Perspectives

In many ways, stockmarkets have been extraordinary in 2020

How this year’s crash differs from bear markets of the past




WHEN A BEAR growls, it is natural to be frightened. Ditto in finance, where bear markets can mean rapid losses of wealth. The coronavirus pandemic led to the fastest equity bear market in history: the S&P 500 index, America’s main benchmark, took just 16 days in February to fall by 20%, the standard definition.

The bear also seems to have been an unusually short-lived member of its species. Although economic data have continued to deteriorate, share prices have staged a remarkable recovery. April was the S&P 500’s best month since January 1987.

Having bottomed at 2,237 on March 23rd, it rallied by 27% by May 1st (see chart). Technically, that has put shares back into a bull market, even though they have yet to regain all their pre-pandemic losses.



One reason for this mismatch between the markets and the economy is that official attitudes to financial downturns have changed a lot since Andrew Mellon, America’s treasury secretary under President Herbert Hoover, argued after the crash of 1929 that downturns would “purge the rottenness out of the system”.

Now central banks and governments respond vigorously to economic and financial trouble, and taxpayers may bear more of the burden of the crisis than investors. The swift partial recovery is just one way in which the bear market of 2020 has been an odd specimen.

The grizzly facts

It is far from clear how the term “bear market” originated. Daniel Defoe used the term “bearskin jobber” in the early 18th century. This may in turn be linked to a saying about how it was dangerous to sell a bearskin before catching the bear. Some speculators would agree to sell shares at the current price (but at a future date) even though they did not own them.

To do this, they would borrow the shares, a practice known as “short-selling”, hoping to repay the loan with shares bought more cheaply. These bears thus wanted prices to fall. More optimistic investors became known as bulls. Some suggest this is because bulls strike up with their horns while bears swipe down with their paws.

The traditional template for a market cycle, outlined by Charles Kindleberger and Hyman Minsky, two economic historians, goes through five stages: displacement, boom, euphoria, crisis and revulsion. The “displacement” takes the form of some new, positive economic development—for example, a new technology, such as the internet—justifying greater prosperity.

Sure enough, a boom then occurs. Profits rise and investors steadily become more confident. Companies borrow to expand and investors take more speculative positions by, say, buying shares on margin (putting up only a small amount of the purchase price, with the rest to be paid later). In the boom’s early stages such strategies are highly profitable, and this encourages others to follow suit.


Enter euphoria. Property is often a particular focus of speculation: the peaks of bull markets are associated with the construction of skyscrapers. At the peak, people who do not normally speculate are drawn in: in the late 1990s, investors became “day traders” in technology stocks; in the early 2000s, more people became homeowners to profit from rising property prices.

Because asset prices look high on conventional measures, optimists make up new ones to justify them (eg, price-per-click for internet companies). Sceptics are dismissed as dinosaurs who just “don’t get it”.

Eventually, the boom leads to inflation, as companies compete for scarce raw materials and workers. Central banks respond by pushing up interest rates. At first, this makes little difference.

But eventually something happens to dent confidence. It can be hard to pinpoint what: it may simply be that a few investors decide to cash in and take their profits.

But once prices stop rising, the machine starts going into reverse.

As asset prices fall, those who have bought on margin, or with borrowed money, are forced to sell. Banks become reluctant to lend. Nervous about the value of collateral, they ask some borrowers to repay. Novice buyers retreat from the market as the prospect of juicy gains becomes uncertain. So it is difficult for forced sellers to find new buyers. The fall accelerates.

Often a scandal is uncovered. Booms are an ideal opportunity for what J.K. Galbraith, a Canadian-American economist, called the “bezzle”: fraudulent schemes that allow insiders to bilk the public. Or the problem may simply be that executives at a company are revealed to have taken far more risks than was prudent.

The Depression brought the collapse of the utilities empire built by Samuel Insull; another utility group, Enron, imploded during the bear market of 2000-02.

Sore heads

Some parts of the template do fit the conditions of 2020. The bear market followed one of history’s longest bull runs, which began back in March 2009. The displacement that started the boom was central banks’ decisions to cut interest rates to new lows and to use quantitative easing to force down bond yields to support economic growth. Ever since, one of the most common arguments for buying equities was that the yields on government bonds and cash were so low.

