How strongman leaders will exploit the coronavirus crisis

It is easy to take advantage of frightened people who have accepted infringements on freedom

Gideon Rachman

Coronavirus head in sand
© James Ferguson

International politics was suffering from a pre-existing condition when Covid-19 hit. Before coronavirus, the political world was already succumbing to a strongman virus.

In 2018, China abolished presidential term limits, making it possible for Xi Jinping to rule for life. This year, Russia announced that it, too, is planning constitutional changes that would allow Vladimir Putin to stay in power until 2036 — giving him a longer period in office than Stalin.

Even well-established democracies are displaying symptoms of strongman syndrome.

Donald Trump came to power in the US in 2016, decrying American “carnage” and proclaiming, “I alone can fix it”. He recently announced that his “authority is total” in dealing with the pandemic. Jair Bolsonaro was sworn in as president of Brazil in 2019, having expressed frank admiration for the military junta that ran Brazil in his youth.

In Manila, Delhi and Riyadh, a personalised, swaggering style of leadership is in vogue.

A global body politic that is already weakened by the strongman virus could get a lot sicker under the impact of a real health emergency. To contain the pandemic, frightened people around the world have accepted extraordinary infringements on personal freedoms, regulating whether they can leave their house or work for a living.

There are also alarming historical precedents in which governments have used an emergency to claim dictatorial powers, which are then left unrepealed. A classic case was Hitler’s use of the Reichstag fire in 1933 to establish the power to rule by decree.

One clear example of a strongman ruler using coronavirus to strengthen his grip on power has already emerged in Hungary. Viktor Orban, who has spent the last few years undermining the independence of the media, the judiciary and universities, moved swiftly to exploit the pandemic.

The Hungarian prime minister has persuaded parliament, dominated by his Fidesz party, to give him the power to rule by decree for an indefinite period. Distracted by Covid-19, the EU’s response has been feeble.

This weekend also saw a round-up of pro-democracy activists in Hong Kong, which looks like an effort by Mr Xi to stamp out the movement, under cover of the pandemic. An event that would have provoked local protests and global outrage a few months ago, attracted relatively little attention.

Elsewhere, however, many strongman leaders have taken a different approach, calling for business-as-usual rather than the suspension of civil liberties. Their behaviour has looked more foolhardy than sinister. President Alexander Lukashenko has ensured that Belarus is the only country in Europe, where the football league is still playing.

In Brazil, Mr Bolsonaro has called for shops to reopen and sacked his health minister for being too fussy about social distancing. Mr Trump initially claimed that the virus would disappear as if by “magic” and urged voters to buy shares. Mr Putin made a show of sending medical supplies to Italy and New York, before finally admitting that Russia, too, faced a serious crisis.

Part of the problem may be that these leaders have interpreted “strength” as a refusal to be intimidated by a mere disease. Mr Bolsonaro has demanded that Brazilians face the virus “like men, not kids” and predicted that he would shake it off easily “due to my record as an athlete”.

In Britain, Boris Johnson made a show of shaking the hands of people in a hospital with Covid-19 patients, before himself succumbing to the virus.

Many strongman leaders in democracies are also populists who trade off hostility towards “elites”, which include suspicious characters like epidemiologists and civil servants.

“Anti-vaxxers”, who spread conspiracy theories about vaccinations, flourish on the fringes of populist movements across the west. If populist leaders continue to make a hash of dealing with the pandemic, coronavirus could reverse the trend towards their politics — by discrediting leaders who mishandled things and bolstering the demand for expertise rather tan macho posturing.

In the UK, Mr Johnson’s supporters have stopped muttering about Britain’s “deep state” and taken cover behind outwardly reassuring figures like the government’s chief medical officer.

Despite his obvious irritation with Anthony Fauci, Mr Trump has not yet felt strong enough to fire his most prominent medical adviser.

