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Economies vs. coronavirus

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As the coronavirus pandemic advances worldwide coming to the fore is the ability of economies to hold out against an increasingly likely global recession.

Throughout the past year, a number of economists predicted a deterioration in international and country situation in 2020. However, at that moment, the researchers cited “classical” macroeconomic reasons for such a recession – the trade war, the slowdown in leading economies, the growing “bubbles” in stock markets, factors of cyclic nature. As for more radical forecasts, even their authors categorized them as “shocking” or “unbelievable.” No one could contemplate a global epidemic, capable of literally “putting on quarantine” billions of people.

“The fight against the pandemic came as a shock of a scope, if not the Great Depression of the 1930s, then at least the Great Recession of 2008–2009,” – says Oleg Shibanov, professor at the Russian Economic School, in Vedomosti. In the face of the coronavirus, there emerged a watershed between countries that have demonstrated the ability to quickly and effectively respond to the epidemic – “this is South Korea, Taiwan, Singapore, Hong Kong”, along with one-party China, which mobilized a well-trained military and civilian state apparatus to fight against coronavirus, “and those Western countries that turned out to be unprepared, ” – says Pierre Lelouch, former French Secretary of State for European Affairs, in an interview with Le Figaro.

From the structural point of view, the closure of dozens of businesses and even the entire sectors of the economy in most countries of the world, combined with the fall of stock markets “during February and March” has caused a drop in demand in most countries of the world. Quarantine inevitably limits consumer access to the service sector, which is fraught with disaster for small and medium-sized businesses, which, for example, in South Korea, make up more than half of national economy. Also, it is completely unclear as to how the transportation industry, tourism industry, public catering can recover after the crisis. In addition, a major problem to be tackled with is the absence, for understandable reasons, of reliable epidemiological models that would allow governments to predict with high precision the development of a pandemic and its economic consequences.

For example, experts have information on the economic indicators of US metropolitan areas during the Spanish Flu pandemic in 1918-19. They show that the more drastic measures the authorities used to combat the epidemic, the higher their economic performance was after it ended. However, The Economist says, the age-related characteristics of coronavirus mortality are very different from the Spanish flu. Unlike then, when it was about an industrial economy, today it’s mainly about the economy of services. Therefore, the outcome may be different.

Economists have traditionally used the concept of “growth model” to describe the key characteristics of the economic systems of individual countries. They also use this model to predict the policies of the authorities in the context of economic crises. However, at present most leading economies or economic associations are characterized by a mixed model which requires the adoption of measures that contradict each other. And therein lies a huge problem.

Thus, the EU faced the pandemic in a situation where the chances for meeting the criteria for EU membership in case of an unfavorable turn of events in the global economic environment were very limited for most countries in the eurozone. The slowdown in European economies during the 2000s – 2010s led to an increase in budget deficits in many countries. The current crisis hit Europe, first of all, countries that are already burdened with high debt. For example, Italy’s public debt could reach 160 percent of GDP by the end of this year – which “could provoke panic in the state bond market.” As a result, one of the first “victims” of coronavirus was the EU Stability Pact.

The current crisis is different for Europe compared to the previous ones also because the pandemic is “unpredictable” and because “Europeanism” was weakened by other crises of the last decade. ”. The situation in the eurozone is“ much worse than in 2009 ”, because forecasters underestimate the “implosion of economic processes.” “The recession promises to be longer and deeper”. According to the ECB, the EU may require a package of fiscal measures of up to 1.5 trillion euro until the end of the year. Like during the euro crisis, Europe has split. Paris, Rome and Madrid, supported by a growing number of other countries, are demanding common “corona bonds” to share the burden of fighting the epidemic and its economic consequences. This is because countries that rely on consumption for growth combat the negative consequences of the epidemic, first of all, by supporting incomes at the highest possible level.

On the other hand, where export is the main driver of the economy, it is first necessary to support the sustainability of the current balance sheets of enterprises and keep jobs. That’s why Germany, which, they predict, will see a 10 percent economic decline in the first quarter, and Austria and the Netherlands, for the evening of April 8, strongly oppose the “uncontrolled printing of money.” Finally, it is not clear what long-term effect for the common market will come from the restoration of border controls and entry bans. “No less than the existence of the EU could be put at stake”,experts say.

