Let’s not be fooled: There’s nothing external & symmetrical in the global economic downturn

by | 8 Apr 2020

On January 23rd, the lockdown of 60 million people in the Hubei province, where CBNC calculated that almost 80% of the Chinese Gross Domestic Product is realized, had already dealt a severe blow to the global offer of goods. For the whole month of February, global supply chains dependent on Chinese inputs slowed down, redirected purchasing strategies, failed to replenish shelves and postponed the expected delivery dates.

Towards the end of February, when the intensity of the contagion started becoming evident in Italy and the rest of Europe, the short-term economic wave generated by the loss in Chinese offer triggered a long-term tsunami combining elements of a global shrinking offer, impoverishment and rapidly falling demand. In reaction to the threat, governments across the board implemented “lock downs”, the sole measure to guarantee some degree of social distancing and reduce the pressure on (often underfinanced and underprepared) health systems. At the moment of writing, more than three billion people are under emergency measures adopted to reduce the diffusion of the virus. Yet, the lockdowns have transformed the biological threat into a full-fledged socio-economic thunderstorm.

All over the planet, millions of people are losing their jobs and source of income at an unprecedented pace. Employees and self-employed alike, after only few weeks of lockdown they face evictions, food insecurity, loss of livelihood, domestic violence and a set of conditions that can lead to social instability and diffused unrest. In addition, people who had no job to start with, depended on family, relied on food donations, were kept healthy with the support of volunteers, etc., have seen their lives totally subverted. On the other hand, enterprises that do not have demand for their products or have been required to shut their operations are facing the risk of defaulting on their loans, losing market access, wasting their stocks and reaching a financial condition that will impede the re-establishment of their activity once the lockdown will be revoked. The death toll of the virus may look insignificant in the face of long-term unemployment, socio-economic insecurity and intensification of intra-state and inter-state inequality.

The need for a rapid and significant public intervention in the economy is not gone unnoticed. Heads of state, ministers of finance, governors of central and regional banks, academics and experts all over the world agree that there is no space for bootstrapping and that public authorities have to find a remedy for the individual and collective socio-economic consequences of the biological pandemic. In the Global North, public are reaching and will potentially overtake the post-Lehman Brothers injection of liquidity.

In the United States, for example, the $2 trillion coronavirus stimulus package that was signed on March 27th includes $1200 direct payment to individuals, extra assistance for people in condition of unemployment, $549 million for the Emergency Food Assistance Program, $77 billion in grants, loans or loans guarantees to the airline industry, and a $500 billion lending program in favor of Main Street businesses and manufacturers. In the European Union, a coordinated intervention has been promised but has not materialized yet. The EU Ministers of Finance and the European Commission has agreed that the conditions are met to trigger the ‘general escape clause’ and allow Member States to depart from the budgetary requirements that would normally apply under the European fiscal framework. The European Central Bank has announced a €750 billion plan to purchase states’ bonds. A Corona Response Investment Initiative worth €37 billion is underway to support new infrastructures. The European Stability Mechanism has announced its intention to lend its €410 billion to Member States, although agreement has not been found yet on procedures and implications. For the moment, individual countries are trying to structure their own rescue packages and draw on different combinations of state guarantees, guaranteed loans and fiscal measures to avoid the possibility of social collapse. On both sides of the Atlantic, the goal is to absorb the shock and let the economy thrive again afterwards.

The size of the stimulus is significant and justified by the rapid crumbling of economies all over the world. Yet, the panic generated by the state of biological and social emergency risks to obfuscate our sight and prevent us from asking questions concerning the rationale, implications and significance of the way in which we look at the economic downturn and at the possible solutions. This is true at the regional level, but also at the level of globally interconnected economies and lives. If we were on the Titanic, EU and USA policy makers and economic advisors would not be the wealthy aristocrats rushing to the lifeboats they would be sitting on the deck of the boat, after the crash, claiming that the noise has been just a shock, and offering financial incentives to all passengers (individuals or corporations alike) to get back to dancing, eating, gambling and enjoying the ride. Before they jump on the lifeboats, of course. How is it possible that, once again, a crisis does not teach us anything about the inherent and systemic limits of our economic system? How is it possible that, after Lehman Brothers, Occupy Wall Street and the claim that public money would have not contributed to reinforce an economy that had failed, we are incapable of realizing that our economy is on a full-speed train bound to social and environmental catastrophe ? The answer is simple: we must pretend that this time, “things are different”.

If the shock is external, once we fix it everything will be fine.

