The pandemic and north-south divides

By Irene Fernandez-Molina, University of Exeter

‘The coronavirus is poised to spread dangerously south’. The global trajectory and mapping of the COVID-19 pandemic suggests a two-stage advance from east to west, and from north to south. Gramsci’s ‘southern question’ could not take long to be raised on all possible scales, from its Italian birthplace to EU politics to the world stage. To what extent is the so-called north-south divide — or divides in plural — a relevant lens to capture some of the current ‘pandemipolitics’?

A passenger has his temperature checked at a South African airport. Image source

There is indeed a very tangible, chronic global north-south gap in health capacities, including both universal health coverage and health worker density. In Africa, the COVID-19 pandemic has called attention to serious shortages of hospital beds, intensive care units, ventilators, surgical masks, medicines and even medical professionals, due to prolonged brain drain. The picture is more mixed when it comes to health emergency preparedness, as some low- and middle-income countries benefit from the experience of dealing with other recent epidemics, such as Ebola in western Africa (2014–2016), in close accordance with WHO guidance. This learning, coupled with awareness of their health system’s fragility, has led many of them to en strict containment measures, including travel restrictions and lockdowns, in very early stages of the pandemic compared to western Europe and North America (is there an additional north-south dimension to social trust, including self-perceptions and assumptions about citizen responsibility?). Also, the population ageing divide between the global north and south is likely to play in the latter’s favour.

More as a side effect but very strikingly, the sharp global north-south (im)mobility divide has suddenly levelled out due to the avalanche of border closures around the world. By the second week of April, 194 countries and territories had enforced mobility restrictions of various sorts. The first African air and sea travel suspensions to prevent access from European countries in mid-March were celebrated in social media with some sense of karma. Since then, as temporary as this might be, the pandemic has in fact put citizens from all states on equal footing in terms of passport power, and even some unheard-of reverse clandestine migratory movements have been reported across the Mediterranean.

Fewer surprises may be expected in relation to the north-south economic capabilities divide. If anything, COVID-19 has brought to the fore a global division of vulnerability whereby the weaknesses of northern economies are increasingly attributed to their neoliberalisation and deindustrialisation, while those of southern states stem primarily from dependence, lack of fiscal space and informality. Over reliance on foreign investment, exports the north, migrant remittances and tourism means that, even if southern countries managed to mitigate their own public health crises, they would still heavily suffer the repercussions of the north’s recession, as happened with the 2008–2009 financial crisis. In other words, they are doomed to pay a double economic price: the cost of domestic containment plus the cost of dependence. Meanwhile, high public debt will hinder the implementation of extraordinary measures to cushion the immediate socio-economic impact of social distancing and lockdowns as well expansionary, stimulus policies to revitalise the economy subsequently.

Finally, the pervasive role of the informal sector in global south economies, especially in terms of employment and inclusion, adds to the lack of a social safety net for much of the population. Upon this background, popular protests against social distancing have erupted in countries ranging from India to Lebanon. Ultimately, the dilemma between dying of the coronavirus and dying of hunger is what draws the line between the global north and the global south in the pandemic’s context. This, of course, distinctly includes the bits of the global south that are present within the global north, and has huge political legitimacy implications.

Two approaches in IR that may help unpack policy responses to this situation. The determinants of the global south state responses can be explored from the perspective of Ayoob’s ‘subaltern realism’ and ‘Third World security predicament’. Looking at the intersection of structural economic dependence and primarily domestic security dilemmas in which ‘the security of the state and the regime become closely intertwined’ yields two interesting observations. First, southern states appear to be now prioritising tackling the public health emergency over economic concerns, which might be unprecedented in history. Second, from Chile to Algeria to Iraq, the ruling authorities of not a few of them have seized mass gathering bans as an opportunity to pause or stifle significant political protest movements, which points towards a conflation of state/human and regime security. Still, whether this temptation is limited to the global south and/or to more authoritarian states within it remains unclear.

Southern state responses to COVID-19 can also be examined as part of north-south burden-sharing in the provision of the global public good that is health. In this respect we can distinguish between the burden of containment, which involves interrelated political legitimacy and economic costs in the short to medium term, and the long-term financial burden that will result from sharp rises in the level of public debt. How are the two burdens going to be distributed? The containment burden is currently weighing on most of the world’s states, albeit not evenly, and particularly less intensely in a few global north countries that have opted for limited social distancing measures. Southern countries are generally shouldering their part, primarily out of self-interest — as their health system’s fragility leaves them no alternative — but also as an indispensable contribution to the global control of the pandemic. The latter expectation transpires from many current comments, which raise the spectre of COVID-19’s potential re-transmission from the southern hemisphere back to the north in the winter of 2020–2021.

Global north states could compensate for the southern states’ disproportionate containment burden by stepping up their contribution in carrying the financial burden. By mid-April, 90 countries had applied for emergency support or debt relief from the IMF. The IMF has in turn called on the G20 to ‘do their part’ as creditors, easing the debt burden of poorest states, and as donors, building up contributions to international financial institutions. However, for the time being the G20 has only agreed a ‘time-bound’ suspension of debt service payments, and has refrained from any new financial resource commitments such as for the IMF’s special drawing rights.

