies abroad. But to put
that number in perspective: It was
barely $1 trillion in 2001.
The same pattern pertains every-
where. In Europe, Brexit notwith-
standing, economic integration con-
tinues apace. In fact, Brexit spurred
a substantial increase in cross-border
investments within the remaining eu-
rozone countries. The shock of one of
its key members leaving seems to
have redoubled the efforts of the re-
maining 27 nations to draw closer,
with a 43% increase in 2019 alone,
according to data firm FDI Markets.
A study from the London School of
Economics shows that Brexit even
spurred more British investment in
Europe, with an increase of 12% be-
tween the 2016 referendum and the
end of 2018.
The post-coronavirus recovery is
certain to bring increased spending
from individual European govern-
ments and the EU itself. Europe’s re-
covery from the financial crisis of

2007-08 was hampered by

north-south divisions. With

the coronavirus now hitting

the whole continent with

growing force, those divi-

sions will subside. The Euro-

pean Central Bank has al-

ready announced a €750 billion ($810

billion) bond-buying program; in the

worst phase of the last financial cri-

sis, it took months of acrimonious

debate for the ECB to do much at all.

Post-virus investment is likely to

pick up as well throughout Latin

America, Africa and especially East

Asia, where the Trans-Pacific Part-

nership (absent the U.S.) has stream-

lined economic relations. Such con-

nections will expand in the wake of

the present crisis, for reasons not of

altruism but of self-interest.

The coronavirus pandemic is, ob-

viously, a negative byproduct of our

hyper-connected world, and it has

brought about a nearly complete halt

of global travel and tourism. When

countries were truly more like is-

lands, diseases had less opportunity

to skip from population to popula-

tion. The scale of travel today for

tourism, trade and business has

made it far harder to contain a pan-

demic. In 1950, according to the U.N.

World Tourism Organization, there

were 25 million tourist arrivals; last

year, there were 14 billion.

And tourism has become a boom-

ing business across the world. Be-

tween 2006 and 2019, it grew from

$5 trillion in direct and indirect value

to more than $9 trillion. The continu-

ing collapse of demand for travel will

be acutely felt and ripple around the

world, from Cambodian resorts to

Mexican beaches and

New York musicals.

Yet tourism and

travel, along with the

related phenomenon

of millions of stu-

dents from dozens of

countries studying

abroad, are among

the more potent sym-

bols of how deeply

interconnected the

world has become.

The alarming spread

of the coronavirus in

recent weeks has in-

deed provoked a

drawbridge reaction

in many countries, but the response

also suggests that the only reliable

inoculation against future pandemics

will be transnational cooperation.

By all accounts, such coordination

is already in play in the medical and

scientific community, as they race to

understand the virus and create

cures and treatments. More interna-

tional partnerships will be necessary

as we assess the economic wreckage

that the pandemic will leave. Enlight-

ened self-interest in working to-

gether to prevent such a crisis from

happening again could well trump

the knee-jerk reaction to retreat to

national fortresses that are anything

but secure.

Though months without familiar

modes of travel may forever change

patterns of behavior, judging from

how people have snapped back after

previous crises, that

seems unlikely. Once the

worst has passed, we

may find waves of pent-

up demand for millions

of people to venture once more into

the world, this time with coordinated

health screening across countries

akin to what emerged in the post-9/11

world to prevent the flow of people,

money and goods that might support

terrorist organizations.

And then there is the flow of capi-

tal. Markets in the past few weeks

have crashed globally, in sync and al-

most simultaneously. In the U.S., as

much as $10 trillion has been erased

from markets. Every major market in

the world saw equities lose 20% to

30%, and bonds have swung wildly

and destructively.

But it isn’t just goods and people

that have circled the world in ever

more energetic motion over the past

two decades; money has too. In the

past 15 years, according to the Fed-

eral Reserve, U.S. holdings of foreign

securities rose from $6 trillion to

more than $12 trillion, and similar

explosive growth occurred for coun-

tries around the world.

That has gone hand in

hand with loosening

rules on capital flows.

China alone, among ma-

jor economic players,

has meaningful capital

restrictions, and only

its domestic markets

move out of sync with

the financial markets of

the rest of the world.

The absence of any

real capital controls

and the vastly in-

creased appetite to in-

vest everywhere is why financial

markets began crashing once the

coronavirus leapt from China. It

took weeks for the disease itself to

move from South Korea to Europe

to the U.S., but it only took days for

the financial contagion to spread.

That is the pain of the moment for

investors, but it is also provides a

glimmer of the possible pace and

scale of the global recovery when it

arrives. Money can evaporate in a

heartbeat and flow in an instant.

It is easy to imagine the demise

of our massively interdependent

world at a moment when it comes

to a rapid, vertiginous

halt. But a sharp con-

traction caused by a

pandemic is not the

same as a permanent

reversal of the deep and compli-

cated global integration of supply

chains, markets and daily life built

up over the past two decades. Those

relationships are durable and bene-

ficial and will be difficult to sever.

Some are ready to try, but most of

the world isn’t eager to renational-

ize industry, make trillions of dol-

lars of global investment worthless

and suppress the appetite for easy

travel and free movement of people,

goods and capital. The coronavirus

is unlikely to be the moment when

we see the collapse of a broad his-

torical trend that has endured

through the Great Depression,

World War II, the Cold War and in-

numerable other crises, from 9/11 to

the financial upheaval of 2007-08.

The months ahead will feel like

the presumptive end of an era of

globalization. And it may be the end

of globalization’s first phase, with

its heady optimism and correspond-

ing ideological and eco-

nomic backlash. But

there will be a next

phase, one less rosy-

eyed and less sour as

well.

As citizens emerge

from various forms of

sheltering in place, they

will confront the days

of spring with the relief

and bewilderment of

our predecessors in

World War II emerging

from a bomb shelter the

morning after. They will

find a changed world of travel limita-

tions and viral testing but also a

massive global system that remains

structurally intact, if on the defensive

philosophically. But the sheer scale of

what has been created over the past

several decades, to say nothing of the

enormous benefits that have flowed

from it for billions of people, will

preclude a lasting reversal. We will

discover that we are indeed all in

this together.

Is it possible that we are truly

at the end? Yes, but not likely.

Globalization is dead. Long live

globalization.

After the Crisis, a New

Era of Interconnection

A Chinese

container ship

in Hamburg,

Germany,

March 3.

Theonly

reliable

inoculation

against

future

pandemics

willbe

global

cooperation.

Japanese tourists

in Rome’s

Colosseum,

August 2015.

American

Affirmations

In the Face of

Another Test