Get Ready for Closed Borders and Crashing Markets

Markets took a new tumble on Monday as WHO indicated a global pandemic may be on the way. If coronavirus becomes 2020’s biggest story, what should the world prepare for?

A disinfection professional wears protective gear at the National Assembly in Seoul on Feb. 24.
A disinfection professional wears protective gear at the National Assembly in Seoul on Feb. 24. Chung Sung-Jun/Getty Images

Global stock markets dropped steeply on Monday amid fears that the coronavirus could be having wider economic impact than thought. Meanwhile the World Health Organization (WHO) announced Monday morning that a global pandemic of the coronavirus hasn’t yet arrived—but is highly possible. That’s an opinion increasingly shared by epidemiologists, especially as outbreaks struck multiple countries over the past week: South Korea, Iran, and Italy. Cases of transmission with no traceable link to the origin of COVID-19 in China are becoming more common. Frighteningly, deaths are emerging in countries with few reported cases, suggesting a much wider undetected pattern of infection.

If this happens, no other story will be more important in 2020. It’s been many years since the world faced outbreaks of this scale. The Hong Kong flu outbreak of 1968 killed approximately 1 million people worldwide, and appears to have been considerably less lethal than the coronavirus. It’s not yet certain what the virus’ case fatality rate—the percentage of those infected who die—is, but it looks to be at the level of the Spanish flu in 1918, which killed more than 50 million people. Medical technology has come a long way since then—but so has globalization and population growth.

China was first to be hit, so it gives the rest of the world some idea of what might be coming. What does that look like?

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1. A shutdown world

After putting more than 700 million people under travel restrictions, 150 million of them under complete lockdown at home, China is now trying to ease limitations in order to get people back to work before the economy crumples in on itself like a failed soufflé. But the messaging has been distinctly mixed, with attempts to end the cordon sanitaire around Wuhan lasting just three hours—and the streets of Beijing and Shanghai are still deserted.

The economic effects of the shutdown in China are already beginning to bite—which is one reason the leadership is pushing for factories to reopen. China’s small firms are already on the brink of collapse, while sales have crumbled. Ships are leaving China’s ports 90 percent empty.

All this will get much worse—and it won’t just be China hurting. One wing of the global economy is already on fire. Foreign firms are already scrambling to replace broken links in supply chains, some of which are threatening critical sectors. Despite the fall today, markets may not yet be pricing in the risk in full, and further tumbles should be expected if the lack of containment becomes clear. (China’s rigged stock market, on the other hand, is rising thanks to government efforts.)

The economic devastation wrought in China was worsened by the virus’s breakout just before the Lunar New Year, which left hundreds of millions of people stranded away from their workplace—but office and factory shutdowns are still very likely. In theory, remote work can replace some of this, but Chinese demand is already causing key systems to crash for lack of capability.

That’s a taste of what’s to come for the rest of the world. True, democratic countries may not resort to the absolutism of China internally—look at the South Korean city of Daegu, where compliance with a “special zone” is voluntary and largely followed. Italy’s new “red zone” is stricter than South Korea’s, but not of the same scale or fierceness. Even countries that have already normalized restricting their own citizens, such as India, may not have the capability to do so. Public events, however, are going to be severely threatened—potentially including critical elections.

But when it comes to international travel, there’s little to restrain the impulse to shut down potential threats—as the end of most other nations’ flights to China has shown. That will come despite the near universal consensus from experts that such measures don’t work. It’ll be easier the more isolated the country is already—Iran is already an easier target than South Korea or Italy because existing links are smaller. As the virus spreads, however, expect international travel to become difficult to impossible for weeks or months. Any event that involves people coming from all corners of the world is also likely to be postponed or canceled, as has already happened with conferences with a significant East Asian component.

 2. Panic buying

Shortages have not been as bad as feared in China, with produce and water reaching even the worst-stricken areas—in large part thanks to the heroic work of delivery personnel. But Hong Kong, despite only a small number of cases, has seen empty shelves in many stores for weeks as residents rush to buy staples such as toilet paper. Supermarkets have been ransacked by panicky buyers in Italy. Worldwide, masks and other medical equipment are in increasingly short supply.

That pattern will replicate as worries spread—especially in areas, like Hong Kong and Italy, where trust in the government’s ability to deliver is small. In Hong Kong’s case, that’s because of the continuing protests against authorities believed to be in China’s pocket; in Italy’s, it’s a persistent mistrust in incompetent officialdom, especially when disasters are involved. As supply chains snap, panic buying is likely to be worsened by real shortages.

 3. Racism and division

Even when the coronavirus was primarily confined to China, anti-Asian racism still grew worldwide. That ranged from indiscriminate bans against Chinese passport holders to street attacks to threatened pogroms and “patrols” by far-right groups in some countries. In China, persecution has centered around people from Hubei province, the virus’s epicenter. In China’s neighboring countries, it has been focused on Chinese diaspora groups. And in Europe and America, every Asian-appearing person has become a potential target.

Natural disasters sometimes have a way of bringing countries together—such as the Greek-Turkish earthquake diplomacy of 1999. The role of WHO and other disease control organizations has been a bright spot in international cooperation, even if that historically involved putting the West before the rest. But there’s been little of that following the coronavirus, where conspiracy theories have dominated media in many countries—whether aimed at China or at the United States. The Chinese government, meanwhile, has turned down offers of aid from the United States and doubled down on nationalist, anti-American rhetoric. On WeChat, conspiracy theories claiming the virus originated in the United States are going undeleted by censors, while nationalistic troll Zhao Lijian recently took up his role as spokesperson for the Ministry of Foreign Affairs.

The further spread of the virus will also sharpen attitudes toward China. For existing sycophants like Cambodian Prime Minister Hun Sen or Pakistani Prime Minister Imran Khan, it’s been a chance to cozy up further to Beijing. For aspiring authoritarians, China’s supposed efficiency—regardless of statistical doubts—will be cited as a model. And for those distrustful of China or fearful of its rise, the cover-up that gave the virus time to spread will be enough to pin the blame for the outbreak squarely on the Communist Party.

 4. Systematic failure

All of these scenarios play into and worsen each other. Shutdowns spur fear. Fear distorts markets and wrecks productivity. Division harms international cooperation and prompts travel bans. The most dangerous scenarios are those where the impact of the virus causes entire systems to collapse.

The world has already seen what that looks like in Wuhan, where the virus has totally overwhelmed an already fragile health care system. That’s producing an unknown number of excess deaths not caused by the virus itself but by the lack of hospital beds, resources, or ambulances to deal with other health issues.

And although China is still relatively poor per capita, the country has enormous reserves of wealth and manpower. Nations such as India or Indonesia, with huge populations and considerably fewer resources, may have an even harder time. If ordinary services, from health care to banking, break down, the knock-on effects will be calamitous.

None of this is inevitable. People are remarkably resilient, adaptive, and cooperative in times of crisis. Vaccines may come sooner than expected, and the arrival of summer may help slow the virus’s spread. The case fatality rate is far higher in overwhelmed Wuhan than in cases outside of the immediate disaster zone, and even lower outside China itself. Public education can do even more to fight the virus than quarantines and restrictions can — if the world’s leaders step up and treat the risks involved seriously. And that’s a big if.

James Palmer is a deputy editor at Foreign Policy. Twitter: @BeijingPalmer

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