Covid-19 may have done more than alert the world on the need for much closer coordination in disease control; the pandemic has rearranged global power altogether.
In the wake of the pandemic, global superpowers like the US, Russia and China are all finding their footing and attempting to reassert their command.
- The effects of Covid-19 have caused a global power shift
- Business recovering to pre-covid status
- Africa pushing to self-produce vaccines
In a 2020 paper titled ‘Global order in the shadow of the coronavirus: China, Russia and the West’ (It’s time to rethink global governance and its priorities), the author, political and economic scholar Bobo Lo contends the following:
‘The Coronavirus pandemic has thrown a harsh spotlight on the state of global governance. Faced with the greatest emergency since the Second World War, nations have regressed into narrow self-interest. The concept of a rules-based international order has been stripped of meaning, while liberalism faces its greatest crisis in decades.’
The author also sees former world leaders stuck in a finger-pointing bout: ‘Western leaders blame today’s global disorder on an increasingly assertive China and disruptive Russia. Yet the principal threat lies closer to home. Western governments have failed to live up to the values underpinning a liberal international order — a failure compounded by inept policy-making and internal divisions.’
True to the author’s train of thought, we can learn a lot from what happened when oil prices plummeted, and as if anchored to crude, the dollar value went tumbling right after—double trouble for the US. Share values for US futures on crude oil prices hit rock bottom, negative four (-4.0) US dollars.
As US futures for oil price free fell, the country’s economic prowess was put to the test and still is. The already challenged economic supremacy of the US by rising powers like China took a great blow from the effects of the pandemic.
The pandemic was hardly over when the Russia-Ukraine war broke out. Some argue that the war is a sign of decreased supremacy in the West versus increased economic powers in China and oil-rich Russia.
The ripple effect can be felt in Africa, with several countries arguing that the Russia-Ukraine war’s economies and budgetary plans were and still are affected. Is the pandemic possibly hammered in the last nail on the West’s economic coffin?
Probably not but the shift can certainly be felt.
In the paper, Lo suggests that in the aftermath of the pandemic, “…two broad narratives of international relations have emerged in recent years.”
“The first is that the liberal, rules-based order is on its knees. Geopolitics is king. And great power rivalry once again defines world affairs,” writes Lo.
“The second narrative asserts that a rising China and a resurgent Russia are the main culprits in the destabilisation of global order. They act in flagrant defiance of its norms, threatening their neighbours, exporting authoritarianism, subverting democratic processes, and undermining multilateral institutions. Moreover, they are not just individually malign; their burgeoning partnership has a multiplier effect, compounding the threat to the liberal order and the global primacy of the United States.”
The global economic power shift is evident.
The Covid-19 economic impact in Africa
Being mostly reliant on the export of raw materials and tourism, Africa suffered a great deal from the Covid-19 lockdowns and travel restrictions that were enforced to control the spread of the virus.
While Western pharmaceutical companies benefitted from producing and selling Covid-19 vaccines, protective masks and other medical treatment aid materials, were there benefits to Africa or African companies?
While the ethical aspect of this outcome can be argued, the monetary gains amassed are a reality that cannot be ignored. Giants like Moderna, BioNTech, and Pfizer are enjoying upwards of 69% profit margins along with tax breaks.
Consider this report by the rights group People’s Vaccine Alliance: “Thanks to their patent monopolies for successful vaccines against the coronavirus, development of which was supported by $100 billion in public funding from taxpayers in the US, Germany, and other countries, the three corporations earned more than $26 billion in revenue in the first half of the year, at least two-thirds of it as pure profit in the case of Moderna and BioNTech.”
Worse still, the Alliance also purports that “…the three corporations are over-charging, pricing vaccines by as much as $41 billion above the estimated cost of production.”
As Africa continues to push for ‘rights to produce Covid-19 vaccines’ not for the related pecuniary benefits but ‘to reduce the cost of purchasing Covid-19 vaccines’ from the West, there have been some pandemic-related financial gains for Africa as well.
The most apparent gain was the fast and steady rise in the price of gold. During the pandemic and even now, gold prices have continued to increase steadily as the world secures its wealth in gold over the dollar.
Gold-producing countries like Zimbabwe and Tanzania in the East and Zambia and Guinea in the West have all stood to benefit. How much this monetary gain has ‘see-sawed’ a balance to the related economic loss is arguable.
This is a direct gain, but the fall of crude oil prices pre-Russia-Ukraine war during the pandemic saw oil importers in Africa save some money. During the pandemic, travel was restricted both for people and goods, which caused a decrease in demand for oil.
It is also argued that just prior to that period, there was a general increase in supply, which all together forced the price of oil to decrease. You will recall this is the period that large oil producers like the US resorted to slashing production in an effort to control the price of oil.
It did not work because by the time the US and other oil producers woke up to the reality, most importers already had a considerable amount of reserves and so the price of oil inevitably decreased.
On the other hand, the drop in oil prices meant a positive balance of payment for the importers. You have countries like Tanzania, where oil makes up more than 20 per cent of Tanzania’s imports; the price decrease significantly impacted the country’s balance of payments.
A favourable balance of payment translates to good exchange rates for the shilling against the dollar. A strong shilling means more value per shilling, allowing the country to make even larger purchases or investments.
Another aspect is the fact that a decrease in the oil price should translate to similar, if not multiple decreases in the cost of doing business and even the cost of living. This is because the cost of transportation is expected to fall, and with it, the cost of the goods being delivered is another gain for Africa (where borders were not closed during that time).
Also, in economic terms, there is a difference between an increase or decrease and rise or fall in price. An increase or decrease in price means a short-term price hike or price drop, which is what we expected to see during the period of oil price increase/decrease.
On the other hand, rise/fall in price refers to persistent increase/decrease over a prolonged period. When this happens, we see sustained inflation or deflation, that is, the general increase or decrease in the price of goods and services over time.
All in all, according to authoritative reports and mainstream media publicity, the pandemic has caused a global economic slowdown and the worst affected is Africa.
Countries like Tanzania, which rely heavily on tourism (25 per cent of GDP), were worst hit. The related closure of hotels meant an immense loss in jobs that are yet to be recovered even as the sector struggles to get back to pre-Covid-19 levels.
Stringent fiscal policies have had to come into play to help economies regain pre-pandemic status. Governments enforced monetary policies to cushion their economies from the effects of the pandemic. However, to date, the negative effects of the virus can be felt at all levels and in all sectors of each and every economy.