Can We Avoid an Economic Depression? Presented by

The first truly global event in our lifetimes is showing — for the second time in a decade — that our model of globalization has a fatal flaw: It doesn’t push us to prepare for the worst. Good coronavirus medical cooperation is not matched by global governance or political leadership. That’s putting the brakes on globalization (read: dozens of borders closures) more than any trade war or migrant crisis.

In today's Global Translations, we’ll cover:

- Can the world avoid economic depression?

- Where to look next as the pandemic spreads

- Trump vs. Xi

- How it’s taken a health crisis for Big Tech to grow up.

Before it gets too heavy, enjoy the clear canals of Venice .

A message from Bank of America: The U.N. estimates $6 trillion a year is required to properly address all 17 sustainable development goals, such as providing 800 million people access to clean water. See how Bank of America is aligning its $2.4 trillion balance sheet to the task.

CAN WE AVOID ECONOMIC DEPRESSION?

With whole sectors halted, most economists now agree the West is already in deep recession. Last week’s conversations about medium-term opportunities from the crisis (cheap energy, diversifying from China and remote working efficiencies) have become background noise.

That doesn’t mean we are automatically headed for a 1930s-style depression. But the speed of economic collapse is different and terrifying in 2020. It took three years for the economy to shrink by a third in the 1930s, but we could face that outcome in three to six months this year.

Before the pandemic, more than 35 million people worked in hard-hit sectors like the U.S. restaurant, travel and entertainment industries. The U.S. travel industry association predicts that in their sector alone coronavirus will eliminate 4.6 million U.S. jobs by the end of April. To put that is global context, 102 countries rely more heavily on tourism than the United States, and will be relatively worse off.

Alexis Crow, head of geopolitical investing at PwC, told Global Translations that “it’s going to take a long time for these sectors to recover.” Talk of a quick recovery is “wildly optimistic” in her view. She worries that central banks can’t directly stimulate the consumption the economy needs to stop its free-fall: "In the U.S., only 10 percent of retail sales are online and in America, 70 percent of GDP growth comes from consumption," she said.

Recognizing that many people (including lawmakers) feel 2008-2009 bailouts failed to do enough to assist ordinary families, Crow thinks public opinion could be different this time around. Unlike big banks rescued a decade ago, the sectors begging for support now, like aviation, tourism and entertainment are “the backbone of the real economy,” she said.

Crow says we should expect to see “culturally specific support measures” emerge in economic policy. Catching her eye so far: “Germany, a major exporter thinking about export credits. Spain, thinking about how workers can be temporarily suspended rather than laid off. In Asia … you’re also seeing the private sector have leniency,” she said.

The economics will remain complicated by the public health issues, no matter what. “Ironically, the more effective you are in reducing (coronavirus) exposure and slowing down the pace of the contagion, the longer it will take for it to be over,” said Kathy Wylde, head of Partnership for New York City. “So the economic damage is inverse to the success in slowing the disease.” French president Emmanuel Macron said Thursday that we need nothing less than a full reorganization of our economies.

Counterpoint: U.S. Treasury Secretary Steve Mnuchin predicts a “gigantic fourth quarter” — which happens to be when the U.S. presidential election is scheduled.

TRILLION-DOLLAR SAFETY NETS: The U.S. is headed for a trillion dollar stimulus, on top of Federal Reserve support. The European Central Bank exploded onto the scene at midnight Wednesday via a $900 billion “Pandemic Emergency Purchase Programme” and Christine Lagarde, the bank's head, indicated "no limits to our commitment to the euro.” In relative terms, Germany, U.K., France and Spain have all offered bigger economic stimulus than even a U.S. trillion-dollar package would.

$100 TRILLION DEBT PROBLEM: Corporate debt is much higher ($74 trillion) now than in 2008, and the U.S. government is now staring down the barrel of $2 trillion annual deficits. Then there’s all the high-interest consumer debt that will come due on credit cards. Governments around the world are starting to put in place measures to allow delayed mortgage and student loan payments. But as with everything in this crisis, policies may have to turn on a dime.

WHAT INVESTORS SAY: Australian billionaire Hamish Douglass, head of the investment firm Magellan Group, suggests stimulus of 20 to 30 percent of global GDP . That’s similar to the budget deficits the allies ran during World War II.

ANTI-DEPRESSION PRESCRIPTIONS

TOP CORONA RESPONSES: I’ve created a Twitter thread on who’s been pioneering the best responses to 20 aspects of the pandemic (from the big health aspects to a reserved shopping hour for elderly and disabled).

The best global dashboards: Worldometer and Johns Hopkins University

WORLD WAR C: With the exception of Angela Merkel (“take care of yourself and of your loved ones”), leaders are speaking the language of war: “War-time presidents” are on “war-footing” because we “ must declare war on this virus”. While healthcare workers are indeed at war, and retail and delivery staff are at risk of becoming civilian casualties, the other truth is that half of us are sitting at home fearful of buying bread: demobilized. Another third don’t see what the fuss is about: the complacent, the nationalist and parts of Gen Z are in a weird alliance of conscientious objection.