For those how had the chance to read some of the statements coming from both US and EU financial experts, they all seem to have learned the same nursery rhyme: the current crisis has nothing to do with the 2008 financial crisis. Twelve years ago, the economy was subverted by the systemic risk deriving from an internal shock that hit countries asymmetrically. As exemplified in the letter that the Eurogroup President wrote on March 24th to the President of the European Council, today’s narrative is that the world is facing an external event that is not linked with the fundamentals of the market and the economy (i.e. exogenous), that is hitting every country in the same way (i.e. symmetrical) and that must be addressed with a prompt and collective reaction aimed at re-establishing the status quo.

Similar to a biological pandemic, the economic earthquake is defined as a crisis produced by an external shock, i.e. as the sudden and unanticipated change that is the consequence of an exogenous element that pushed the global economy out of its ‘normal’ cycle. Both the virus carried by bats that jumps into the human species and the lockdown of whole countries that jumps into the global supply chain equilibrium are thus described as unexpected and unpredictable events. (Start new sentence here) interruption of the normal time of peace – moments of crisis like a war or an invasion- that must be fought until equilibrium and prosperity are brought back.

Once the responsibility for the economic meltdown is allocated to unexpected changes that took place outside of the economic system, three intertwined intellectual processes are triggered:

  • firstly, we assume that the economy is completely detached from both society and the planet, as if what happens in social and environmental systems (including climate change, disasters involving natural hazards, wars, etc.) is separate from the economy as the simple organization of the factors of production.
  • Secondly, we are invited to find solutions and proposals to internalize and redress the external shock rather than explore the underlying flaws of the economy and the way in which it contributed to the propagation of the shock. While there is some realization that the economic slowdown is intensifying some people’s vulnerabilities, the mainstream belief is that this problem will be rectified once the economic machine is back on track.
  • Finally, when we define a shock as external and unforeseen, we embrace the rhetoric that we need solutions to go back to a more resilient ‘normality’ based on the most efficient use of resources. We only need to go back to the pre-covid19 economic condition, apply the same premises and objectives and internalize the risk of how pandemic can spread and how we can avoid the contagion (algorithms, drones, long-term social distancing, etc.).The risk of aiming to a biologically more resilient pre-coronavirus economy is that we normalize and put aside the conflicts, tensions, inequalities, fragilities, vulnerabilities and intersectional injustices that riddled the ‘normality’. We convince ourselves that covid-19, like the iceberg for the Titanic, is the cause of the crisis. Not the way in which the boat has been structured (efficient use of beds in hospitals and just in time logistic), the speed at which it was going (the growing level of debt and financialization of economies), the lack of lifeboat (empty beds in intensive care, a self-sufficient food system, enough medical supplies and enterprises capable of producing them), the hierarchical division in classes and the possibility to lock people behind bars, etc.

The implications of this are clear in the measures adopted in the USA and proposed by EU Member States: funds directed to the health care system to buy the material that it needs to face the surge in hospitalizations; temporary money to support unemployment; credit lines to corporations to overcome the supply and demand shock; bridge investments to guarantee the survival of industries during the lockdown; a temporary suspension of the repayment of mortgages and debts. All these measures approach the current situation as a temporary and challenging parenthesis in an otherwise prosperous, vigorous and well-functioning socio-economic journey. However, are we sure that the shock was external? Do we truly believe that the internal conditions of the socio-economic status quo had nothing to do with the rapid propagation of both the biological and economic crisis?

Covid-19 is the mutation of a virus present in wild animals that infects human beings. As such, it has been characterized as exogenous to our society. Yet, if we consider the circumstances where the transfer of the virus took place, we are forced to reconsider this assumption. The virus, according to the most diffused reconstruction, was transmitted to a human by an animal kept in captivity in a wet market of Wuhan. The pandemic outbroke in a space, the food market, that is an integral part of human societies and that represents a specific way in which humanity treats and deals with animals. Cages. Confinement. Domination. There is nothing external in the way in which people see and treat nature and animals. In fact, there is no externality when we consider the inextricable relationship between society and nature in economic theories, where capitalism or socialism merely define the relationship between the two. When we define covid-19 as external to our society and our economic system, we are creating imaginary boundaries that do not reflect the centrality of animals and nature (along with human labor, capital, etc.) in structuring them. When we define the pandemic as exogenous, we turn a blind eye to the socio-ecological interconnections that underly the economy and the need to rethink human’s approach to the web of life.