But, as events wear on, strongman leaders might find that the new environment is even more hospitable to their style of politics. Economic despair and desperation are often the enemies of calm debate and a friend to the conspiracy theories that help populism to flourish.

An expansion of state-surveillance, once rolled out, could be hard to reverse and will be a potent tool for would-be dictators. The blame game that is breaking out between nations — whether it is the US and China, or the Netherlands and Italy — also stokes nationalism, which goes hand-in-hand with strongman politics.

Both the Xi and Trump administrations have deflected domestic criticism, by pointing at enemies in the outside world. Mr Trump has lashed out at the “China virus”. Meanwhile, the Chinese official media has suggested that foreigners are unfairly scapegoating China — provoking a torrent of nationalist commentary online.

The world’s strongman rulers often made a weak impression in the early stages of the coronavirus crisis. But I fear they will turn it to their advantage in the long run.

You Can't Have A Sucker's Rally Without Foolish Buyers

by: Altitrade Partners


- The 35% rally off March 23, 2020, will go down as one of the biggest sucker's rallies ever seen in the U.S. stock market.

- This rally is being fueled by foolish buyers who choose to ignore the past while hanging on to a buy-the-dip strategy that is now obsolete and dangerous.

- The coming collapse in equity prices will be fast and furious, as retail investors become painfully aware that, once again, they have been led to the slaughterhouse like sheep.

- Comparisons between a 38-year stock market super-cycle in the U.S. and a 39-year super-cycle in Japanese equities should not be ignored.

- P.T. Barnum, who is credited with having coined the phrase "there is a sucker born every minute", understood human weaknesses better than most.

There is a quote from a book entitled Bleeds My Desire by Nenia Campbell which talks about how power can be a fickle mistress.
Power is a fickle mistress, easy to seduce, but even easier to lose. That's how it works. One moment she is your closest confidant, whispering the secrets of the universe into your ear; the next, she is your vilest oppressor-and once her ears close to your plights you are well and truly screwed."
After reading her quote, it dawned on us that there is another seductive force that holds the same powerful grip over humanity - the power of money. Just re-read the above quote and substitute the word money for power. Agree?
Throughout history, there have been stories of fortunes made and fortunes lost on Wall Street. Often referred to as "the canyon of dreams", there is a famous artist by the name of G. Harvey whose modern work bears that same title.
There certainly is something romantic about Wall Street, but there is also something sinister, at the same time.
As a young Registered Representative eager to make my fortune on Wall Street, I fell prey to the powerful grip of this fickle mistress.
My early successes, as a young stockbroker, in the field of trading and investing, made me feel a sense of being invincible. Furthermore, it made me believe (falsely, I might add) that I was smarter than I actually was.
Yes, I found that it is true that "pride goes before a fall".
Today, I wouldn't trade those humbling experiences for anything in the world because it was those early lessons, born out of failure, that taught me how to respect risk in the financial markets.
One of my early mistakes was the use, or should I say over-use, of leverage in my stock positions.
Margin cuts both ways. It's great when you are on the side of a winning trade, but it is devastating, both emotionally and financially when you are in a losing position.
We are seeing a lot of novice investors today, who are relatively new to the financial markets.

