Valdai Club

The escalation of the crisis associated with the coronavirus epidemic is having an increasing impact on both the global economy and politics. The situation has become even more complicated due to the recent oil price war, which was largely triggered by the game being played between Russia and Saudi Arabia, the general crisis of the globalist system and the attempts of US President Donald Trump to reconsider many aspects of the American domestic political system and the basic principles concerning international economic and political relations on which it was formed (under American leadership) over the past 30 years. Therefore, the way the current crisis is resolved will have a direct impact both on the state of the world economy and on politics, as well as on the outcome of the American election campaign.

Throughout his tenure in the White House, Donald Trump has emphasised that his trump card is the excellent state of the American economy, which gave him hope not only to consolidate support from those groups that supported him in the 2016 elections (such as representatives of big business in the real sector of the economy, owners of small and medium-sized businesses, most of the white middle class and employees of law enforcement agencies). However, those whose economic situation has improved significantly as a result of the economic boom as well as protectionist measures, include even a significant proportion of ethnic and racial minorities. All this has allowed Trump not only to consolidate his positions among those groups that supported him in 2015-2016, but also to begin to “lead away” large groups of minority voters from the Democrats.

The economic collapse caused by the epidemic largely weakens the position of the president, giving the Democrats at least some hope of victory in the November elections, even in the absence of formidable candidates. In particular, two weeks ago, the Dow Jones, NASDAQ and Standard and Poor indices lost all of the gains they’d made during the years of Trump's presidency and returned to their late-2016 levels, having decreased more than 35% overall. GDP production in the first quarter of 2020 was 12% lower than in the same period last year. Two weeks ago, the number of applicants for unemployment benefits increased 3.2 million; last week they added another 6.6 million, so the number of job loss over the past 2 weeks has increased by almost 10 million people, exceeding the scale of the 1929 disaster.

As in the case of the Great Depression, we are witnessing a serious strengthening of the socio-economic role of the state: the package of measures adopted last week by Congress provides for the allocation of 2.2 trillion dollars to combat the crisis. These measures are aimed to solve problems in three main areas: medical (a sharp increase in the production of ventilators, medical masks and disinfectants, as well as research, the development of drugs and vaccines, and the building of temporary hospitals); individual (assistance to those who’ve lost their jobs and cash payments to all Americans – together worth more than 500 billion dollars); and support of the American economy (including 350 billion for supporting small businesses and 500 billion for American corporations). The adoption of this package and a number of other measures (including reaching an agreement on reducing oil production) has made it possible to soften the blow dealt the economy and citizens and stabilize exchange indicators. However, it is already clear today that this will not be enough, and new stabilization measures will follow – their total cost is estimated today at $6.3 trillion – almost a third of the US annual GDP. The adoption of such measures, in turn, will entail a sharp increase in public debt.

Meanwhile, Trump’s growing concern is precisely the economic consequences of the crisis. Ironically, the decisions in question can be thought of as the adoption of a Keynesian model and lead to the further strengthening of the role of the state in both the economic and socio-political spheres.

In particular, a return to the idea of ​​two years ago is possible, when the President offered the Democrats the adoption of a programme for the development of transport infrastructure with a total value of $1.5 trillion. At that time, the proposal was blocked due to the all-consuming hatred of the opponents of the president and their unwillingness to support any initiative that could increase his ratings. However, today this Keynesian project, in its essence, is capable of stimulating the economy on the basis of state-generated demand and creating millions of jobs, and may turn out to be a life-saving solution; sabotaging it could bring very painful political consequences.

The implications of this don’t simply concern a serious deterioration of the economic situation in the US and the global economy as a whole. By utilising the panic prevailing in the country, the Democratic Party apparatchiks hope to protect their favourite presidential election candidate, former vice president Joseph Biden, from direct communication with voters and the media. For Biden, who does not shine with either physical health or mental acuity, this could be a life-saver. Moreover, intense pressure has been levied at Biden’s main opponent, left-wing senator Bernie Sanders, to immediately depart the race. At the same time, demands are growing for an end to the internal party debates among the Democrats – and the last debate has already taken place in the absence of spectators, which also plays into the hands of a party leader who is poorly oriented in terms of space and time. We can expect further attempts to cancel Biden’s direct debate with President Trump, a debate that, for the elderly and dull-witted Democratic candidate, could turn out to be the “kiss of death.”
 Particularly disappointing for the Democrats was that, according to a Gallup poll, 60% of respondents today approve of the president’s actions amid the current crisis (only 43% approved of his actions two weeks ago). Among them are a number of senior representatives of the Democratic Party, who were forced to recognise the effectiveness of the administration. Moreover, Trump’s actions didn’t just meet the approval of 92% of Republicans, but also 43% of independent voters and even 13% of Democrats, while Trump’s activity as president was generally approved by 49% of respondents (44% two weeks ago). In addition, the Republican electorate shows a very high degree of enthusiasm for its candidate – and this is in sharp contrast with the lukewarm attitude of the Democrats towards Joe Biden. The latter is not at all surprising – Biden, in addition to his general weakness, has proven himself to be the most prosaic coward, hiding in the basement of his home in Delaware and avoiding any direct contact with the outside world. All attempts by the apparatchiks of the Democratic Party and the mainstream press to airbrush his image, organise the likeness of his speeches and press conferences on Skype have failed to produce the desired result. All this sharply contrasts with the behaviour of not only Trump, who holds long press conferences every day, meets with political leaders and the leaders of large companies and continues to move around the country, but also the actions of several other politicians, including the democratic leadership of Congress and a number of governors.

Therefore, there hasn’t simply been criticism among Democrats in relation to Biden, but also proposals to replace him with a more effective candidate, for example, New York State Governor Andrew Cuomo, who is actively working in the media space now and is rapidly gaining popularity among Democrats.

However, given the rigid selection system, it will be very difficult to do so – although yesterday’s decision to postpone the party congress definitely opens up room for manoeuvre in this sense. In the near future, we can expect a new propaganda attack on Trump and his closest associates, accusing them of an ineffective approach to solve medical and socio-economic problems associated with the current crisis. With the approach of elections, direct attempts to provoke riots are also likely to destabilize the nation’s socio-political situation.

Meanwhile, the crisis has left its mark not only on domestic politics in the United States, but also on the foreign policy and trade relations of America with its partners abroad. Increasingly, one can hear statements about the deep crisis of the very globalist system that the United States and its partners in the Global North have helped built over the past 30 years.

An interesting manifestation of this trend was the president’s unilateral decision last week to cancel the G7 meeting scheduled for June 2020 in the United States and hold a video conference instead (it will follow similar events, one of which took place last week, and the other is planned for April).

On the one hand, this indicates both the seriousness of the situation with the coronavirus epidemic and the progress of telecommunication technologies.

On the other hand, the point here is not only avoiding the danger of direct physical contact – this step has once again emphasised that Trump considers the other members of the G7 as junior, rather than equal partners. It is curious that the leaders of these countries were informed about the president’s decision not by him personally, but by Trump’s economic adviser Larry Kudlow, who is also the presidential Sherpa for relations with the Seven. Following the recent closure of entry into the United States for Europeans and statements from Washington that the countries of Europe (including four members of the Seven) should rely on their own choices to combat the current crisis, these actions once again showed that the crisis only reinforced Trump’s determination to continue the line of revising the foundations of the globalisation system, changing the geopolitical priorities of US foreign policy and refusing to provide clear guarantees to European partners regarding both the military and other areas. Such a situation can in no way suit Western leaders and may lead to the further intensification of their opposition to the current American administration.