As in previous bull markets, equity valuations rose substantially. Robert Shiller, a Nobel prize-winning economist, compiles a valuation measure which averages profits over ten years, called the cyclically adjusted price-earnings ratio (CAPE). At the start of 2020 the CAPE for the American market was 31. That compared with a historical average of 17, and peaks of 44 at the end of 1999 (during the dotcom boom) and 33 in August 1929.

When shares trade at a high multiple of past profits, the implication is that investors expect future profits to grow rapidly. But even before the pandemic, the trend was not encouraging.

According to the Bureau of Economic Analysis, American corporate profits were flat in 2019. Furthermore, the world economy slowed in the face of the Sino-American trade war. Global growth was just 2.4% last year, the weakest since the financial crisis of 2007-09. Commodity prices, which usually surge at the end of a boom, drifted down after May 2018.

Another sign of impending trouble was in the bond market. Usually, the cost of long-term borrowing is higher than that of short-term finance; lenders demand more for locking up their money. But sometimes short rates are higher—a state known as an inverted yield curve, which often occurs before a recession.

Parts of the yield curve inverted in March 2019 and the phenomenon has reappeared at various times since, most recently in January 2020. So share prices might have fallen even without the coronavirus.

Polar opposites

But in other respects, the coronavirus crash does not fit the template neatly. There was no inflationary surge at the end of the boom. The personal consumption expenditure index, the inflation measure targeted by the Federal Reserve, rose by just 1.8% in the year to January, just before the stockmarket declined. The Fed was cutting interest rates, not increasing them, even before the pandemic started.

Another difference is the scale of the authorities’ response. In America, Congress has approved $3trn of tax cuts and spending increases, while the Fed has cut interest rates to nearly zero and expanded its asset-buying programme, even agreeing to buy riskier high-yield corporate bonds.

In Britain, the government is guaranteeing loans to small businesses and paying 80% of the wages of furloughed workers.

These measures have buoyed market sentiment, as has evidence that the number of cases and deaths from the coronavirus may have peaked. As well as a rally in equities, the high-yield bond market has picked up (which means that borrowing costs have fallen).

Of course, the enormous support given by the authorities has been designed to offset the economic damage caused by their attempts to contain the disease. Around 30m American workers have signed up for unemployment benefits in six weeks; the previous record for a six-week stretch was just under 4m, in 1982. The European Union’s GDP fell by 3.5% in the first quarter of the year, which included only a few weeks of lockdown.

These extremes make valuations hard for investors to assess. It is as if someone tuned on a scalding hot shower and then reacted by emptying a bucket of ice over themselves. And there are few historical parallels.

The outbreak of the first world war was also a genuine shock, but the authorities quickly closed stock exchanges, so it is not a useful basis for comparison. Furthermore, wars usually involve a massive increase of industrial activity, to produce armaments, rather than the current lockdown.

Emerging from hibernation

Usually, bear markets tend to be drawn out as falling asset prices interact with, and exacerbate, economic downturns. The classic example was the Depression, which was linked both to widespread banking failures and the stockmarket crash that began in 1929. The collapse of property prices and the banking sector in 2007 and 2008 led to a recession across the West.

But the “revulsion” stage of the bear-market template may be yet to occur. The authorities have stopped the rot on Wall Street, but Main Street is still suffering. Second-quarter figures may show some economies shrinking at an astonishing rate, of 20% or more. The IMF, which expects global GDP to decline by 3% this year, says that “the magnitude and speed of collapse in activity...is unlike anything experienced in our lifetimes.”

The impact on companies will inevitably be severe. S&P, a rating agency, estimates that the default rate on the riskiest European bonds will jump from 2.2% to 8% this year. Firms are slashing dividends. Royal Dutch Shell has cut its payout for the first time since the second world war.

Robert Buckland of Citigroup estimates that European profits and dividends will fall by half this year. In 2019 American companies spent $729bn on buying back their own shares, an important source of support for the market. Many have suspended buybacks, including the eight banks deemed “globally systemically important” by the Basel Committee on Banking Supervisión.

So although the origins of the bear market may be unusual, and the support from central banks and governments have been substantial, the same feedback process seen in other downturns could yet occur. Bad debts may rise, and investors may lose their enthusiasm for risky financial assets for an extended period.

In the wild, bears are likely to run away when they hear a lot of noise. So perhaps the authorities have done enough to scare this one off.

But with most countries still in lockdown, we are unlikely to be out of the woods yet.

We are entering the new age of American austerity

The decade after the financial crisis saw the creation of a vast asset price bubble

Rana Foroohar

US Era of Austerity
© Matt Kenyon


Americans are traditionally the world’s consumers of last resort. But that’s about to change.