In addition, the diffusion of the pandemic and the way in which it spread across the planet are embedded in political decisions that were (or not) taken and that were often justified on the need to protect productivity and competitiveness. The propagation of the contagion (size and intensity) is the result of endogenous political processes and economic decisions rather than the virus itself. Secondly, the intensity of the economic shock is undoubtedly related to the shape and characteristics of global supply chain capitalism as an interconnected, interdependent and highly fragile set of actors, geographies, laws and resources. Furthermore, the economic fragility of national economies is clearly intertwined with the high level of indebtedness, the promotion of expansionary business practices leveraged by loans and the continuous search for economic growth. To claim that the economic crisis is external means ignoring the role that socio-economic structures, rules and business strategies have in absorbing or exasperating the effects of lockdowns and slowdowns.

Covid19 as a symmetric economic leveler: we are all hit in the same way (or not?)

If the shock is symmetrical, we are taught by economics textbooks that it will affect all regions or sectors equally. Global recessions, for example, may have uniform effect across a whole region or a sector. As a biological threat that is rapidly spreading around the world and has provoked similar consequences (increase in patients in intensive care, needs for more medical equipment, crisis of supply and demand, etc.) and led to similar responses (lockdowns, social distancing, isolation, etc.), the corona-crisis is thus defined as economically symmetrical. We are in this all together and all countries must contribute to halt the biological pandemic and to preserve the economy. Once more, this trend to universalize “one size fits all” approach to the crisis as a leveler that requires coordinated efforts has significant intellectual repercussions and defines the search for solutions.

At the macro level, the idea of a symmetric crisis discounts the fact that sectors which are particularly dependent on the continuous flow of global supply chains have been affected more severely than others. Wuhan, where the outbreak began, is the planetary epicenter of the automotive and electronic sectors: its lockdown at the end of January had already impacted these value chains and produced domino effects throughout the world. At the same time, the idea of the crisis as a contemporary version of the ‘Great Flood’ that hits all economies in the same way is forgetting to mention those sectors (like logistics, distribution, digital services, production of medical device, financial investors who hedged or bet on covid19 as a ‘black swan’ etc.) that are benefitting from the crisis.

Moreover, the notion of a symmetric shock fails to recognize that countries’ health systems are hit differently depending on the amount of resources, infrastructures, staff, etc. that is available. Like human beings, also economies can have antibodies ready to resist the virus. Strong, well-organized and accessible health systems that can deal with the diffusion of the virus reduces the impact of the shock on both the population and public finances. Similarly, wide-spread safety nets for households and individuals, unemployment schemes, self-sufficient and vigorous food systems are structural elements that can limit the economic contagion. This is the case within individual countries and at regional level too.

Thus, the hardship of the coronavirus in Italy and Spain, two of the countries that were most hardly hit by the austerity measures imposed by the European Union in 2011, cannot be dismissed as a geographical or cultural fact but must be linked with the lack of medical infrastructures, the fear of paralyzing a highly indebted economy and the difficulty with which governments can access further credit. Similarly, the diffusion in the United Kingdom must be linked both with the unprepared response of the Government and with a decade of conservative governments that have impoverished the National Health System to the bone and have slashed the public benefits scheme. And there is no doubt that the social and economic toll is going to be even greater in countries in the Global South that have been structurally impoverished, that are kept under the yoke of international debt and where access to treatments depends on people’s financial condition or the affordability of an insurance.

At the micro level, the idea that we are all on the same boat – or all flooded – provides an opportunity to turn a blind eye to the patterns of discrimination, marginalization and subordination that already characterized our economies before covid-19. “We are all in lockdown.” “We are all struggling.” “We are all going to be better.” These are some of the phrases that circulate on social media and are hanging from balconies across the planet. Yet, are we? I am sitting at my desk with a good internet connection that allows me to give classes online. The apartment where I live in the capital of a European country that is not experiencing overcrowded intensive care units has large windows that let the sun comes through. I have an employment contract that has not been affected by the lockdown of the University I work for and the salary that I receive gives me the security to pay rent on the 1st of the month.

For sure, I could lose my job if no more students were to enroll in the University in the coming years, but this is a very remote opportunity. Am I in this crisis in the same way of doctors, nurses and households who have been directly affected by the virus? And what about the people who have to go to work and expose themselves to the risk of contagion, those who lost their jobs, those who do not have access to internet, those who cannot self-isolate, those who are going to default on rent, their mortgage or any other debt that hangs on their head? My socio-economic exposure to the crisis has nothing to do with that of the workers of the informal sector, the factory workers of global supply chains that have cancelled their orders, the people without health insurance in countries where you have to pay to be treated, the prisoners and refugees behind bars despite the risks that it means for their physical and mental health.