Their cocksure attitude is something that we can certainly relate to from our own years of experience in the stock market.
These neophyte investors can choose one of two ways to earn their stripes on Wall Street. The first is to learn by your own mistakes, as we did. The second is to learn from the mistakes of others. The first option is the most costly but carries with it a much stronger psychological imprint on the investor's mind.
The problem for many investors today is that they have grown accustomed to the seductive charm of living through a bull market super-cycle that dates all the way back to August of 1982.
Not that there have not been corrections and bear markets along the way over this 38-year stretch, but the takeaway for many has been that if you just buy the dips, over time, you will make money.
Getting your so-called sea-legs, as it were, requires that you go through some rough waters. For many investors today, the stock market calm has only been briefly interrupted by a few squalls, every now and then.
To those investors, we say, don't be fooled into thinking that what we have seen in the past few months will quickly pass and it won't be long until we return to the blue skies and sunshine of another bull market.
What we have witnessed, to date, is one of the greatest extraneous events in the past 100 years.
Something of this magnitude doesn't go away quickly or easily. The scars will remain on many of us for a very long time.
The COVID-19 virus shock has done almost irreparable damage to both the economy and the financial markets, which will take years to recover from.
We are not going to see a "V"-shaped recovery, as some would have you believe. In today's news cycle, that hopeful narrative may play well for President Trump and Treasury Secretary Steve Mnuchin's agenda, but it is hardly realistic to expect that things will get back to "normal" (whatever that now means) within a month or two.
Some investors appear to be drinking the Administration's Kool-Aid, while others, quite frankly, are guzzling it.
If we are lucky and we don't see a second wave of the coronavirus emerge in the fall and winter months of 2020, as some are predicting, we will still have a long and arduous path to economic recovery.
If we do experience a second wave, it is likely that a depression will ensue and any meaningful recovery will be elusive for many years.
We would ask readers to give some serious thought to what took place in the Japanese economy and the Nikkei stock market average over the past 20+ years.
The Bank of Japan followed a path of systematically lowering interest rates, to stimulate the Japanese economy. The Nikkei 225 stock market average peaked on December 29, 1989, at 38,915.

Today, over 30 years later, the Nikkei 225 has yet to regain its former glory and has effectively been in a 30-year bear market, as the Japanese economy has muddled along.
We would note a striking similarity in that Japanese investors also experienced a stock market super-cycle of some 39 years from 1950 to 1989. The parallels between these two countries, economies and markets should not be ignored.

Ruchir Sharma, the Chief Global Strategist for Morgan Stanley had this to say in a Fortune Magazine article from August 2019.
In this environment, cutting rates could hasten exactly the outcome that the Fed is trying to avoid. By further driving up the prices of stocks, bonds and real estate, and encouraging risky borrowing, more easy money could set the stage for a collapse in the financial markets. And that could be followed by an economic downturn and falling prices - much as in Japan in the 1990s. The more expensive these financial assets become, the more precarious the situation, and the more difficult it will be to defuse without setting off a downturn.
                                                                                    Source: Fortune Magazine
The U.S. Federal Reserve is on a similar path as the BOJ, according to some market watchers.

The question is, will the U.S. stock market, ultimately, mirror the performance of the Japanese Nikkei 225, which still remains roughly 50% below the peak it achieved in 1989?
Our point here is that many of today's investors who have viewed the recent U.S. stock market decline as a buying opportunity may be placing false hope in a narrative that we believe has a very slim chance of playing out the way that the bulls envision.
There were a few periods during the last 30 years when the Nikkei 225 managed to rally, in an attempt to once again reach the 39,000 level. However, none of those bear market rallies succeeded in a return to the all-time highs for the Nikkei.
The great P.T. Barnum knew that human nature causes people to engage in behavior and thinking driven by false hope, excessive greed, and a willingness to allow themselves to be suckered into believing an alternative reality, despite evidence to the contrary.
He knew that people had a propensity to be ignorant, naive, and lazy, and oftentimes looked for an easy explanation for those things which would normally require an objective and rational thought process.
Many of today's younger investors approach Wall Street in the same manner that I did many years ago. The quest for riches and big hopes and dreams cause us to place our confidence in somewhat naive and easy explanations that serve to do nothing more than validate our confirmation bias.
We become misguided in our thinking and look for simple explanations to complex issues. We fail to take the time to perform extensive due diligence on our potential investment choices and fall prey to the error of looking for shortcuts by being lazy.
Just take a look at how many investors who recently ran headlong into buying shares of United States Oil Fund (USO) without even taking the time to research and understand the underlying structure of the ETF.
The effects of contango and backwardation, common terms used in the futures market, were important concepts to understand before rushing off to buy the falling shares of USO. This is just one example of how buying-the-dip can have financially devastating consequences.
A thorough assessment of the new realities of today's U.S. economy, and its ramifications for the future of stock prices, requires that you allow yourself to avoid the trap of confirmation bias by being open to alternative theories and ideas.
The four most dangerous words ever uttered by investors has always been and continues to be, "It's different this time".
There can be no doubt that the COVID-19 pandemic has created a global economic shock that is very different from anything that the world has ever experienced before.