Even when what the IMF is calling the Great Lockdown ends and we emerge from the immediate coronavirus crisis, the economic ramifications of this moment will produce a new age of US austerity.

The idea of Americans penny pinching for any prolonged period may seem unlikely, despite currently living through the sharpest downturn since the Depression. Today’s economy, after all, is built on consumption.

Since the 1980s, the US has incentivised debt over savings for both consumers and corporations, and encouraged the growth of a financial sector that has repeatedly brewed up asset bubbles to support the spending that real economic growth could not. In fact, the decade between the 2008 financial crisis and this one saw the creation of a vast asset price bubble in just about everything.

That bubble is now bursting, exacerbating the economic changes that the pandemic has brought, be that a massive increase in public debt, the reshoring of international supply chains or technology-forced shifts in labour markets.

In many ways, the US has been here before. The period leading up to the 1929 market crash and its aftermath closely mirrors our recent past. It also suggests where we may go next: a new era in which Americans must save and produce more — and consume less.

Like the decade leading up to the financial crisis, the Roaring Twenties were marked by technological wonders, easy money (including a 1921 rate cut by the US Federal Reserve that set the stage for a stock market bubble) and massive income inequality. Working-class wages stagnated, while the wealth of the upper class rose, buoyed by rising asset prices.

Then, as now, when people couldn’t afford to buy, they borrowed: in the 1920s, Americans bought more than three-quarters of major household items on credit. They also began investing in securities en masse for the first time.

As Harvard economic historian Edwin Gay put it in a 1932 article in Foreign Affairs: “They were not . . . educated in the use of credit; they simply received a new vision of its possibilities.”

All that ended in tears in 1929.

But the changes in behaviour that grew out of the crash created a generation of people like my grandmother, who would use a tea bag several times before throwing it away. The personal savings rate of Americans soared from around zero in the early 1930s to as high as 28 per cent during the second world war.

This is crucial.

Like today, government spending rose sharply in the 1930s to stave off an even bigger downturn. Federal spending was just above 3 per cent before the Depression.

It rose to 10 per cent afterwards, and kept rising to over 40 per cent by the end of the 1940s.

Then, as now, the budget deficit soared. Unlike today, however, private savings rates were far higher.

Indeed they were positively Chinese, in part because forced rationing limited consumption, while incomes rose amid strong exports and war-related economic expansion.

It will be harder to achieve similar gains today. Reshoring supply chains could benefit parts of the US industrial sector and boost wages, in a win-win for businesses and workers; Germany’s Mittelstand firms may be a model.

But in the short term, deglobalisation will raise prices for everyone.

Companies that survive the lockdown will meanwhile replace as many workers as they can with software, so unemployment will remain high. Public sector spending will also skyrocket, with US federal debt growing from nearly 80 per cent of gross domestic product before the crisis to over 100 per cent by October, and then probably higher still.

This will further hurt economic performance: academic opinions about worrisome debt thresholds vary, but it’s clear that high and rising debt levels do dampen economic growth.

What the US government is doing now isn’t some sort of productive Keynesian spending programme, but a full-scale bailout of everything.

Perhaps some wise fiscal stimulus in areas such as infrastructure will make some of that additional debt load more productive. But it’s hard to see how that will offset the huge economic headwinds that we face.

This isn’t the 1990s and the US economy will struggle to grow out of the situation. The solution, based on history, is clear. Americans are going to have to save a lot more.

In 2010 a prescient McKinsey Global Institute study, of 45 episodes of deleveraging in mature economies since 1930, showed that half involved sustained periods of austerity, slow credit growth and higher savings. This doesn’t mean we don’t need the vast government spending being implemented now.

But it does mean the US needs an honest conversation about where to go from here. Ultimately, debt is a national burden shared by all taxpayers. Policymakers therefore need to think about how to incentivise savings: trimming every unproductive debt and leverage loophole from the tax code is a good place to start.

In time, the Fed will also have explain how it will shrink all that debt off its balance sheet.

And everyone will have to think about thrift.

Enter the new age of American austerity.

Hospitals Face Difficult Recovery From Coronavirus Crisis

Health-care stocks have performed well during the Covid-19 crisis, but earnings from the largest U.S. hospital chain suggest that optimism may be misplaced

By Charley Grant


More-lucrative elective procedures are largely suspended at hospitals as they treat Covid-19 patients. Photo: eduardo munoz/Reuters .