In short, global burden-sharing in the COVID-19 crisis is likely to be asymmetrical in the sense that southern states have little choice but to cooperate in containment, while there is no compulsion for northern states to contribute more financially.

COVID-19 and the Contradictions of Interdependence

by Patrick Holden, University of Plymouth

The human experience of COVID-19 is full of contradictions. We talk of society ‘coming together’ by implementing social distancing and refraining from normal human relations. Notwithstanding the incongruities, the pandemic has demonstrated in the most vivid way possible that ‘society’ is a thing. Whatever our pretensions to individualism we share physical spaces and particulates on a daily basis. This interdependence has also been (re) illustrated at the global level, again in contradictory ways. It has demonstrated the very real interdependence of bio-systems and political structures. Strict European regulation of animal welfare and food safety has not saved Europe from viruses emerging in other parts of the world (while the industrialised agriculture we are all complicit in helps create these new diseases).  On the other hand the political, economic and public policy implications of the virus seem to diminish cooperative interdependence.

As has been often mentioned, COVID-19 has reiterated the fundamental importance of the state. Even in an integrated region such as the EU it makes an enormous difference whether you reside in (for example) Germany, Sweden or Italy in terms of the policy response, economic impact and your likely health outcomes. Sovereign governments still have the ultimate power over regulation of society, control of borders, taxation and maintenance of the economy.

To combat the virus many of the flows of what we can call globalization have been halted (in terms of people and many goods, though not finance or digital interaction). Some of this will be temporary but the political economy paradigms seem likely to change. In a global economy, countries rely on being able to import even the most fundamental products (food for the UK, essential medicines for the US). The perils of this are evident as states compete for access to scarce medical equipment (only the European Union has made an effort to moderate this, within its region). Many states have paced temporary restrictions on the exports of key equipment and medicines (see the WTO’s list here) while trade more broadly has been decimated due to the national societal and economic shutdowns.

So what does this mean for the theory and practice of interdependence? In contemporary IR it emerged via the concept of ‘complex interdependence’ in the 1970s and also informed international regime theory (in some senses a forerunner of globalization theory). Keohane and Nye argued that relationships like, for example, the US-Mexico relationship had so many forms and levels of mutual interaction (including many different forms of societal, economic, security, ecological, political interdependence) that domination, even for a power such as the US, was not practical and cooperation was a necessity.

Practical interdependence provided the basis for a lot of international regime theory, which offered a hard-headed counter point to realist statism (stressing that international institutions mattered not because of high minded liberal idealism but because of the practical imperatives for cooperation over issues such as monetary policy and trade). Generally regarded as a liberal concept it was criticised as obscuring the real power realities by those who, whether based on a realist (usually state-based) or a Marxist (class and economic forces based) perspective, retained a rigorous focus on power. Susan Strange’s unique analytical framework  disdained the term interdependence; what, after all, did it mean to say that the US and Guatemala were interdependent? The term asymmetric interdependence offered a little more precision and ‘realism’ here.

Interdependence as concept also permeated what can be called globalization theory (some of the excesses of which are now painfully evident) and ideas of global governance. Liberal globalization in particular rested on classic liberal economic assumptions that states should not pursue autarchy or self-reliance but could rely on being able to purchase what they need in the global market.

What new forms of interdependence will emerge after this crisis? There is no determinism here. Certainly the intensity and scope of this shock may result in new political regimes with radically different socio-economic policies. Globalization still has its defenders, Sandbu argues that intelligent globalization can bolster national resilience (there was nothing to prevent states buying cheap emergency equipment and stockpiling it for events like these, or at least globalization was not the reason that did not take place).

It is certainly true that no average country could aspire to even a limited form of autarchy. Could the UK feed its 66 million people? Could Honduras make its own medical equipment? A vision of regional (as in continental and sub-continental) autarchies based on regional supply chains is perhaps more realistic. However, we have often had predictions of the world devolving into protective regional blocs but that dog has not barked (partly because most regions are hopelessly divided).

Also, as Hans Kundnani notes, thus far only some elements of economic/financial globalization have been shut down (financial flows and the digital economy are proceeding and expanding in the latter case). Although anger at China is evident, the need for the PPE and medicines it produces is more acute than ever at the moment, thus countries pursue a delicate balancing act (in some cases between racist scapegoating and commerce).

 As noted, interdependence is generally regarded as a liberal concept as it implies a need for cooperation, but it could also be read as implying a need for domination.  Absolute domination is not practical but could we see heightened struggle to control the commanding heights of technological, financial and economic networks or what Farrell and Newman call the ‘choke points’ of interdependence? If states emerge with new, more radical, socio-economic visions from this crisis they will have to navigate these also.

