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What does the Covid 19 pandemic mean for globalization? Business journalist Beat Kappeler speaks in “NZZ views” about bankruptcies, lies and an earthquake that awaits the euro zone.
The economy is moaning under the crown crisis: supply chains are breaking, borders are closing, globalization is falling into disrepute. What are the long-term effects of the pandemic? Journalist and business author Beat Kappeler believes that states and companies have underestimated the risk of a pandemic for too long. In the latest issue of “NZZ Points of View” with NZZ editor-in-chief Eric Gujer and political philosopher Katja Gentinetta, Kappeler argues in favor of bankrupt companies, saying that the European monetary union is no longer viable.
“I hope the pandemic continues to be a unique event,” says Kappeler. Otherwise, many products are likely to become much more expensive in the future due to the dismantling of globalization. Even before the crisis, the economy had returned to its own country. There is a growing desire to produce products like medicines again on our own, rather than in China. Of course, that could increase prices. This trend will continue, also because China has continued to lose confidence. But the United States is also not very transparent in the crisis. For example, President Donald Trump did not allow his medical director to testify before Congress. “Truth is the first victim in the virus crisis,” says Kappeler.
“No one wants to go on a cruise”
Kappeler sees long-term consequences for air traffic. There will be fewer business trips, companies are discovering video conferencing. Kappeler points to billionaire Warren Buffett, who recently sold all of his airline shares. Kappeler also predicts massive losses for the cruise industry. “I don’t think people want to get on a 13-story cruise ship, only to be quarantined for two weeks at anchor when one or two people test positive.”
However, it was premature to call for the end of the travel industry. After every major crisis, be it after the oil crisis in the early 1970s or after the 2008 financial crisis, it was said that everything would change. “But that was not the case.” People would not have decided to consume in any other way or to give up traveling entirely. “It may even be necessary to catch up.”
Kappeler is much more pessimistic when it comes to central bank monetary policy. “The money is simply printed to correct everything, the real market is abolished.” The impression is given to the population that it can correct congestion. But: “Simply printing money doesn’t solve real problems.”
Zombie companies are said to go bankrupt
The western world is now in debt due to the crown crisis. “Bankruptcies are no longer allowed, but they would make sense in some places.” There are zombie companies that should have disappeared during the financial crisis, instead they were saved by central banks because they were systemically important. A big mistake for Kappeler: “A bankruptcy only destroys the owners, not the employees, plants or machines, they are cheaper later.” Owners would have to take the risk, but this cool view was lost. “Instead, everyone calls the state.”
Against purely economic argumentation, Eric Gujer brings political reality into play. Indebted states in particular would not simply go bankrupt that way. Italy already had a high level of public debt before Corona, and now the situation is worsening. The NZZ editor-in-chief argues that the euro zone will not simply abandon Italy without a fight.
“I think it is possible for an Italian government to get serious and say we have to get out of the euro,” Kappeler replies. “If Italy leaves the currency, the country can have all the debts in the lira at once and then work with inflation.” In contrast, under European law, Italy would remain indebted in the common currency of the euro and would be pressured by creditors.
The problem is that in 1999, frivolous and hasty, a monetary union was created for mainly political reasons, with completely unbalanced participants. However, there is no central cash register required and optimal job mobility. “Now Euro-Turbos like Emmanuel Macron are trying to build a debt community with a thousand tricks,” says Kappeler. “But the Germans, the Dutch and the Finns definitely don’t want that, so monetary union is not viable.”