The US growth model is highly questionable as well. While it leans on a fairly large service sector, significant exports, the main driver of the economy is consumer spending. According to critics, the American economy cannot survive a long period of national quarantine without catastrophic consequences. A total halt in economic activity will destroy the social fabric of society and bring the existing growth model down to its knees. However, a “reset” of the economy, which the Trump administration continues to dream about, “will turn the pandemic into a plague.”

Unlike the 2008 crisis, all the emergency measures taken by the FRS in recent weeks have not stabilized the markets. The more than two-trillion aid package, formally approved by the Congress, leaves the most burning question unanswered: who should be the recipients of this support, businesses or citizens? Usually, Washington chooses businesses. But in this case, the authorities face a dramatic upsurge in unemployment, which has not been observed for the past 60 years. Meanwhile, it is the employment factor that can become key in determining the winner in the upcoming presidential election. For the incumbent administration, Henry Kissinger points out, “public trust in American ability to manage the situation at home” is at stake.

A dual situation is observed in China. On the one hand, Beijing, according to official figures, has managed to at least put the epidemic under control. In economic terms, China is “in a strong position”, possessing the world’s largest reserves, significant liquid assets, and industrial capacities that can not only quickly compensate for the losses of recent months but give a new powerful impetus to Beijing’s greater economic presence throughout the world. At the same time, China is confronted with “the weakened and over-credited United States and Europe, which are threatened by a widespread financial crisis that will follow the collapse of their economies”.

On the other hand, the Chinese economy is heavily dependent on exports to other countries, which have declined sharply in recent months, and on imports, which suffer as well following closures of production facilities and ports around the world. In addition, China has reported an incessant slowdown over the past few years. The high debt of businesses and problems in the banking sector have worsened amid the “corona crisis”. In terms of global markets, China poses a threat to the US debt market if circumstances force Beijing to sell off dollar reserves. Finally, the slowdown, not to mention the decline of the Chinese economy, will play a major role in lowering commodity prices, since China holds the world’s second position in annual imports.

Lower-priced commodities can destabilize the economies of dozens of developing countries that depend on their exports. On March 30, UNCTAD published a report stating that “for developing countries, the consequences of the pandemic … proved worse than what they had to go through in 2008.” Devaluation hit particularly hard on Brazil, Mexico, Indonesia and South Africa. According to UNCTAD experts, the shortage of funds for developing countries to fulfill their financial obligations in 2020 and 2021 will amount to up to 2 trillion. dollars. “This could lead to a debt crisis in which many direct and indirect lenders in industrially developed countries will be dragged into.” Finally, in many developing countries, most people have no savings and governments do not have enough funds to support those who have lost their jobs. Even a relatively short nationwide quarantine can send the economies of such countries into decline. According to media reports, by April 6, “at least 85 states had turned to the IMF for assistance.”

According to pessimists, there is a good reason to believe that the longer the quarantine lasts, the greater structural damage it will cause to any economy. The professional skills of workers, as well as their social networks, will also be affected. According to optimists, “America and Europe will put the economic crisis out with money, while incomes lost due to the epidemic will be reimbursed from the budgets and all problems will be sent into the infinitely distant future.” And the economic models that demonstrated growth before the Covid-19 crisis will return to it within 2-3 years.

Finally, governments in many countries will surely resort to measures aimed at restoring or expanding national production in strategically important sectors, including the food and medical industries. Domestic market support policy is gaining popularity again. “This is in line with the strategy of Donald Trump in the USA, the strategy of Boris Johnson in the UK and Shinzo Abe in Japan. The goal is not so much as to limit international trade, but to create a sound domestic market, which will make it possible to reduce its dependence on conflicts and the blows of world trade ”.

In the aftermath of the pandemic, the authorities in most countries will have to spend “much more than they think.” The consequences of the pandemic in the form of rising government debt and spikes in inflation will not take long to present themsevles. Markets may find themselves “replaced by governments”; and people in most countries of the world “will want to restore national prerogatives, especially regarding … the health sector.”

