◼ ECONOMICS Bloomberg Businessweek March 23, 2020
AustraliaBrazilIndonesiaMexicoRussiaSouthAfricaChinaSouthKoreaU.K.CanadaSaudiArabiaU.S.TurkeyArgentina27consumptioninChinaasevidenceofwhatlies
aheadforEuropeandtheU.S.
Theextentofthedamage,hesays,willdepend
inlargepartonthescopeanddurationofthe
outbreak.Buta lotreliesongovernmentsact-
inginunisontorolloutaggressivemeasuresthat
easethepainforbigbusinesses(thinkairlines)
aswellasthelittleguy(yourneighborhoodbar-
tender).Atthesametime,centralbanksneed
todoeverythingintheirpowertopreventwhat
beganasa healthcrisisfrommorphingintoa
financialmeltdown.
Aftersomefoot-dragging,policymakersin
EuropeandtheU.S.areswingingintoaction.
Centralbankshavecutratesandenactedmea-
surestoensurestressedmarketscontinuetofunc-
tion.Followinga March 16 videoconferencecall,
theleadersoftheGroupofSevennationsvowed
todo“whateveris necessary”toprotectlivesas
wellaslivelihoods.
The statement echoed former European
CentralBankPresidentMarioDraghi’s 2012 vow,
inthethroesoftheEuropeandebtcrisis,todo
“whateverit takes”topreservetheeuro.Butthe
G-7declaration,whichwasrepletewithgrand
promisesratherthantangibleactions,didn’t
sparka reliefrallythewayDraghi’spledgedid.
TheDowJonesIndustrialAveragecloseddown
13%onMarch16,asU.S.marketsrecordedtheir
biggestsingle-dayfallsincethe 1987 crash.
ThattheG-7statementcamejusthoursafter
theU.S.FederalReserveannounceditssecond
emergencyratecutin 12 daysraisesanominous
question:Whatif thistimewhateverit takesis
notenough?
Duringtheglobalfinancialcrisis,muchofthe
creditforpreventinga slipfromrecessioninto
depressionwenttothedecisiveactionsofgroup-
ingssuchastheG-7andG-20,whichrepeatedlysig-
naledtheirresolvetoeschewprotectionismand
beggar-thy-neighborpolicieslikecurrencydeval-
uations.Morethana decadelater,it’splaintosee
thatthebondsamonghistoricalallieshavebeen
frayedbythetradewarsandheightenedmistrust—
which risks taking the response to the present cri-
sis down a dangerous nationalist path.
By calling SARS-CoV-2 a “Chinese virus” and
abruptly imposing travel restrictions on visitors
from China and Europe, President Trump has
further strained those relationships. Chinese
officials have complained of unfair discrimina-
tion and ordered the expulsion of American jour-
nalists. The Europeans, who were irritated that
Washington hadn’t consulted with them on the
travel ban, introduced their own restrictions a few
days later, and a raft of other countries including
Canada have followed suit.
Another factor working against a con-
certedeffortisthattheU.S.—andTrump,a self-
proclaimedanti-globalist—presentlyholdsthe
rotatingpresidency of the G-7. It doesn’t help
either that Saudi Arabia, which is at the helm of
the G-20, has decided to wage a destabilizing price
war against U.S. shale oil producers. “Right now I
don’t think—given the Trump presidency—anyone
imagines the G-7 or the G-20 as an effective coor-
dinating device for a response to this crisis,” says
Adam Tooze, a Columbia University economic his-
torian and the author of Crashed, an account of
the 2008 crisis. “The only way to put this is it’s
quite disillusioning.”
It’s not just the Americans and the Saudis who
could undermine attempts at collective action. In
what Obstfeld calls a “Europe First” moment, the
European Union recently banned exports of face
masks and other protective gear to countries out-
side the bloc. Although the move was meant to
ease the flow of precious supplies within the EU,
it was also evidence of something potentially more
corrosive. “It’s not surprising that after three years
of President Trump tearing down international
cooperation the Europeans would not have a lot
of trust in any sort of U.S. leadership role or be
willing to put their interests at the mercy of inter-
national cooperation,” says Obstfeld, who’s now
at the University of California at Berkeley. “But it’s
really sad, and it doesn’t bode well for the future
and trust between countries once we as individ-
ual nations get through this panic.”
There are signs that such tussling may be only
just beginning. Die Welt am Sonntag and other
German media reported on May 15 that the Trump
administration had sought to acquire a German
company developing a coronavirus treatment to
secure its sole use for the U.S., prompting an inter-
vention by Berlin. Tooze and others see in that a
portent of a bigger fight to come, one that will
likely take the trade restrictions from the realm
of safety equipment into the far more challenging
arena of intellectual property and medicines that
pharmaceutical companies are racing to develop.
“The major players are acting as if their inter-
ests are not aligned,” says Daniel Drezner, a Tufts
University political scientist. That is one of the
major ways in which this crisis is different from
2008, says Drezner, author of The System Worked:
How the World Stopped Another Great Depression.
Then, national interests were both interlinked
by globalization and aligned in stopping a melt-
down of the financial system. The economic▼ Change in
benchmark interest
rate since Jan. 1-0.25-0.25-0.25-0.25-0.25-0.25-0.5-0.5-0.5-1 .0-1.25-1.3-2.25-1 7.0