The COVID-19 pandemic is a Rorschach test for society: everyone sees something different in it, and the range of political and economic responses to the crisis can leave us feeling overwhelmed.
This book cuts through the confusion, dissecting the new post-coronavirus capitalism into several policy areas and spheres of action to inform academic, policy and public discourse.
Covering all the major aspects of contemporary capitalism that have been affected by the pandemic, Andreas Nölke deftly analyses the impacts of the crisis on our socio-economic and political systems. Signposting a new era for global capitalism, he offers alternatives for future economic development in the wake of COVID-19.
Even in a world of global production networks, trade policies remain important for capitalist economies. They regulate the conditions under which goods and services may cross borders; for example, by imposing tariffs or regulatory norms. Countries can choose more liberal or more protectionist policies. With the onset of the coronavirus crisis, several governments have implemented protectionist policies; in particular, by limiting the export of medical supplies. Moreover, we can observe increasing indications of a public discourse that turns against trade liberalization. Political economy approaches help us to identify the motivations behind these policies and declarations, as well as the consequences for the institutions of global trade governance. Should we continue on this path to a somewhat increased protectionism or move back to trade liberalism?
International trade policies are the most established topic in International Political Economy scholarship. Each textbook features at least one comprehensive chapter on the topic; some, a whole series of chapters (Oatley, 2019). While there is a long list of trade policy instruments and institutional settings, as well as a great variety of theories on how to explain trade policies, the core issue always is the juxtaposition between free trade and protectionism.
Proponents of free trade claim that a specialization of countries based on their comparative advantages leaves everybody better off. While Adam Smith highlighted the importance of specialization for enhancing productivity due to economies of scale, David Ricardo demonstrated that trade can also improve overall welfare when one country has absolute advantages on the production of all goods and services.
During the coronavirus crisis, the fast production of pharmaceutical products to detect, prevent and heal virus infections has become an issue of utmost urgency. At the same time, this has led to the question why products related to similar diseases have not been produced much earlier. Some observers have argued that this neglect is due to the limited financial incentives for the pharmaceutical industry, particularly with regard to vaccines. Moreover, after the development of vaccines, their mass-scale production arguably was limited because pharmaceutical companies were worried about the loss of their intellectual property rights. Whereas the one side argued that patent protection should be relaxed or even abolished in order to make vaccines quickly available to as many people as possible – most notably including the global poor – the other side warned that this proposal would weaken the incentives for pharmaceutical companies to invest resources into vaccine development in the future. Which side has the better arguments?
During the last decades, the pharmaceutical industry has been a prime topic for students of International Political Economy, particularly because of the controversial debates on the protection of intellectual property rights by international institutions such as the agreement on Trade-Related Intellectual Property Rights (TRIPS) of the World Trade Organization (WTO). At the background of these debates are four fundamental trends that have increased the importance of intellectual property during the last decades (Balaam and Dillman, 2014: 238). First, it has become increasingly obvious that economic growth and political power today more and more depend on knowledge and human capital in fields like engineering and ICT, instead of traditional resources such as control of land.
With regard to global governance, the most striking development during the coronavirus crisis was the decision of President Trump – withdrawn by President Biden – to leave the WHO, based on an allegedly too prominent role of the Chinese government in this organization. Later during the pandemic, limitations of global health governance became an issue because it turned out to be very difficult to safeguard an equitable global distribution of scarce vaccines and global health institutions were unable to prevent ‘vaccine nationalism’. For some observers, finally, global health governance has been fundamentally flawed for many years, because of the prominent role of private actors such as the Gates Foundation. Do we need to return to the intergovernmental system of the WHO or should we proceed with giving a major say to private–public networks?
The study of global economic governance provides us with ample analytical instruments in order to put these developments in place. For uninformed observers, the WHO may look like the powerful global authority on all health issues. International Political Economy scholars, however, are well aware that the power of the WHO – like that of all UN organizations – is severely circumscribed.