Any strategy adopted by the authorities in the current conditions will entail significant social and economic damage. Therefore, a search for the best model for adapting the economy to the comprehensive challenge of the pandemic will most likely be conducted by trial and error. The errors, unfortunately, will cost human lives. In the end, countries that succeed in picking a more effective model will gain a tangible advantage in economic competition in the “post-virus” world.

From our partner International Affairs

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Economy

How U.S.’s Response to Covid-19 Could Precipitate 2nd Great Depression

Eric Zuesse

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On March 10th of this year, there were 290 daily new U.S. cases of Covid-19 (coronavirus-19).

On March 13th, U.S. President Donald Trump declared a pandemic national emergency, because the number of daily new cases was now suddenly doubling within only three days. However, no lockdown was imposed. The policy-response was instead left to each individual. This is in accord with America’s libertarian idelogy. Trump even announced that “he was allowing his health secretary to bypass certain regulations to provide more flexibility to doctors and hospitals responding to the outbreak” — outright reducing, insead of increasing, federal regulations, this being his way to address the matter. That’s the libertarian response.

Covid-19 (coronavirus-19) cases started soaring in the U.S., from 600 daily new cases on March 13th, to 25,665 on March 31st. Americans were scared to death, and facemask-usage soared, and independent small businesses started laying people off en-masse. (Restaurants, hair salons, travel agencies, inns, dental offices, etc., were hard-hit.)

Immediately, the alarming rise in new cases halted on April 4th (at 34,480), and the daily new cases remained approximately flat, but slightly downward, from March 31 to June 9th (when it reached bottom at 19,166), but then soared yet again, to 78,615, on July 24th.

But, then, it again declined, so that, on September 8th, it was at only 28,561. This was already returning to around what the new-cases rate had been back on March 31st. So: despite peaking again on July 24th, the rate of daily new cases was little changed between March 31st and September 8th. And, all during that 5-month period, people were coming back to work.

The key immediate and direct economic variable affected by Covid-19 is the unemployment rate. Here, that economic effect is clearly shown:

U.S. unemployment: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Though the daily-new-cases rate went down after March 31st and after July 24th, the unemployment rate progressed far more gradually downward after March 31st: the small businesses that had been panicked by the explosion of new cases during March were now gradually re-opening — but they remained very nervous; and, so, unemployment still was almost twice what it had been during March.

Here, that experience will be compared with two Scandinavian countries, starting with Denmark, which declared a pandemic national emergency on March 13th, just when Trump also did. “Starting on 13 March 2020, all people working in non-essential functions in the public sector were ordered to stay home for two weeks.” The daily new cases fell from the high of 252 on March 11th, down to the low of 28 on March 15th, but then soared to 390 on April 7th, and gradually declined to 16 (only 16 new cases) on July 9th. Then it peaked back up again, at 373, on August 10th, plunged down to 57 on August 26th, and then soared yet again back up to 243 on September 8th. The new-cases rates were thus irregular, but generally flat. By contrast against the experience in U.S., Denmark’s unemployment-rate remained remarkably stable, throughout this entire period:

Denmark: March 4.1, April 5.4, May 5.6, June 5.5, July 5.2

Sweden’s Government pursued a far more laissez-faire policy-response (“The government has tried to focus efforts on encouraging the right behaviour and creating social norms rather than mandatory restrictions.”), and had vastly worse Covid-19 infection-rates than did the far more socialistic Denmark, and also vastly worse death-rates, both producing results in Sweden more like that of the U.S. policy-response than like that of the Danish policy-response, but far less bad than occurred on the unemployment-rate; and, thus, Sweden showed unemployment-increases which were fairly minor, more like those shown in Denmark:

Sweden: March 7.1, April 8.2, May 9.0, June 9.8, July 8.9

That was nothing like the extreme gyration in:

U.S.: March 4.4%, April 14.7%, May 13.3%, June 11.1%, July 10.2%, August 8.4%

Why was this? 