But, in the end, markets rise and fall on the combined future expectations of investors; they always have and always will. Don't let your expectations be influenced by an unrealistic perspective, based solely on an ingrained pattern of BTD behavior that, while it has worked in the past, is unlikely to work in the future.
Be diligent, have a healthy respect for risk, and above all do not ignore the possibility that the Federal Reserve's intervention is not a panacea for equity markets.
If you are buying the dips and taking a long position in this market, you may, unknowingly, be following a dream that could quickly turn into every investor's nightmare.
Don't be a sucker. Prove B.T. Barnum wrong.

Russia and the Fight Against Tragedy

By: George Friedman

Karl Marx wrote that “history repeats itself twice, the first time as tragedy and the second time as farce.”

The collapse of the Soviet Union was not a tragedy, nor is what is happening in Russia now a farce.

Still, the collapse of the Soviet Union was a defining moment in human history. Russia’s current struggle with itself doesn’t begin to rise to that level.

At issue is the collapse of oil prices. Before the long decline in energy prices, oil and natural gas accounted for about 60 percent of Russia’s exports and 30 percent of its gross domestic product. At the time, Russia was a Third World country trying to sustain a First World military.

I call Russia Third World because for Vladimir Lenin, the countries that survived by selling raw materials to more advanced countries were the prisoners of imperialism, and later came to be called Third World.

To Lenin, the fact that Russia generated a third of its GDP, as well as the majority of its national budget, from energy sales to industrialized countries makes it a classic Third World country.

The problem of these countries, according to Lenin, was that their survival depended on prices they could not control. Since the price of commodities is inherently volatile, determined as it is by the robustness of industrial powers, the exporter can neither control the price nor have an opportunity to generate investment capital on a systematic basis.

Whereas Marx gave little thought to Russia, which he considered hopelessly backward, Lenin obsessed over it. The entire point of Stalinism was to industrialize Russia through the ruthless confiscation of raw materials in order to raise capital for industrialization. More than 100 years ago, Lenin staged the Bolshevik Revolution to move Russia beyond dependence on raw material sales. About 90 years ago, Stalin savaged Russian society in order to fulfill Lenin’s dream. Both failed to build a modern Russia.

A country that depends so heavily on any one commodity will always be vulnerable to imperial powers. There was a time when Russia could use energy sales — or energy embargoes, as the case may be — to make Europe tremble. But now the world is awash in energy, and despite Russia’s recent efforts to reach an entente with the Saudis — the epitome of the Third World energy exporter — it has failed to maintain prices.

The Russians have floated conspiracy theories of U.S. and Saudi collaboration designed to cripple the Russian economy with low energy prices and few markets, but that assumes that any conspiracy would need to lower prices. The supply of energy has surged, largely because of the American energy sector, and demand did not keep up.

The price of oil has moved downward over recent years, but now the price has collapsed because of the coronavirus pandemic. The contraction of the global economy inevitably decreased the need for energy. Attempts by OPEC, an organization as relevant to today’s realities as the League of Nations, to raise prices have failed.

In the 1970s, demand surged and OPEC could manage the supply. Some among us will recall the Arab oil embargo. It defined the 1970s and was the opportunity for countries like the Soviet Union and Iran to create modern economies. The oil producers assumed that their power, and therefore income, would be permanent.

