World Economies Grow as the U.S. Stumbles over COVID

New COVID infections in Germany, South Korea, Taiwan, Vietnam, Japan, and several other countries have almost disappeared.  Their economies are gradually returning to normal. In comparison, U.S. infections are registering daily records, and states are pondering new lock-downs.

America’s global leadership is threatened increasingly as economies in Europe, and even China start to grow. Even before the pandemic, China was tied with the U.S. – each producing 17% of global output. However, first-quarter U.S. GDP declined by -5 percent, while China’s production grew by 3.2%.  There are serious questions about the accuracy of China’s economic statistics. But few economists doubt that China’s recovery is outpacing America’s.  

The current global economic order was established following World War II when the U.S. replaced the U.K. as the undisputed world economic leader. It happened at a little-known meeting at St. Simon Island, Georgia.  Famous British economist John Maynard Keynes attended the meeting and advocated on behalf of the U.K. At the time; he was the world’s leading economic thinker and architect of fiscal stimulus policies to counteract recessions.

Keynes argued eloquently that the U.K. should remain in control of global financial institutions. In response, the U.S. offered a simple counter-argument by a little-known Treasury Secretary. Europe, he asserted, was much indebted to the U.S. Therefore, despite the eloquent presentation by Lord Keynes, the U.S. would call the shots from now on. In short, superior economic leverage determined who would and would not be in control of world financial institutions.

That new world order has persisted until now. But there are signs of it unraveling – accelerated by the misguided policies and mismanagement of President Trump. Politically he has promoted U.S. isolationism, alienated historical allies, and cozied up to hostile dictators. Incredibly, Vladimir Putin has greater influence on American foreign policy than does our European allies. As Trump perused these foolish policies, Attorney General Barr investigated career civil servants who questioned their legitimacy.  

Just as the White House’s policies have weakened the country’s global political standing, mismanagement of the COVID pandemic is undermining its economic reputation. In January, the U.S. public health system was ranked #1 in the world. Yet today, the out of control pandemic in the country is among the worse in the world.  

Despite more than 140,000 COVID related deaths and record daily infections, President Trump asserted in a Sunday interview with Chris Wallace that COVID would “disappear.” The main problem he stated is too much testing, not too many infections! It is like saying that too much testing causes more prostate cancer and breast cancer. One cannot defeat a pandemic without recognizing that it is a severe problem?

The economy is showing signs of recovering from the steepest recession since the Great Depression. Had the White House managed the pandemic and reopened the economy effectively, the recovery would be gathering more steam – rather than running into a new shut-down.

Over 11 percent of the workforce remains unemployed, and new claims for unemployment compensation averaged 1.4 million a week over the last month. The U.S. cannot afford a new shutdown. Yet, this is precisely where it is headed.

The White House has responded to COVID bad news by silencing CDC experts, suppressing the timely release of data, opposing new federal funds to states to fight the pandemic, and promoting propaganda that claims the virus is under control. In contrast, U.S. allies and competitors are fighting the virus head-on.

We have all experienced the incompetent parent whose child gets suspended from school repeatedly for bad behavior. The parent argues there is nothing wrong with the child; the real problem is the school does not know how to handle high achieving kids. Before too long, the so-called high achieving child lands in jail, and the parent cannot understand what went wrong when the answer is obvious – poor parenting. Like the misguided parent, the White House cannot comprehend why a resounding majority of people in the U.S. and the world have abandoned its incompetent leadership. Trump still thinks he can smooth talk Americans into believing the pandemic is over. Maybe he should try adding a few acres of swampland to the sales pitch.  

About Thomas_Danny_Boston 25 Articles
Danny Boston is an economist, writer, and entrepreneur. He is professor emeritus of Economics and International Affairs at Georgia Tech and for 25 years served as CEO of EuQuant, an economic research company. Today, Danny publishes the blog GazelleIndex.

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