International organizations such as the WHO fulfil two main functions. On the one side, they act as meeting points of national governments for the development of common rules and activities. On the other side, the secretariats of these organizations have important functions for the impartial collection of data, research and recommendations on global best practices.
During the coronavirus crisis, governments have raised massive debt in order to combat the health emergency. However, many countries of the Global South already had high levels of public debt before the coronavirus crisis. Correspondingly, we may witness a new global debt crisis soon. Led by the G20, the IMF and the WB, creditor governments have reacted to this problem by temporarily relieving low-income governments from debt service. The question is whether this is enough or whether they have to permanently write off some Southern debt. International Political Economy scholarship provides us with a number of analytical instruments to tackle this question.
Taking up public debt is not necessarily a bad idea for countries of the Global South. Processes of economic catch-up often require huge amounts of public funds, often much higher amounts that are available domestically via tariffs, taxes and other public sector sources. Correspondingly, governments sell securities and bonds in order to raise additional resources. Depending on the income group of the country, governments address different sources for foreign debt. Upper-middle-income countries usually have a good access to international capital markets; that is, private creditors. For lower-middle and particularly low-income countries, both international organizations – in particular, multilateral development banks such as the WB – and Northern governments (via bilateral cooperation) are more important sources of loans.
In most cases, debt is issued in the currency of the debtor country. Other governments, however, have denominated their debt in foreign currencies (for example, the US dollar), due to the need to pay imports with these currencies.
During the coronavirus crisis, the use of disposable gloves and plastic containers for goods surged. In the mindset of many people, the war on the environment took the backseat for a while. But will it return to the front seat in the era of post-corona capitalism? Among environmental activists, the coronavirus crisis gave rise to hope, that this crisis is an ‘opportunity’, a trigger, for change. But will it be a change in the ‘right’ direction? Work on global environmental change in International Political Economy helps us to answer these questions in an informed and structured manner (for discussions in Environmental Studies with relevance for Political Economy, see Chapter 25).
In contrast to other issue areas in International Political Economy such as trade and finance, the epistemic authority of scientists is particularly relevant with regard to climate change. It took not only this authority to get the topic of climate change onto the international agenda at all, but this authority became to a surprising degree contested. The questions whether climate change exists, whether it is dangerous and whether it is man-made still are contested by sizeable minorities, in spite of the overwhelming scientific evidence that answers these questions affirmatively (O’Brien and Williams, 2016: 250–1, 256). As we shall see, this problem returned during the coronavirus pandemic. When people agree on the highly dangerous and man-made nature of climate change, this leads to the question where it exactly it is coming from. From an International Political Economy perspective, the role of economic globalization for the causation of climate change is particularly relevant (Dauvergne, 2020: 386–9). How did the temporary retreat of globalization during the pandemic affect climate change?
Many people see the outbreak of the coronavirus pandemic as a more or less necessary consequence of capitalism and its inherent growth imperative. Correspondingly, they perceive the pandemic not only as an urgent warning sign, but also as a unique opportunity to overcome the focus on economic growth. This is assumed to be even more pressing, given the climate crisis and the close linkage between economic growth and carbon dioxide emission (see Chapter 24). Is degrowth a realistic perspective or is it a fantasy that cannot be realized, due to economic or political reasons?
Traditionally, discussions about degrowth did not play a major role in IPE debates. However, during the last decades IPE scholars have started to engage with debates in Environmental Studies between ‘technocentric’ and ‘ecocentric’ approaches to sustainability (O’Brien and Williams, 2016: 246–9). Both perspectives agree on the urgent need to protect the environment, but they disagree on the relative weight of this objective against other objectives. From a technocentric perspective, the main function of the economy is to satisfy human needs. In an ecocentric perspective, human needs are balanced with the concerns of all living organisms. A technocentric perspective assumes that economic growth is possible without ecological degradation in principle, even if it has been tightly coupled so far. Crucial instruments would be taxes on carbon dioxide emissions and technological innovations. An ecocentric perspective is deeply sceptical of modern industrial growth and assumes that it is incompatible with ecological preservation.
