The global economy and covid19

Guest Column

BRIAN ELLIS PLUMMER

TWENTY TWENTY, the year of perfect vision, is coming to an end and the two main issues that will dominate the world in the foreseeable future are the global economy and covid19. With 93 per cent of the world’s economies in recession the relationship between the two largest economies (China and the US) will be a determinant factor. 

China is still an export-led economy and the American consumer is its largest customer. But China’s export share of its gross domestic product has fallen from 37 per cent in 2007 to slightly less than 20 per cent today. China is better able to withstand the pressure of tariffs and other actions that are aimed at its exporters.

The US depends heavily on China for providing the low-cost goods that enable income-constrained American consumers to make ends meet. The US also depends on China to support its own exports. Next to Mexico and Canada, China is America’s third largest and by far its most rapidly growing major export market.

The US depends on China to provide funding for its budget deficits. It is the second largest foreign holder of US Treasury securities but in 2017 it was the largest – some US$1.08 trillion in direct ownership and at least another US$250 billion of quasi-government paper. 

From 2019, over 80 per cent of US treasuries have been purchased by the Federal Reserve and there is a direct relationship between China stopping the  purchase of US treasuries and the US monetising its debt because there is no other country that can support its insatiable appetite to borrow.

America depends on China because of a fundamental weakness in the structure of the US economy – a profound and worrisome lack of domestic saving. In the first quarter of 2020, net national saving, which includes depreciation-adjusted saving of households, businesses and the government sector, was 1.4 per cent of national income.

Lacking in savings at home, and wanting to consume and grow, the US must import surplus foreign savings from abroad – and run massive balance-of-payments and trade deficits to import this capital. In 2017, the US had merchandise trade deficits with 102 countries. In 2019, it largest trade deficit was with China (US$346 billion). The US trade deficit in goods and services was US$616.8 billion in 2019. Imports were US$3.1 trillion and exports were only US$2.5 trillion. 

This rivalry between the US and China will define the next decade. We must become knowledgeable about the potential Thucydides Trap, a term coined by American political scientist Graham T Allison to describe an apparent tendency towards war when an emerging power threatens to displace an existing great power as the international hegemon. It was coined and is primarily used to describe a potential conflict between the US and China.

The other major issue is the covid19 virus. On December 11, the US Food and Drug Administration (FDA) issued the first emergency use authorisation (EUA) for a vaccine for the prevention of covid19 in individuals 16 years of age and older. The emergency use authorisation allows the Pfizer-BioNTech vaccine to be distributed in the US. This is not an approval but an emergency authorisation. 

The FDA has determined that the Pfizer-BioNTech vaccine has met the statutory criteria for issuance of an EUA. The totality of the available data provides clear evidence that the vaccine may be effective in preventing covid19.  

In 1861 Louis Pasteur announced that it was proven that germs cause diseases. Terrain Theory of Disease could be traced back to Antoine Bechamp. Bechamp was a rival of Pasteur. Modern medicine followed the germ theory and has had great success treating disease by considering microorganisms as enemies of life.

Bechamp said that disease would not develop in a truly healthy environment and that it could only evolve in an unhealthy organism. The change of a person's microbiome is a way of changing his physical terrain. This does not mean total change – just change.

It would be wise to consider both theories because they are not scientific laws but highly probably explanations. Many people have bad “health terrain” because they do not eat a balanced diet and exercise so vaccines and antibiotics are good choices for them. For those who are willing to be disciplined, eat right, exercise and manage stress, they will be less susceptible to diseases, even covid19. So Bechamp lived to be 91.5 years and Pasteur lived to be 72.  

I am not against people taking the covid19 vaccines but I do not think human beings are identical and it is definitely not suitable for all. It should be available for those who are at risk for covid19 instead of wholesale distribution – which will likely fail.