Comment

On all fronts, Covid is making a fool of our Western democracies

After more than 40 years of globalisation and integration, deglobalisation and disintegration are fast becoming the name of the game

This might appear an odd thing to say about what seems likely to be the most consequential event of our lifetimes, but fundamentally, Covid hasn’t actually changed things nearly as much as widely supposed.

Relative Asian ascendancy and Western decline still remains the overarching story of our times. By putting rocket boosters under already established, pre-existing trends and developments, the pandemic has merely confirmed that narrative.

It’s been called the “Great Acceleration”, after the “Great Moderation” and “Great Recession”. That’s about the sum of it.

Looked at in the round, the accelerated speed of change might I suppose be considered revolutionary; yet the reality is that an already pre-ordained future has merely been brought forward into the present.

The velocity of change has been hugely increased by Covid, but otherwise there is nothing particularly new in any of it.

Be it greater home working; increasingly redundant office space; the collapse of non-food physical retail; monetary financing of burgeoning government deficits; ever lower interest rates; the closing of international borders; the pursuit of national self-sufficiency and consequent disintegration of international supply chains; the advent of more authoritarian, interventionist government; the digitalisation of the economy; rising inequality; or the now almost certain prospect of higher taxes on the wealthy and better-off, the direction of travel has been clear for a long time.

To this list I would add Western relations with China. The blame game over Covid has brought matters to a head, yet it hasn’t much changed the trajectory.

The speed of the deterioration is nonetheless remarkable. What little more than a year ago was still supposed to be a “golden era” of relations between Britain and China has degenerated into one of insults and contempt, such that China is now regarded as a hostile state.

A recent virtual event hosted by the Chinese embassy in London to mark the 71st anniversary of the People’s Republic is said to have been quickly brought to a frosty conclusion – some say an acrimonious one, with the ambassador reduced to a state of apoplectic rage – after a junior Foreign Office minister used the occasion to warn China against any further incursions on Hong Kong’s democratic freedoms.

Whatever the rights and wrongs of Beijing’s new security law, it’s just plain rude to use what is meant to be a celebratory event to criticise your host – a bit like turning up at a wedding to loudly insult the bride during the best man’s speech. The minister said to be involved, James Duddridge, isn’t even a China specialist.

The growing sense of bridges being burnt coincides with China’s new “dual circulation” economic policy, which seeks to make the country entirely self-sufficient in technology, energy and just about everything else.

To that end, Huawei is planning a microchip manufacturing facility in Shanghai to support its wider ambitions in telecoms infrastructure. This is a matter more of necessity than choice; American firms, which dominate chip manufacturing, have been banned from supplying Huawei and other Chinese groups.

But Covid has compounded the sense of decoupling, reinforcing both Western and Chinese suspicion of each other and their determination to achieve economic self-reliance.

After more than 40 years of globalisation and integration, deglobalisation and disintegration are fast becoming the name of the game.

I don’t want to exaggerate; trade with China remains extensive, and in some areas still actually growing. We remain highly reliant on China for a vast array of goods, including personal protective equipment to fight Covid.

If the UK Government’s aspirations on climate change are ever to be realised, moreover, China has to come on board with meaningful commitments, and it requires climate change technologies widely to be shared internationally.

So the door needs to be left ajar. For the moment, however, it’s being slammed shut.

While Britain stupidly finds itself sucked into America’s war on China, many US businesses don’t seem to take it quite so seriously. Vanguard, Blackrock, JP Morgan and Goldman Sachs have all recently announced significant new investment in China.

Their calculation is that Donald Trump and Xi Jinping don’t matter in the long run. Much more important is that China is a vast and fast-growing market, and likely to remain so whatever the shifting sands of political leadership.

British businesses are meanwhile told to stay as far away from China as possible. Those with established positions in Hong Kong and the mainland, such as HSBC and Standard Chartered, are condemned for the apparent kowtow with which they defend their business.

There is a certain arrogance in the Government’s belief that its own voice still matters on the global stage; it doesn’t in these regions unless prepared to act in an economically and politically pragmatic way. Defeating Covid requires global cooperation, but for now it only succeeds in driving us further apart.

This is as much China’s fault as that of the West, perhaps more so. Entirely reasonable Australian demands for a full-scale World Health Organisation investigation into the origins of the disease have been met with swingeing tariffs on goods by way of punishment.

It sticks in the craw that while Western nations still struggle with the challenges of a second wave, life in China and much of the rest of Eastern Asia seems to have returned to normal. China will be the only major economy to show any growth this year.

That defeating Covid seems to require Europe and America to become more like China is an irony not lost on the Chinese leadership, which routinely contrasts for propaganda purposes its own supposed success in containing the virus with apparent Western failure.

It’s a depressing conclusion to reach, but Asian ascendancy and Western decline are threatening to be hard-baked by Covid into the march of history.

On multiple fronts, the pandemic is making fools of our Western democracies.