The ‘degrowth’ concept is a particularly prominent articulation of ecocentric approaches. The basic assumption of the degrowth movement is that, sooner or later, the climate change crisis will lead to natural disaster, which entails much loss of human life.
The likely origin of the coronavirus in a Chinese wet market, but also food shortages during the crisis have led to additional attention to the global food system. Many observers criticize the latter severely, because its expansion has led to a loss in biological diversity and has brought people too close to wildlife, thereby increasing the risk for zoonotic diseases in the future. Were the developments in Wuhan an isolated accident or is the systemic criticism of the international agricultural and food system warranted? At stake is not only the increased risk of zoonotic diseases, but also widespread hunger. According to the World Food Programme, the pandemic has increased the number of people with acute hunger by more than 80 per cent, towards 270 million people (WFP, 2020: 6). Should we take this observation as an indication to focus agriculture upon local community support or should we further its integration into global supply chains?
Political economy scholarship can assist us in dealing with these questions by highlighting a number of structural features of contemporary agriculture and food production. Put very simply, scholars working on the ‘international political economy of food and hunger’ (Balaam and Dillman, 2014: 460) distinguish between transnational agribusiness and its global supply chains on the one hand and local agricultural production for local needs on the other. Which of the two fundamental alternatives gains support through the coronavirus pandemic?
Issues of agriculture and food are not only important to Political Economy because of continued hunger crises and the role of agricultural exports as major problem for the conclusion of global trade negotiations, but also because the economic features of food production changed very dynamically during the last decades.
The coronavirus pandemic emerged in a historical situation where the political relations between China and the US, not only the two largest economies, but also the contenders for global economic hegemony, grew increasingly tense. The pandemic has put fuel onto the fire of this rivalry. While the US blamed China to be responsible for the emergence of the pandemic and for undue influence in the WHO, China used its early economic recovery to strengthen its ties to countries globally. How will the pandemic influence the balance of power between these two economies?
During the last two decades, much International Political Economy scholarship has studied the emerging economic rivalry between China and the US, even if it did not yet find much reflection in the major textbooks. While the discussion during the 2000s mainly focused on the question whether the rise of China would be aggressive or peaceful, it increasingly turns to the question of the stability of the US-led liberal global order during the 2010s. During the first debate, the core contenders were ‘power transition theory’ and ‘offensive realism’ on the one side, arguing that the rise of China would lead to military conflicts, and liberal as well as constructivist scholarship on the other side, predicting that this conflict can be avoided, due to economic interdependencies and the socialization of China into a cooperative behaviour (Nölke, 2015: 657–8). The second debates focused on the challenges that China poses for the US-led ‘Liberal International Order’ (LIO).
The coronavirus pandemic was a novel challenge for the EU. The purpose of combatting a pandemic was not part of its process of evolution. Still, many observers – both inside and outside the EU – assume that it should be able to play a major role in fighting the pandemic and the subsequent recession. The core question with regard to the EU – as always – is whether it leads to more European integration or rather to an erosion of the Union.
Over the decades, European Union Studies has emerged as a major research field of its own, with a multitude of specialized journals and academic associations. Still, from an International Political Economy perspective the core question still is to explain why countries are willing to pool a substantial amount of sovereignty in order to tackle common challenges (Balaam and Dillman, 2014: 295–7; Ravenhill, 2020: 159–61). The EU is by far the most impressive case of sovereignty pooling in the global political economy. Whereas the European Community during the 1950s was a group of completely sovereign states with limited cooperation in selected issue areas, the EU during the 2020s not only encompasses nearly all issue areas, but also holds supranational competences over many fields of economic policymaking.
To explain this development is the task of the classical theories of European integration, although the latter are only a small part of EU scholarship. Again, there is a whole range of theories that seek to explain why EU sometimes moved on with allocating new powers to Brussels and why they sometimes failed to do so, notably including theories of Critical Political Economy (van Apeldoorn and Horn, 2018).