High prices generated a search for new sources of oil and gas, as well as new efficiencies in energy use, and the price fell dramatically in the 1980s.

Now, the Soviet Union fell for many reasons — inefficiency and corruption had been mainstays of the system for decades — but things changed in the 1980s. For one, defense budgets soared as Moscow tried to keep pace with American development, particularly the legendary Star Wars project, as much legend as a project.

For another, the price of energy fell, and the Russians were heavily dependent on energy sales. Russia was caught in a vise between defense spending and falling energy prices, which ultimately undermined the basis of the Soviet Union.

After the fall of the Soviet Union in 1991, Russia faced the old challenge of building a modern economy rather than a Potemkin village of modernity. The first decade after the fall was chaotic as investment bankers and oligarchs appropriated the wealth under the banner of privatization.

The emergence of Vladimir Putin, the former KGB agent who as head of St. Petersburg was tied into the oligarchy, should have led to a surge of modernization. Energy prices were reasonably high, and investment capital for a modern economy could, in theory, have been created. But the problem of Brezhnev and Yeltsin was not solved.

Investment capital was diverted for investment and safety outside of Russia, and Putin, who depended on the oligarchs for his power, could not do what he knew had to be done.

Over time, his power surged and investment was possible, but as the process began to accelerate, the price of energy declined and with it the foundation for investment.

In the past few days, it has totally evaporated.

Russia’s problem now is not building a new generation of hypersonic missiles, nor investment in advanced technologies. Its problem is to avoid collapse.

The Russian budget is distributed among its constituent regions, which pay the teachers and doctors and firemen. But with the decline of energy prices, Russia’s budget declines, and as it declines, the regions contract.

Russia, a Third World country, has few counters to low energy prices.

Putin is a powerful leader — certainly more powerful than Gorbachev and Yeltsin ever were. But his options are two: the Stalinist one, which grips the country by the throat, or something else.

The something else is essential, but urgency itself is not a solution. The Russians may muddle through. That was Brezhnev’s strategy, but the blow to Russia of energy prices is significant.

The idea of building Nord Stream 2, for example, to bring natural gas from Russia to Germany is an idea from ancient history. Between the virus and energy prices, it is the last thing on anyone’s mind.

During my sordid youth I worked in places that worried about Russian power. The ability of the U.S. military to exaggerate the power of Russia is in hindsight amazing. Back then, the Soviet Union was a cripple masquerading as a great power. I see that process repeating itself, both with Russia and with China (another story).

It is always forgotten that the idea of the Potemkin village came from deep in the Russian soul. A czar was to tour a region, and to hide the poverty of the region from him, villages facing the railroad track were built — but only the fronts of the houses were put up. The facades gave the czar the illusion of Russian prosperity, behind which resided a far grimmer reality.

The Russian people endure, and I am always told by Russians that the ability to endure means that Russia cannot be judged by foreign standards. It is true that the Russians endure and only rarely rise.

But when they rise, as they did in 1917 or against the Germans in World War II and ultimately in 1991, they can dissolve things that seem immutable. The Russians say that they know how to survive a long hard winter.

But at a certain point they snap, and with the value of oil a fraction of what Russia needs it to be to make do, let alone prosper, it is hard to see how the Russians will endure this winter of disease and poverty.

I think Marx got it wrong. The farce came first. The tragedy may come second.

The Chinese Health Organization?

If the World Health Organization is to spearhead international health policy and respond to disease outbreaks effectively, it must pursue deep reforms aimed at broadening its jurisdiction and authority. That won’t happen unless and until the WHO rebuilds its credibility, beginning with new leadership.

Brahma Chellaney

chellaney124_Naohiko Hatta - PoolGetty Images_tedrosxiwhochinacoronavirus

NEW DELHI – The COVID-19 pandemic, much like a major war, is a defining moment for the world – one that demands major reforms of international institutions. The World Health Organization, whose credibility has taken a severe beating of late, is a good place to start.

