Sun, 12 Jul 2020

US New Great Depression - Will US lead the world to chaos?

(Op-ed) Brain Hutzler
27 May 2020, 13:47 GMT+10

US government data shows that more than 33.5 million people lost their jobs and the unemployment rate rose to 14.7 percent. The US New Great Depression, also known as the Trump Depression, has arrived. Therefore, we need to know why this depression happened and where it will go. This is not only a problem that the US needs to resolve urgently, but also determines the future of the world.

Donald Trump is to blame for this depression.

The US economy shrank at a 4.8% annualized pace in the first quarter, and nearly 23% of US households said that they couldn't afford enough food, according to Brookings Institute. Many economic analysts believe that this New Great Depression has already caused a catastrophic downturn which is much more dramatic than the Great Depression of 1929. To be honest, the US, with strong economic strength, shouldn't have such a depression, but it was a series of bad decisions, kin my view made by President Trump that doomed the New Great Depression.

First, the US lost nearly three months when they could have prepared for the inevitable Covid-19 pandemic. Since January 3, Trump was repeatedly warned by officials that a pandemic was on its way, yet he continued to neglect the threat and didn't take any precautions. Thus, the serious outbreak in the US caused a tremendous loss of lives and employment. On the contrary, South Korea and Germany have been hit harder than many places by the coronavirus, but they maintained smooth economic growth by taking medical, economic and social precautions. As a result, South Korea's unemployment rate in April was 3.8% and Germany's unemployment rate was 5.8%.

Second, when the pandemic has not been controlled, Trump has started calling for reopening of the US with no systematic, scientific and rational reopening measures. Right now, the US still doesn't have a national testing and tracing strategy to contain the pandemic. Meanwhile, the Paycheck Protection Program and Health Care Enhancement Act as well as other coronavirus aid packages cannot provide enough resources to help state governments, which has left states exposed to bankruptcy.

However, Trump still refuses to take responsibility or self-reflection, which will increase the severity and duration of the New Great Depression. Treasury Secretary Steven Mnuchin, the president's economic adviser Kevin Hassett and Federal Reserve Chairman Jerome Powell all warned recently that the economy is going to get worse and last all year. In the meantime, Trump is focusing on shirking any responsibility. Check out his performance in an interview with Fox News on May.14:

HOST: "We've got 33 million people filing for unemployment, we've got 20 percent-"

TRUMP: "Nobody blames me for that."

Donald Trump may drag the world into chaos

Trump said that the economy will begin to recover just in time for the presidential election. However, will the US economic recovery affect the rest of the world? Trump's current foreign policies suggest that the world will pay for US economic recovery.

First, Trump will snatch resources and bully allies. Trump's primary goal is to get reelection through economic recovery, which means he will resort to every conceivable effort to stop the New Great Depression. He forced international companies to return to the US; he used tariffs to protect US trade (EU seems to have had enough); he compelled others to provide medical supplies; and he asked Japan and South Korea to pay more for US bases.

Second, Trump has shown little interest in working with the international community, which has lead to a divided world with low capacity to fight the pandemic. Former Australian prime minister Kevin Rudd said that: "Normally, however imperfectly, America would also have mobilized the world." Carl Bildt, former Swedish prime minister agreed: "Everybody waits to see what the Americans are doing, and then they calibrate their own response based on that." However, during this global pandemic, the Trump administration is doing nothing. To make matters worse, Trump has repeatedly threatened to permanently freeze WHO's funding.

Third, Trump has been trying to shift blame away from himself to China and forced other countries to pick a side. The Trump administration suggested that a post-pandemic US must change its relationships with China, rally its allies to defy China, and rewrite the rules of commerce to exclude China. In the era of globalization, forcing other countries to cut business relationships with China risks a devastating blow to the global economy. It is worth mentioning that, although what China has done might be a gesture in politics, its humanitarian aids against the Covid-19 are all over the world now. The Chinese government recently said that if the COVID-19 vaccine is successfully developed, it will be made available to the whole world.

The only way to avoid a global depression is to change the "America first" world order.

Behind the "America first" slogan, US uses its influence to devour international resources and benefits while evading its responsibilities. The Nobel prize-winning economist Joseph Stiglitz pointed out that: "Fighting global pandemics require global cooperation. It's just that the president of the United States doesn't understand that." However, Trump neglects to pay attention to these appeals.

In short, in the post-pandemic world, rebuilding a fair, united and resilient international league is the key to resisting the pandemic and preventing a potential global depression. In fact, many middle-power countries have been swapping details of their responses, supporting shared solutions - like vaccines - and starting to look ahead. Moving forward, all countries should stand and work together to establish a world order of "Equality and Mutual assistance" instead of "America first".

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