The crisis is not symmetrical because the pandemic is spreading across households and countries characterized by pre-virus asymmetrical conditions. The health and economic tsunami is not affecting countries in the same way because they are not equally capable of absorbing it. It is not affecting people in the same way because we were not all in the same social, economic and cultural condition when the lockdown was declared. Because conditions were not symmetrical to start with, the economic meltdown is not impacting our present equally and – therefore – it is going to have very asymmetrical impacts on our futures. Thus, why are we talking about a symmetric crisis? This can be explained because the idea of symmetry, in line with exogeneity, is functional to a discourse that places responsibility outside of the system and dismisses any consideration of the root causes that lie within.

Symmetry and externality reinforce the narrative that policy’s goal is to absorb the shock and the promise that we will prompt go back to normality. They dismiss the claims for a different economy that is not highly fragile and inequal. They comfort us in the perception that hitting the iceberg was not a reason to rethink the way of building and conducting boats. In cooperation with the vocabulary of war, we are convinced of the existence of an enemy out there (whether visible or invisible, it does not matter). We are asked to fight together. To struggle together. To suffer together. To win together. But we are not. Our futures are not. And, unless we radically change our understanding of the economic crisis and the responses that we formulate, we will be even more apart.

Changing perspective as a first step to change the solutions

Few days ago, a phrase was projected on a building of Santiago de Chile ‘No volveremos la normalidad porque la normalidad era el problema’ (We will not go back to normality because normality was the problem). This sentence resumes the need for a change in the way we confront and engage with the economic meltdown create by the rapid diffusion of the coronavirus and the national attempts to confine contagion by locking down people and enterprises. Covid-19 is not an external enemy that has created the fragility of lives and economic structures in the context of hyper-accelerated financial capitalism. Like the Lehman Brothers’ bankruptcy, the coronavirus has unveiled the shaky and unjust foundations of the contemporary world. A world where 2019 represented the best year for financial markets since the 2008 crisis and yet imploded at the first sight of a slowdown.

If we do not want to go back to the ‘normality’ of a socially, economically and environmentally (i.e. ecologically) unjust world, we cannot accept the idea that we are experiencing an exogenous and symmetric shock. We cannot accept that the struggles of billions of people around the world are transitory and contingent. We have to reject the narrative that ‘everything will be fine once the biological threat it is over’, because nothing was fine before covid-19 jumped from animals to humans. We have to recognize the role that supply chains’ interdependence, privatization of public services, lack of adequate safety nets, precariousness of labor, unprecedented reliance on debt, cheap money, extractivism, and individualization have played in building a world where the flap of wings of butterfly in Wuhan can trigger a socio-economic tsunami never experienced before.

By using fiscal and monetary policies to absorb the shock and go back into business, we are denying the severity of the problem. We need to look inward. To understand and assess the endogenous causes of the instability and inequality that existed before the pandemic we can think of a society that will be truly regenerative and resilient. We have to realize that the past asymmetries affect present responses to the virus and contribute to generating divergent futures for states, people and the planet. We have to accept that there is nothing exceptional or unique in the situation that people and economies across the world are experiencing. We have to mobilize for short-term responses that guarantee global mental and physical care. We have to organize around long-term political visions that reject business as usual.

The journey towards a subversion of the relationship between people, planet and economics will not be an easy one. In many parts of the world, people are witnessing militarization, authoritarianism, state violence and the use of the virus as an opportunity to intensify control, hierarchy, capitalism and domination. In the meanwhile, the last week on both sides of the Atlantic has also proved that impossible may become possible when there is the political will. A republican and anti-state intervention government in the USA approved largest public stimulus in the history of the country and compelled a car manufacturer to produce ventilators by invoking a piece of legislation. The European Commission relaxed the budgetary rules that had been used only nine years ago to discipline, sanction and subjugate Member States like Greece, Italy, Spain and Portugal.

Will the pretention of a symmetric and external shock become another opportunity to reinforce geographical, economic and cultural divides, widen the abyssal gap that has been constructed over centuries of colonialism and imperialism? Or will we be capable of highlighting historical, present and future inequality that covid-19 has unveiled do the only thing that matters: imagining a world where the impossible becomes possible, where the true emergency of climate extinction is addressed, and where conditions are in place so that social and economic fragilities do not compound the effects of biological threats?


  1. A good piece. Thanks. As long as profit is the engine of the system, the system has to be replaced. Profit determines state actions as well as corporations actions. Profit also determines the type of crisis and social conflicts. Profit also determines where wealth goes and which class or classes suffer and which sclass survive better in disasters shether it is war, tsunami, pandemic.

  2. Please, rectify that “start a new sentence…” in the 8th paragraph.


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