The WHO is the only institution that can provide global health leadership. But, at a time when such leadership is urgently needed, the body has failed miserably. Before belatedly declaring the COVID-19 outbreak a pandemic on March 11, the WHO provided conflicting and confusing guidance. More damaging, it helped China, where the crisis originated, to cover its tracks.

It is now widely recognized that China’s political culture of secrecy helped to turn a local viral outbreak into the greatest global disaster of our time. Far from sounding the alarm when the new coronavirus was detected in Wuhan, the Communist Party of China (CPC) concealed the outbreak, allowing it to spread far and wide. Months later, China continues to sow doubt about the pandemic’s origins and withhold potentially life-saving data.

The WHO has been complicit in this deception. Instead of attempting independently to verify Chinese claims, the WHO took them at face value – and disseminated them to the world.

In mid-January, the body tweeted that investigations by Chinese authorities had found no clear evidence of human-to-human transmission of the virus. Taiwan’s December 31 warning that such transmission was likely happening in Wuhan was ignored by the WHO, even though the information had been enough to convince the Taiwanese authorities – which may have better intelligence on China than anyone else – to institute preventive measures at home before any other country, including China.

The WHO’s persistent publicizing of China’s narrative lulled other countries into a dangerous complacency, delaying their responses by weeks. In fact, the WHO actively discouraged action.

On January 10, with Wuhan gripped by the outbreak, the WHO said that it did “not recommend any specific health measures for travelers to and from Wuhan,” adding that “entry screening offers little benefit.” It also advised “against the application of any travel or trade restrictions on China.”

Even after China’s most famous pulmonologist, Zhong Nanshan, confirmed human-to-human transmission on January 20, the WHO continued to undermine effective responses by downplaying the risks of asymptomatic transmission and discouraging widespread testing.

Meanwhile, China was hoarding personal protective equipment – scaling back exports of Chinese-made PPE and other medical gear and importing the rest of the world’s supply. In the final week of January, the country imported 56 million respirators and masks, according to official data.

By the time the WHO finally labeled the epidemic a public-health emergency on January 30, travelers from China had carried COVID-19 to far-flung corners of the world, including Australia, Brazil, France, and Germany. Yet, when Australia, India, Indonesia, Italy, and the US imposed restrictions on travel from China, WHO Director-General Tedros Adhanom Ghebreyesus roundly criticized the actions, arguing that they would increase “fear and stigma, with little public-health benefit.”

At the same time, Tedros extolled Chinese President Xi Jinping’s “very rare leadership” and China’s “transparency.” The bias has been so pronounced that Japanese Deputy Prime Minister Taro Aso recently noted that, for many, the WHO is looking more like the “CHO” – the Chinese Health Organization.

Yet, despite the WHO’s repeated deference to China, the authorities there did not allow a WHO team to visit until mid-February. Three of the team’s 12 members were allowed to visit Wuhan, but no one was granted access to the Wuhan Institute of Virology, the high-containment laboratory from which a natural coronavirus derived from bats is rumored to have escaped.

In fact, a study conducted at the South China University of Technology in Guangzhou with support from the National Natural Science Foundation of China concluded in February that “the killer coronavirus probably originated from a laboratory in Wuhan” working on bat coronaviruses.

China did not always enjoy deferential treatment from the WHO. When the first twenty-first-century pandemic – severe acute respiratory syndrome (SARS) – emerged from China in 2002, the agency publicly rebuked the Chinese authorities for concealing vital information in what proved to be a costly cover-up.

Why has the WHO changed its tune? The answer is not money: China remains a relatively small contributor to the WHO’s $6 billion budget. The issue is the WHO’s leadership.

Tedros, who became the agency’s first non-physician chief in 2017 with China’s support, was accused of covering up three cholera outbreaks while serving as Ethiopia’s health minister. Nonetheless, few would have imagined that, as WHO chief, the microbiologist and malaria researcher would be complicit in China’s deadly deception.