Even though Sweden’s policy-effectiveness was more like America’s than like Denmark’s at keeping down the percentages of the population who became infected, and who died from Covid-19 (i.e., it was not effective), Sweden’s policy-effectiveness at keeping down the percentage of the population who became unemployed was more like Denmark’s (i.e., it was effective, at that). Unlike America, which has less of a social safety-net than any other industrialized nation does, Sweden had, until recently, one of the most extensive ones, and hasn’t yet reduced it down to American levels (which are exceptionally libertarian). Therefore, whereas Swedes know that the Government will be there for them if they become infected, Americans don’t; and, so, Americans know that, for them, it will instead be “sink or swim.” Make do, or drop dead if you can’t — that is the American way. This is why Swedish unemployment wasn’t much affected by Covid-19. When a Swede experienced what might be symptoms, that person would want to stay home and wouldn’t be so desperate as to continue working even if doing that might infect others. Thus, whereas Sweden’s unemployment-rate rose 27% from March to May, America’s rose 202% during that same period. Americans were desperate for income, because so many of them were poor, and so many of them had either bad health insurance or none at all. (All other industrialized countries have universal health insurance: 100% of the population insured. Only in America is healthcare a privilege that’s available only to people who have the ability to pay for it, instead of a right that is provided to everyone.)

On September 9th, Joe Neel headlined at NPR, “NPR Poll: Financial Pain From Coronavirus Pandemic ‘Much, Much Worse’ Than Expected”, and he reported comprehensively not only from a new NPR poll, but from a new Harvard study, all of which are consistent with what I have predicted (first, here, and then here, and, finally, here), and which seems to me to come down to the following ultimate outcomes, toward which the U.S. is now heading (so, I close my fourth article on this topic, with these likelihoods): 

America’s lack of the democratic socialism (social safety-net) that’s present in countries such as Denmark (and residual vestiges of which haven’t yet been dismantled in Sweden and some other countries) will have caused, in the United States, massive laying-off of the workers in small businesses, as a result of which, overwhelmingly more families will be destroyed that are at the bottom of the economic order, largely Black and/or Hispanic families, than that are White and not in poverty. Also as a consequence, overwhelmingly in the United States, poor people will be suffering far more of the infections, and of the deaths, and of the laying-off, and of the soon-to-be-soaring personal bankruptcies and homelessness; and, soon thereafter, soaring small-business bankruptcies, and ultimately then big-business bankruptcies, and then likely megabank direct federal bailouts such as in 2009, which will be followed, in the final phase, by a hyperinflation that might be comparable to what had occurred in Weimar Germany. The ceaselessly increasing suffering at the bottom will ultimately generate a collapse at the top. Presumably, therefore, today’s seemingly coronavirus-immune U.S. stock markets, such as the S&P 500, are now basically just mega-investors who are selling to small investors, so as to become enabled, after what will be the biggest economic crash in history, to buy “at pennies on the dollar,” the best of what’s left, so as to then go forward into the next stage of the capitalist economic cycle, as owning an even higher percentage of the nation’s wealth than now is the case. Of course, if that does happen, then America will be even more of a dictatorship than it now is. Post-crash 2021 America will be more like Hitler’s Germany, than like FDR’s America was.

The Democratic Party’s Presidential nominee, Joe Biden, is just as corrupt, and just as racist, as is the Republican nominee, Donald Trump. And just as neoconservative (but targeting Russia, instead of China). Therefore, the upcoming November 3rd elections in the U.S. are almost irrelevant, since both of the candidates are about equally disgusting. America’s problems are deeper than just the two stooges that America’s aristocracy hires to front for it at the ballot-boxes.