The spread of the novel coronavirus has upended the hospital business model. Earnings from the largest publicly traded bellwether are an ominous sign for the rest of the industry.

HCA Healthcare, HCA -3.63%▲ which operates nearly 200 hospitals and more than 100 surgical centers in the U.S., suspended its outlook for 2020 on Tuesday morning. It also suspended its dividend and share-buyback plans and is cutting back on capital spending. Original guidance issued in January called for revenue of $53.5 billion to $55.5 billion.

First-quarter sales actually rose about 2% from a year earlier to $12.9 billion, but even those results show signs of strain. Hospitals earn much higher profit margins on elective procedures such as knee replacements than on emergency-room care, and those procedures are largely suspended to treat Covid-19 patients.

Same-facility inpatient surgical procedures fell 1.8% from a year earlier. Outpatient surgical procedures fell 6%, and that drop will likely be much steeper in the second quarter. Outpatient surgeries are down about 70% from a year ago so far in April, the company said.

HCA should be able to get through this rough patch, and its shares actually rose in morning trading. But smaller hospital systems, many of which operate on a nonprofit basis, are likely faring worse.

After all, HCA has among the strongest balance sheets in the industry and doesn’t operate in the greater New York City area, which has suffered the worst outbreak in the U.S. so far. Even HCA relies heavily on debt financing; it ended the first quarter with nearly $35 billion in total debt outstanding and $731 million in cash on hand, though it has the ability to tap nearly $6 billion more in loans and credit lines.

The results should give all health-care investors pause, whether they own HCA shares or not.

Hospital chains themselves have relatively small market values, but far more valuable health-care subsectors, such as biotech or medical devices, depend on well-functioning hospitals. HCA says it expects much of its operations to return to normal by the end of June, but no one can say with any certainty when elective procedures will fully return.

Granted, a rush of surgical procedures is possible when hospitals get the green light, as patients race to catch up on deferred care. But betting that procedure volumes will fully return to precrisis levels is a risky assumption.

For one thing, employer-provided insurance is more likely to pay for elective care than public programs such as Medicaid, so a prolonged economic downturn would keep hitting hospitals.

In the case of HCA, nearly half of revenue came from Texas and Florida in 2019. With the energy and tourism sectors of the economy in shambles, a true return to normal seems a long way away.

Investors betting on health care for its defensive characteristics may want to reconsider.

Recession and Depression

By: George Friedman


A recession is an essential part of the business cycle. Among other things it culls the weaker businesses and redistributes capital and labor for better uses. It is painful but necessary and it ends as it began, as a function of a healthy economy.

Depressions are not economic events; they are the result of exogenous forces such as wars or disease. Depressions are not a necessary culling but a byproduct of the savage destruction of these external forces, which not only disrupt but destroy vast parts of humanity and decency, along with the economy.

Therefore, the question of whether we are now in a depression or recession is not an academic question but the single most important question that humanity faces. We will recover from a recession. We will recover from a depression as well, but it will take much longer and involve far more pain.

Depressions are economic events not created by economic forces. Therefore, measuring the depth of a depression by economic measures alone is insufficient. The measure of a depression is the extent to which it will destroy the hopes and dreams of a generation, making what had been in easy reach inconceivably far away, and taking successful people and reducing them to penury.

Like many things, the face of depression is readily recognized even if it is difficult to quantify.

Among other things, if for example an economy were to contract by 30 percent, recovering from that by, say, a 4 percent growth rate would not be a triumph but a confirmation that we would be beginning to climb out of depression.

The United States emerged from its last depression in World War II, so it has been almost a century since we have experienced one, and the one that we experienced arose from war and was solved by war. World War I created a massive depression in most of Europe.

Germany was particularly savaged by the Treaty of Versailles, but Britain, Russia and Poland were also wrecked in different ways. The cause of the depression was that over four years at least 20 million Europeans, for the most part the next generation, had died. For four years the economy was focused on building weapons and ammunition.

Shell-shocked soldiers came home to shell-shocked nations, an industrial plan irrelevant to anything but war, and the thanks of their fellow citizens. They did not come back to the futures they had imagined, but then those who did not go to war had their futures shattered as well.

Economists like to point to periods during the 1920s when the economy grew, but sporadic growth does nothing to affect my definition of depression. The term “lost generation” came about to refer to the cynical intellectuals who arose in the 1920s, but it more accurately describes, for example, the soldier who had hoped to own a shoe store but now found himself in a country where shoes were no longer bought but only mended.