The WHO’s faltering response to the 2014 Ebola outbreak underscored the imperative for reforms before Tedros was at the helm of the agency. But, rather than overseeing the needed changes, Tedros has allowed political considerations to trump public health.

As the costs of the mismanagement continue to mount, a reckoning is becoming all but inevitable. An online petition calling for Tedros to resign has garnered almost a million signatures. More consequential, President Donald Trump’s administration has suspended the WHO’s US funding, which accounts for 9.2% of its budget.

The world needs the WHO. But if the agency is to spearhead international health policy and respond to disease outbreaks effectively, it must pursue deep reforms aimed at broadening its jurisdiction and authority. That won’t happen unless and until the WHO rebuilds its credibility beginning with new leadership.

Brahma Chellaney, Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow at the Robert Bosch Academy in Berlin, is the author of nine books, including Asian Juggernaut, Water: Asia’s New Battleground, and Water, Peace, and War: Confronting the Global Water Crisis.

Globalized Commerce Might Prove Resilient to the Pandemic

Companies might reshore some production of medical equipment for emergencies, but other international supply chains will be harder to break

By Mike Bird

Japanese manufacturer Iris Ohyama is using government subsidies to expand mask production domestically. /Photo: eric piermont/Agence France-Presse/Getty Images .

The first examples of coronavirus-induced supply-chain shifts are under way. This week, Japanese consumer-products manufacturer Iris Ohyama announced it would take government subsidies to expand the production of masks domestically, adding to its existing production in China, the first company to do so.

Bringing some manufacturing home for medical or security purposes might make sense. But those expecting large-scale deglobalization and the return of domestic production for many goods might be disappointed.

Amid the U.S.-China trade war, reshoring was already a major issue of discussion before the coronavirus arrived. In its annual assessment of the state of reshoring, consulting firm A.T. Kearney found that American imports of Asian-made goods as a percentage of domestic manufacturing output dropped in 2019, falling from a record high to the lowest level in five years.

But that decline was down to a sharp fall in Chinese imports. Imports from the rest of low-income Asia actually rose, and U.S. manufacturing output was roughly flat.

This isn’t exactly deglobalization. Manufacturing shifting from one country to another as countries grow richer and pivot to higher-value manufacturing isn’t new. Just as China took a greater share of manufacturing once done in South Korea and Japan, Bangladesh and Vietnam are well placed to take a portion of manufacturing that, for now, is done in China.

It would be inefficient for wealthy countries to attempt to resume much low-value production currently done abroad. Even in high-value sectors, a lack of knowledge, experience and competitiveness in niche areas would prove difficult to surmount.

A test case came in July, when Japan restricted exports of smartphone screen components to South Korea. Despite Korea’s dominant position in electronics, these components are largely produced in Japan, and major manufacturers such as Samsung and LG were left hanging.

Korea managed to reduce its Japanese photoresist imports modestly, from 92% of the total in the first half of 2020 to 85% of in the second half, by massively expanding exports from the U.S., Belgium and Germany, along with considerable efforts to boost domestic production. Japan eventually loosened but didn’t completely remove the restrictions late last year.

It’s difficult to imagine how countries without similar expertise in the right industries would manage to reshore far more ambitious elements of the manufacturing process.

It’s also often presumed that pulling down trade barriers is the main factor that allowed global value chains to grow in the first place.

The truth might be the reverse: Anti-dumping measures and other trade restrictions might have been rolled back as a response to growing commercial globalization, with increasingly international firms no longer wanting protection, some economists have suggested.

Ideological commitment to globalization didn’t drive the growth of major value chains in the first place, and its decreased popularity is unlikely to unwind them even with the current pandemic.

Without gargantuan subsidies or even more punitive trade restrictions, the seemingly fragile spider’s web of global commerce may remain surprisingly resilient.