Patrick Holden is Programme Leader of the Masters in International Relations, and leader of the Global Instability and Justice Research Group, at the University of Plymouth.

China’s Overseas Investments and the Coronavirus Crisis: Towards Benevolence or Profit?

By Catherine Owen, the University of Exeter

A ‘new settlement‘ in Kyrgyzstan — one of many countries with a high level of Chinese investment under the Belt & Road Initiative (Credit: Owen)

The last week of March was a big day for economic news. While the IMF declared that the world economy was in a COVID-19 induced recession and Fitch credit rating agency downgraded the UK’s credit rating from AA to AA−, observers noted signs that the Chinese economy was beginning to recover from the sudden impact of COVID-19. Although profits were still low, property sales and steel production had more or less returned to normal.

But China’s economy is not out of the woods yet: while the government has implemented a raft of policies to help businesses as they resume operations, there is little it can do to boost the external demand required to sustain its export-based economy. As the global financial devastation wrought by the whirlwind of COVID-19 becomes apparent, will China take advantage of commodities prices’ historic lows and ramp up overseas investments or will it begin to demand timely repayments on its global loan book as domestic purse strings tighten?

In the last two decades, Chinese state-owned banks and enterprises have lent hundreds of billions of dollars to developing countries, leading China to surpass the World Bank and IMF as the world’s largest creditor.  When confronted with COVID-19, developing countries are likely to take the biggest hit in terms of both economics and mortality, as their fragile markets and health systems are pushed to point of collapse. Meanwhile, China’s loans are often secured against commodities, meaning that when borrowers default, countries must cede natural resources or infrastructural apparatus to China.

China’s highly publicised aid-related activities differ sharply from the much more oblique management of its burgeoning overseas financial portfolio, the former constituting more of a global public relations campaign while the latter remains shrouded in secrecy. Indeed, recent research indicates that up to 50% of its loans go unreported.  While the World Bank and the IMF have called on creditors to suspend loan repayments for the world’s poorest countries, Chinese creditors have thus far remained silent. Last month, China Development Bank stated that it would provide low-cost financing and loans for companies involved in the Belt and Road Initiative (BRI) — but it is not clear whether this referred solely to Chinese companies.

While it will take months for China’s overseas debt management strategy to become clear, there are places we can look for the first signs of emerging trends. Colleagues and I have argued elsewhere that activities at the state’s peripheries are just as significant as central government pronouncements when trying to understand national strategies. Hence, in order to gather an indication of what is to come, we can examine the activities of sub-national Chinese actors in the margins.

The first indication of how things could continue comes from a pronouncement from an economist at the People’s Bank of China, who recently stated that local governments were likely to respond by investing in high-cost infrastructure projects, supported by trillions of yuan of local government bonds released as fiscal stimulus. This could see local governments at China’s peripheries expanding the already extensive cross-border collaboration with low-income neighbouring countries desperate for infrastructure and investment. While BRI construction has temporarily ground to a halt across Central, South and South East Asia, this provides reason to suggest that, once travel restrictions are lifted, BRI-related activities will increase with renewed zeal.

However, the debt-stricken countries on China’s periphery are not able to wait that long. For example, on 26 March, Kyrgyzstan became the first country to receive a soft loan to tackle the economic impact of COVID-19 totalling $120.9 million — not from China but from the International Monetary Fund. Its largely remittance-based economy is taking a further hit as swathes of workers return home from Russia as enforced lockdown is extinguishing work opportunities in Moscow. Heart-breaking stories of people unable to afford to feed their families as food prices have shot up and shops have closed have appeared in the local media. The country has received financial support and donations of masks and personal protective equipment from USAID, the World Health Organization, and the Soros Foundation Kyrgyzstan. While China and Russia have donated much-needed medical equipment, Kyrgyzstan’s debts to China total at least 30% of its GDP with almost half belonging to a single creditor — China’s Export-Import Bank. It is not clear how this debt will be managed in the near term.

Elsewhere, the consequences of unprofitable Chinese overseas investments have become devastatingly apparent. In Australia, when Chinese businessman Liu Dianbo recently closed 34 private hospitals he owned in Australia due to a cited lack of profit. As this case demonstrates, with profits stalling, there is little to prevent Chinese investors from simply shutting down essential infrastructural operations overseas. While strong states like Australia can mobilise other resources to fill this gap, this is far from the case in countries like Kyrgyzstan, where the government is already struggling to respond to the epidemic.

Many other countries in Africa and Southeast Asia are facing comparable situations to that of Kyrgyzstan: corrupt governments, fragile health systems, and large debts to China. How China’s big banks and billionaires respond to the economic crisis ripping through the world will have profound consequences for the living standards of many of the world’s poorest. Some have suggested that the international symbolic capital acquired by China through its comparatively effective management of the pandemic will outweigh the accusations by Western countries that its initial handling of the crisis was poor, and shift normative power further away from Western countries. But how China acts as the world’s largest debt collector during this crisis should also form a large part of this picture.