Global vaccine 'Manhattan Project': The surest way to end this is a vaccine (a new anti-viral cocktail to speed recovery would also be welcome). The Coalition for Epidemic Preparedness Innovations (CEPI), says $2 billion is needed immediately to develop "at least 3 vaccine candidates." Former U.K. Prime Minister Gordon Brown, who was instrumental in mobilizing the G20 to avert depression in 2009, says that will only intense global cooperation will suffice. Health warning: that’s not happening yet, though the Trump administration keeps talking up elimination of some domestic drug trial rules .

Help businesses to hibernate: Have businesses avoid shut down, collapse or bankruptcy by having governments act as their payer of last resort. A typical small business has access to just 27 days of cash , which is why the proposed U.S. stimulus may end up including $300 billion to ensure all American small businesses can keep everyone employed for eight weeks (the ones that didn’t fire everyone already, anyway).

Keep schools open: The Australian government is keeping schools open to minimize economic disruption. Six state governments and the federal government unanimously reasoned that keeping kids out of their homes minimizes workforce disruption (including in hospitals) and is the best way to keep the most kids away from the most older Australians for longer.

The rebuilding of public capacity: Veteran EU analyst Brigid Laffan says we will be forced into the rebuilding of public capacity : “Climate change requires it. Coronavirus will prove it”.

A message from Bank of America:

REALITY CHECK CORNER

CHINA’S MASKED DIPLOMACY WILL NOT SAVE IT — OR YOU: The Trump administration wants you to call this " Chinese Virus ," as part of a broader anti-China strategy. The virus affects all ethnic groups and countries and there are better reasons to be angry at China: If the Chinese government had acted quicker (as opposed to heroic Chinese medics), it could have reduced case numbers by 66 percent to 95 percent. Now the effects go well beyond health. The pandemic is doing more to unravel U.S.-Chinese ties than trade wars, technology threats and presidential tweets ever did. That’s partly because China is re-branding itself as the global pandemic response leader, angering a flat-footed Trump administration.

The effects of China’s corona flip are many and real: From trying to bury their own role in the crisis to upending decades of China-Japan antagonism "through the gifting of masks and other supplies." The regime’s internet police (part of its Cybersecurity Defense Bureau) are carrying our real-life reprisals against those questioning how coronavirus has been handled.

And here are some of the great stories of the type you won’t be reading now that China has kicked out some of the best journalists operating in the country.

OTHER COUNTRIES STILL HAVE THEMSELVES TO BLAME: Most countries largely ignored China when it did raise the alarm. Some are only now starting mass testing and social distancing, risking an 18-fold increase in the number of cases they experience compared to those who took early action (Taiwan, Hong Kong, Singapore).

CORONAVIRUS — WHERE TO WORRY NEXT

IRAN: Researchers at Sharif University of Technology have produced a model showing the absolute best case scenario there is 12,000 deaths. The worst case is 3.5 million dead by the end of May. Religious devotees are refusing to follow health advice to avoid religious sites, while sanctions mean Iran cannot conduct all the transactions it would need to get enough medical supplies.

INDIA: With a population of 1.3 billion, large-scale slums where social distancing is impossible to maintain, and a massive false information problem (including from politicians), India is a sitting target for the virus. WEF details substantial government action , and the state of Kerala took early local action. Yet India was processing 500 tests a day this week, and has no plans to test more than 2 million people: further signs of a fragile and uneven health infrastructure.

AFRICA: Africa already has a plague: locusts, which are prompting fears of starvation, but the Ethiopian head of WHO, Tedros Adhanom Ghebreyesus, warned Thursday afternoon that "Africa should wake up, my continent should wake up." While some African governments acted sharply before coronavirus cases were identified, including South Africa, Uganda and Senegal, it’s almost certain that the continent has far more than 640 known cases. Aminata Toure, former prime minister of Senegal, told Global Translations that early decisions to close schools and ban congregations helped to contain the virus. She warned there is “still lots of communication to be done, especially with young people — 70 percent of the population” in Senegal. When the pandemic does arrive in big numbers, the most basic problem will be that nearly half of Africa’s population lack basic hand-washing facilities in their homes, according to a 2017 United Nations survey. As previously noted in Global Translations, “ Transmission in an informal settlement is a disaster, an absolute disaster,” said Susan Cleary, a health economist at the University of Cape Town.

Senegal also took legal action against high-profile Senegalese who publicly said coronavirus was a hoax, Toure said. Her lesson from Ebola: “We need to work together to eradicate diseases worldwide regardless of where outbreaks start because diseases know no boundaries.”

RUSSIA: It’s improbable that we’re getting the full picture out of Russia. While quarantines are in place, the country reported only 199 cases as of Friday. But we do know Russia is happy to use the virus to achieve other objectives: coronavirus disinformation campaigns, removing remaining obstacle to Vladimir Putin asserting power until 2036, and destabilizing the oil sector.