Author’s note: first posted at Strategic Culture

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Democracy in the doldrums

Samudrala VK

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It is clear that during the COVID-19 pandemic  times, Democracy has gone pear shaped throughout the world. Power and Political activity are considered as alpha and omega of the modern day democracy.
The Modern state(political authority),which is based on legitimacy and a tool to deliver political, economical and social justice, has been rendering yeoman service to
corporates, both domestic and foreign. The ruling dispensations all around the globe have resorted to authoritarianism under the guise of health emergency. In addition, the topsy turvy of Democracy, through excessive centralisation and the iron curtain imposed on political activities during this pandemic, has left minimal space to raise the concerns of the urban poor. The pandemic, a bolt from the blue, has caught our health systems off guard. In India, the labour class has caught between the devil and the deep sea, thanks to the recent twin moves of the central government, privatization and the helter-skelter lockdown. The pernicious effects of the lockdown are yet to hit the masses. Seemingly, the rudderless policies of central government have created enough space to further pauperization of masses, mostly have-nots.
Now, the federal governments of third world countries have to walk on razor edge by meeting the fiscal deficit targets on one hand and by connecting the welfare dots on the other.It is not surprising to say that the big corporates are making good fortunes with the relaxation of tax rates and new labour codes. As unemployment is hanging like the sword of domacles over the working class, the corporate class would expect this surplus labour to be at their beck and call.The early warnings of intelligentsia on the consequences of disastrous lockdown  were remained as the voices crying in the wilderness. The ruling elite has been trying to enshroud the general despondency among the civic force by shifting the propaganda machinery to sensitive elements like religion, hyper nationalism and sloganeering-not to mention self aggrandizement.

Neo-liberalism and corporatisation

The diktats of the world bank and the IMF(International monetary fund) on the third world nations like pruning the subsidies, roll back of welfare measures and the abatement of labour laws as an essential sina qua non for any sort of relief package during the crisis of BOP(Balance of payments) have left labour class of the thrid world nations in quandary. The US with the support of the WTO( World Trade Organization)had exhorted all these countries to provide untrammeled access its products. Apparently, the aims and paths of federal governments of these nations ,the WTO and the IMF are congruent with regard to free trade and the globalization of capital. The lawful protections for the working class under the labour laws have proved disastrous for the interests of the capitalist class and being viewed as shackles for the exploitation. The decades-long struggle to retain these labour rights in independent nation states has been ending in smoke due to weakened trade unions and the decline of social capital. The time has come to fight tenaciously and move heaven and earth to restore their rights which are otherwise go to the dogs. When the market space is being dominated by Monopoly or Duopoly or Tripoly, the free and fair competition which the unhindered market guarantee is an absolute sham. Extolling the virtues of Neo-liberalism, the modern nation states have centred their development agenda in and around urban centres. Economically, in the post-liberal era of India, the upward mobility is largely confined to a few sections of the urban middle class.

Welfare economics

It is wrong to mention that welfare economics is based on “Rob Peter to pay paul principle” when Peter has direct access to resources(natural, political, economical and social) vis-a-vis Paul. It is not the Peter but the Paul who is running from the pillar to post in search of opportunities. The notion of political equality of liberal ideological stream revolves around freedom and liberty of an individual and overlooks the core elements of equality like social and economical justice. The central governments all over the world have successfully repudiated the pro-poor agenda and this volte face from welfare state to pro-capitalist state has pushed the labour class out of the frying pan into the fire.

Nexus between political class and biggies

The unholy nexus between the political class  and corporates has been riding roughshod over the interests of poor. This alliance behooves the political class to safeguard the vested interests of corporate bigwigs. It is apposite to mention that representative democracy has been metamorphosing into a turncoat democracy. Back in the day, Politicians were known for their erudition, statesmanship and uncompromising ideological commitment. On the contrary, present day representatives are turning into snollygosters for their personal gains. There are several voluminous reports from different corners on rising economical disparities in the post-liberal era on which no political party is keen to act upon. As Michael Jackson, king of pop, penned in one of his famous tracks “All I want to say is that they don’t really care about us”-the lyrics are still relevant in this pandemic times.

Globalization and dependency

The South Asian nations have started their LPG (Liberalisation, privatization and Globalization) path at the same time, with the exception of Sri Lanka which had opened its economy by fits and starts.They had adjusted their economical apparatus with a new global integration process at a time when the global economical architecture was dominated by unipolar power, the US.
The lopsided globalization process has been converting many third world countries as dependents and in some cases almost to a level of aid recipients upon the erstwhile colonial powers or the US. Under the banner of global integration, all these nations were dragged into this complex whole, in most of the cases through persuasion. In the name of free trade, the Western powers have been  bleeding these nations white of their resources. The asymmetrical globalization has also challenged the sovereignty of these nations while the same has remained intact in case of developed nations. The US has been playing a rigged game of globalization under the auspices of the WTO, the world bank and other agencies. The time has come for these players to bury their hatchet and rise as a one voice to have a just order at the international sphere.

