Great plagues have always had great consequences, reshaping and reordering the societies in which they occurred in deep and lasting ways. We have every reason to expect that the great coronavirus pandemic that has already made 2020 an economic write-off will, in a similar way, define our current era.
You don’t need to look any further than Ottawa for proof of that. A year ago, Prime Minister Justin Trudeau’s government seemed to be unravelling amid the SNC-Lavalin affair that had led to the resignation of his all-powerful principal secretary and clerk of the privy council. Reduced to a minority government in October, Mr. Trudeau seemed to spend the next few months in a postelectoral funk.
Now, our Prime Minister displays a new-found sense of purpose. And why shouldn’t he? He is, after all, presiding over the greatest one-time expansion of government Canada has known. History has decided to make him a transformational prime minister in ways no one could have imagined a few months ago.
On Thursday, the Parliamentary Budget Officer projected the federal deficit will rise to more than $250-billion in the 2020-21 fiscal year, a sum that is wildly out of sync with anything previously believed possible. And the deficit will likely go higher still – and stay high for possibly years to come as temporary income supports turn into semi-permanent ones.
Mr. Trudeau is not about to let this crisis go to waste. A top-to-bottom reform of Canada’s social safety net is being contemplated, with some around him seeing the Canada emergency response benefit as the template for a potential basic income guarantee. He will need to tread carefully, however.
“There is already anecdotal evidence that some people on the CERB refuse to go back to work when employment opportunities rise,” the C.D. Howe Institute’s crisis working group warned this week. “In some cases, this may be due to legitimate pandemic fears, but in many other cases employees may prefer receiving the CERB benefit than working difficult shifts even if they would make more than $500 a week.”
That could be a problem as we move to “restart” the economy, especially as pressure mounts to extend the CERB and the Canada emergency wage subsidy beyond their June expiry dates. It would be hard for any government to remove these crutches; but it will be especially hard for one that touts its progressive credentials.
Past pandemics have permanently altered the balance of power between capital and labour in favour of workers, but for reasons no one would care to repeat now. The 14th-century Black Plague took the lives of so many people that the supply of labour shrunk by between 25 per cent and 40 per cent in England alone, according to a recent study by published by the U.S. National Bureau of Economic Research. That led to a doubling in real wages for workers who survived.
“Even in the worst-case scenario, COVID-19 will kill a far smaller share of the world’s population than any of these earlier disasters did, and it will touch the active work force and the next generation even more lightly,” Stanford University historian Walter Scheidel wrote this month in The New York Times. “Labour won’t become scarce enough to drive up wages.”
The coronavirus pandemic is likely to speed up income inequality within Canada and globally, adding to a long list of economic woes that could further destabilize an already shaky world order. “State weakness has been a significant global problem for decades, but the economic toll of the pandemic will create even more weak or failing states. This will almost certainly be exacerbated by a mounting debt problem,” Council on Foreign Relations president Richard Haass wrote recently in Foreign Affairs. “There is a real potential for aftershocks – in India, in Brazil and Mexico, and throughout Africa – that could interfere with global recovery.”
Our postpandemic world promises to become even more dangerous than the world we knew before this crisis struck. “COVID-19 will not so much change the basic direction of history as accelerate it,” according to Mr. Haass. Worrying trends already under way – rising nationalism, deglobalization and xenophobia – will increase as countries turn even more inward amid demands from their citizens to rely less on imports and close their borders to migrants.
There’s still a chance that humankind could come together to meet our collective challenges to fight climate change and, as Jordan’s King Abdullah II pleaded this week in The Washington Post, aim “for a renewed integration of our world that centres on the well-being of its people.”
Odds are, however, that a postpandemic world looks a lot more like the Dark Ages than the Enlightenment.
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