GERMANY: Angela Merkel (a scientist) wouldn’t describe coronavirus as Germany's biggest challenge since the Nazis if she really thought Germany would maintain its exceptionally low death rate (0.003 percent of known infections vs 8.3 percent for Italy). Germany's death rate is low because of its high testing rate (160,000 per week) which has shewed towards younger and fitter Germans. That's likely to shift: Germany borders eight countries and its caseload has been jumping up to 24 percent a day. Germany last week instituted an export ban on personal protective medical equipment, a stance it reversed Thursday.

A message from Bank of America: The U.N. estimates $6 trillion a year is required to properly address all 17 sustainable development goals, such as providing 800 million people access to clean water. See how Bank of America is aligning its $2.4 trillion balance sheet to the task.

TECH-TOCK

TECH COMPANIES BECOME GLOBAL DIGITAL POLICE: For years, legislators and activists in democracies have called for big tech companies to do more to clean up their platforms. Those lawmakers were often avoiding the hard calls themselves, and libertarian-leaning Silicon Valley techies were reluctant to add cost, complication and censorship to their business models. Now global tech companies are becoming digital police , sanitizing the coronavirus communications environment.

China’s internet crackdown puts Western missteps into perspective, such as Facebook and Instagram users finding themselves stopped from posting links on their own accounts Tuesday after a zealous bot went too far trying to cut spam and false information from the platforms.

POWER PLAYS AND ELECTIONS

U.S. 2020 — THE ZOMBIE ELECTION: As we predicted last week in Global Translations, it’s a zombie election campaign now . It will be largely on hold until a new Super Tuesday takes place June 2 (mail-in ballots and pandemic-permitting). Senators Ron Wyden (D-Oregon) and Amy Klobuchar (D-Minnesota) introduced a bill that would give all voters the ability to cast their ballot by mail

How Justin Trudeau took control of his country while quarantined: The Canadian government was looking rudderless, then coronavirus came to the rescue.

U.K. postpones local elections by up to a year: While President Trump has no power to delay U.S. elections, Boris Johnson shelved mayoral and local council elections due in May.

Russian election meddling is back — via Ghana and Nigeria.

Lobby capital coping mechanisms: Since lobbyists can’t lunch anymore, they’re having to go digital in the world’s lobbying capital, Brussels. How the DC political-media-party complex is coping with virtual lackdown .

Sustainability

This week Global Translations asks how green is your bailout, and looks at how companies should uphold their ESG commitments during the pandemic. Read our full Sustainability Spotlight.

POLITICO’s founding editor John Harris explains why the harsh choices of the global pandemic are really just a sped-up version of the climate change debate . Both are global, both make you choose whether you believe in bluster or experts, and whether you’re willing to pay now to save later. Both have severe more consequences for particular generations. Like climate change, “The reality of a dangerous virus is that we are all in this together.”

Brexit negotiations aren’t working out via video, so there’s reason to suspect international climate negotiations will flop, too. The coronavirus pandemic is making it more difficult to conduct diplomacy related to November’s COP26 climate summit in Glasgow, ex-Bank of England Governor Mark Carney said Wednesday. A COP26 spokesperson said that the plan is for the summit to go ahead.

INSTITUTIONALIZED

Saudis as global convenors: Saudi Arabia, the holder of the G20 Presidency has called for a virtual summit of G20 national leaders (the EU also attends), next week .

Trump can do the G7 from Mar-a-Lago after all: President Trump called off the July meeting and replaced it with a teleconference.

Brexit negotiations on hold — Negotiator positive: The EU's Brexit negotiator Michel Barnier has coronavirus, but meetings were already postponed before the diagnosis.

How Coronavirus is affecting the United Nations: Have a listen. World Food Programmeexecutive director David Beasley announced he has coronavirus Thursday.

OECD refuses digital tax delay: The organization says it is online “working full steam” and “on schedule,” in an effort to settle the technical details of a global deal by July.

EU adopts digital decision-making: As the Romanina Parliament goes online , European governments are planning to lift the requirement of physcial attendance for key EU meetings .

Board games: With JP Morgan CEO Jamie Dimon out of action recovering from emergency heart surgery, and Bill Gates stepping down from the board of Microsoft, meaning American corporate life is without its two biggest names as crisis engulfs. Meanwhile, Ken Chenault is leaving Facebook’s board, reportedly after disagreement over Mark Zuckerberg’s political policies. Chenault is the fourth independent board member to leave in a year.

VIRTUAL BOOK CLUB

I’ve pre-ordered Weird: The Power of Being an Outsider in an Insider World , by Olga Khazan, and am reading The Ghost Ship of Brooklyn (Robert P. Watson) in preparation for navy ship hospitals arriving in New York.

Also recommended:

Why we're not going back to normal: Article by Gideon Lichfield, and panel view from 30 experts POLITICO surveyed.

China’s Western Horizon by Daniel Markey

The Vaccine Race: Science, Politics, and the Human Costs of Defeating Disease by Meredith Wadman

The Great Influenza by John M. Barry

POLITICO’s EU Confidential Podcast

THANKS to editor John Yearwood, Luiza Ch. Savage, Zack Colman and Halley Toosi.

Follow us on Twitter Ryan Heath @PoliticoRyan