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Economy

Objectives and Importance of Advertising in a Competitive Business World

Ahsan Siraj

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The best way to communicate with the customers is communication through advertisements. Through advertising customers are informed about the available brands in the market and also variety of new and existing products useful for them.Here are different definitions of advertising.

According to Kotler’s definition: “Advertising is any paid form of non-personal presentation & promotion of ideas, goods, or services by an identified sponsor.”

According to the Advertising Association of the UK: “Advertising is any communication, usually paid-for, specifically intended to inform and/or influence one or more people.”

Advertising is done by using different media types and different techniques and methods as per the requirements. It also aims to attract all age groups depending on the nature of brands and products they are offering to their customers. Communication between companies and customers are basically carried out in a very artistic way and for this effective communication in order to fulfil desired objectives one should possess great communication skills and convincing power.

What are Advertising Objectives?

Advertising is part of marketing and one of the most creative fields. Advertising is part of marketing but normally people confuse advertising with marketing. Hence, the objectives of Advertising are completely different from Marketing. The main objective of advertising is to carry out communications between the brand and the customer. Here are some more important objectives of advertising.

  • The introduction of the new product in the market is the most common reason behind the advertising by the brands and these brands can be new in the market as well as existing brands. The objective here is to tell customers about the new product launched in the market.
  • There are a lot of new businesses starting in the market and many among those are service providing businesses. For services the business are marketed as a brand instead of marketing their individual products.
  • Businesses use advertising to get attention as well as creating desire to buy a certain product or service and according to the AIDA model mostly followed in advertising basically getting attention is awareness creation while desire creation leads to buying. By advertising companies capture attention of people and make them aware of the products available in the market.
  • Another important objective of advertising is seeking customers. These customers can be both new and the ones purchasing from other brands. By effective advertising potential customers can be attracted to a certain brand making existing customers to switch brands.
  • In a competitive business world, it is very important to differentiate a brand’s product and service from its competitors and it is done by effective advertising. A customer can only differentiate between products and services based on the value a certain business provides over its competitors. That’s why advertising is used to create value and to differentiate one brand’s products and services from others in the market.
  • Brand building is also an important objective of advertising. So, when a brand regularly advertises and delivers quality products and fulfills the promises it makes, automatically the value of the brand is built.
  • Increasing the sales is another objective being achieved by effective advertising. The more customers attracted to a brand by advertising the more increase in sales is recorded.
  • With the value being communicated and the brand being differentiated as well as sales being increased, there is no doubt that advertising can contribute a lot to increasing profits.

What is the Importance of Advertising?

Advertising is equally important to customers, businesses and society. So, here are some of the important factors to all above mentioned areas.

Importance of advertising to Customers

Convenience: Advertisement is very helpful for customer’s decision-making process because through advertisement customers are well aware of their desired products available in the market. So, it is convenience for them to find their desired products in the market.

Awareness: It is due to the advertising that customers are well aware of the products and their features available in the market.This awareness not only helps customers to make purchase decision but also enable them to compare different products and choose the best product for them.

Quality Assurance: When we look at the trends in the market we come to know that advertising is done by brands only about their products and services. No local businesses go for advertising because no advertisements are required for unbranded products. This ensures quality products to the customers.

Importance of advertising to Business

Awareness: It is because of advertising that people are well aware of their desired brands and productsavailable in the market.

Brand Image: It is very important to create a positivebrand image and brand personality in the minds of the customers and it is done efficiently by advertising.

Product Differentiation: One business is able to differentiate its product from those of its competitors’ and communicate its features and advantages to the target audience by using effective advertising.

Profit MaximizationDue toadvertising brands are able to deliver their message to a large audience and hence more people tend to buy from those brands ultimately making them able to earn more money.

Importance of advertising to Society

Advertising is really helpful in educating people. There are some social issues required to be addressed for social benefits and advertising deals with them like child labor, smoking, family planning education, etc. therefore, advertising plays a significant role in society.

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