This was not unique to any one country, save the United States, which fought for only a year and came home to a country able to produce the engines of war and the men who manned them, and all the food that could be imagined. For the most part their dreams were kept alive, for a while. But the persistence of the European depression meant that the U.S. could not resume its role as exporter.

Instead, Europeans who had jobs at lower wages than the Americans undersold American products in the U.S. Washington’s response was a tariff on European goods that changed the structure of global trade, and added the United States to the list of casualties. I won’t trouble you with the details of the American depression. One of the characteristics of the greatest generation was that, having gone through the depression, they saw World War II as their great hope.

Depressions become a political event. There are those who do well in such times and want to preserve the depression. There are others too rich or poor to know that there is a depression underway. And there are those politicians who either invoke ancient ideology irrelevant to the moment, pretending to know what to do and figuring that no one will notice that they don’t, and a few who know that in a crisis the people will rally to those who actually care and plan.

One of these latter politicians was Lenin. Russia was utterly shattered. The leaders didn’t care. Lenin did and knew what to do. He famously said that you can’t make a pie without breaking the crust. To speed things up, he ordered bakeries to bake only crusts for breaking, forgetting the pie. But there was little to be done with Russia.

In Germany, a leader emerged who recognized that unemployment was the heart of the problem and presented fascism as the solution, along with something vital: someone to blame. He nationalized the economy while leaving business in place, and nominated the Jews as the villains, to wild applause.

These are the people who come out of depressions. The successful are monsters; the decent can’t control the forces that depressions unleash. Roosevelt’s New Deal helped some but didn’t change the reality. World War II offered the greatest stimulus package of all time.

Depressions create desperate people hungry for everything — above all, some hope for a future. Hitler and Lenin were one kind of leader; Roosevelt and the other European leaders were another kind. In the end, the solution was not found by the Federal Reserve but the military.

World War II did not end the depression, save for in the United States. Europe was once again in depression. China and Japan were ruined. When I was a child, the words “Made in Japan” brought laughter and the expectation of cheap and trashy goods.

The solution came because the Americans feared the Soviets and created aid packages for allies and the right to sell cheap goods to the U.S. The skilled workers of Eurasia were either led into a generational depression by the Soviets or into recovery by the Americans. Again, depressions and the possibility of war went hand in hand.

The coronavirus crisis has similarities to war. The state mobilizes the people heedless of consequences. The workforce, or a large part of it, is diverted from its work. Schools are closed. Most of all, we are afraid. Even the question of how the virus began has hints of retaliation assigned to it.

The enemy is death, in this case from the virus. We duck and cover, and in a war, the rule is that there is no price too high to be paid for victory.

But victory in war and victory against the coronavirus are very different. This leads us to ask what victory in this case should look like. The virus should go away, on its own or from a vaccine. And the world should return to what it was. Yet the problem of war and depression is that the world doesn’t go back to what it was. It is very different, and in its mildest form it causes the survivors to change their dreams — but most important they will still have dreams.

They will not have to abandon their right to dreams.

So those are the questions of the moment. First, will the virus be defeated or go away? If it remains, will we accept the permanence of the new disease or will we conduct a war that will transform the world in unknown ways?

Second, is this like the depression after World War I, a global crisis? We Americans do not control how the world will react to the choice we have made, and decisions by Canada or Italy could affect how we live.

For what it is worth, I don’t think we have reached the depression point. I don’t think the numbers show it yet, and the despair of depression is not here yet. But some part of the world may have reached that point, and depression spreads its claws.

The urgency on vaccines and openings I think reflects a sense of fear of reaching the breaking point, but as I have written in my book about the United States, we are a uniquely inventive people, and this is in the end a technical problem.

Still, it is useful to bear in mind the past. When we look at the first half of the 20th century, the economy was a prisoner of war, and contrary to the histories of the time, it was not economic theory that defined things. But the political systems made the decision on the price to be paid, and the price was enormous in terms of death.

In all of this equation, the dark reality is that solving this without accepting death will be difficult — unless the medical profession has an emergency mode.

Disunited States

Long held up as a model for Europe, the United States is now also suffering from balkanization, internal competition, out-of-touch and short-sighted leadership, and narrow turf battles. Given the large number of pressing global challenges, the world must hope that America does not go further down that road.

Ana Palacio

palacio106_Ivan AbreuSOPA ImagesLightRocket via Getty Images_USflagtornground


MADRID – In 1946, with war-ravaged Europe exhausted and in disarray, Britain’s wartime leader, Winston Churchill, gave a speech in Zurich in which he emphasized the need to “recreate the European fabric” in order to restore peace and freedom to the continent.

“We must build a kind of United States of Europe,” Churchill declared. It was a foundational moment for what would become the European Union, even if Churchill’s views of the United Kingdom’s place in Europe were rather more nuanced.

Subsequent attempts to construct a united Europe have never lived up to the grand vision that Churchill advanced that day. Indeed, in the 74 years since his speech, the United Kingdom first refused to take part in the European project, then grudgingly entered the bloc and secured numerous opt-outs and concessions, only finally to leave it in January this year.

Nonetheless, the idea of a cohesive Union remained, with the United States of America seen as the ideal model for what Europe might someday become. Indeed, in 2006, a year after French and Dutch voters rejected the ill-fated European Constitution, Belgium’s then-prime minister, Guy Verhofstadt, published a manifesto for the continent’s future that evoked the Churchillian dream. He titled it “The United States of Europe.”

But after a decade of crises, sluggish growth, ineffectual leadership, and internal divisions, the idea of building such an entity has all but faded away, and Europe has taken a sharp turn toward intergovernmentalism. For all the talk of shared values and common approaches, robust unity is simply not feasible right now.

For the foreseeable future, Europe will remain politically constrained by the reality of parochialism – epitomized by member states’ extreme difficulty over the last month in reaching agreement regarding pandemic-related recovery funds and how to share the additional debt burden.

Rather than bridging divides, multiple meetings of EU heads of government and finance ministers have only highlighted and reinforced them. We cannot act together, because we do not think of ourselves as belonging to a single whole.

There is no United States of Europe, but rather united blocs of states within Europe. We often hear about the “frugals,” the Visegrád Group, the Nordics, and the Southerners, for example.

A similar dynamic was evident during and after the 2008 financial crisis, in the EU’s weak response to Russian aggression in Ukraine, and, devastatingly, during the 2015 migration crisis.

And Europe lacks the leadership needed to align these blocs and push everyone in the same direction.

Worse, the US under President Donald Trump is taking a similarly troubling turn. In the absence of strong and effective national leadership, US states – and, more tellingly, groups of states – are going it alone.

On April 13, California, Washington State, and Oregon announced the formation of a “Western States Pact” to coordinate their coronavirus response, while seven northeastern states have established a similar grouping. With the federal government failing to coordinate procurement of medical supplies to combat COVID-19, state and local governments have reportedly been competing to purchase scarce personal protective equipment and ventilators, thus driving up prices. California Governor Gavin Newsom has even taken to referring to his jurisdiction as a “nation-state.”

My intention is not to opine about US federalism or the extent of Trump’s authority (although his recent claim that he wields “total” authority under the US Constitution was so roundly rejected by all sides that he backed down the following day). My point is to express real concern.

After all, it is precisely the dynamism resulting from America’s unique marriage of diversity and cohesiveness that has made the country a model for many Europeans. US Supreme Court Justice Louis Brandeis once famously remarked that any state could serve as a “laboratory” for innovative policy experiments which could later be adopted nationally. And the US has been far more successful than Europe in achieving the delicate balance between empowering individual states and maintaining a sense of national unity.

Today, however, America, too, is falling victim to balkanization, internal competition, out-of-touch and short-sighted leadership, and narrow turf battles. Such warning signs suggest that the US is becoming more like Europe, rather than vice versa.

These developments are especially worrying because the coming years will be exceedingly difficult for a world fundamentally changed by COVID-19.

The International Monetary Fund is now predicting that global real GDP will shrink by 3% in 2020 as a result of the virus, compared to a drop of -0.1% in 2009, in the depths of the Great Recession.

That episode fueled the profound political polarization, populist surge, and instability that continue to hamper the world’s ability to tackle pressing challenges such as COVID-19.

We will need global engines of creativity and economic growth.

More than at any time since the end of World War II, the world needs America to be at its best and most effective, and to be a model to emulate again.

For its own sake and ours, the US cannot become another Europe.


Ana Palacio is former Minister of Foreign Affairs of Spain and former Senior Vice President and General Counsel of the World Bank Group. She is a visiting lecturer at Georgetown University.