People Don't Trust Their Governments to Handle the Coronavirus Crisis
Op-ed for Axios
The following is the full text of ASPI President Kevin Rudd's article originally posted in Axios.
The current collapse in global equities markets is mirroring a broader collapse in global public confidence.
The big picture: Both financial markets and public sentiment are reacting to uncertainty at three levels: the future trajectory of the coronavirus outbreak; the adequacy of the policy response; as well as the impact on the economy and financial institutions.
At the heart of all three is a growing gap in public trust in our various national governments.
- In part that's because folks have been told for so long that government is the problem, not the solution.
- In part it’s because critical public institutions mandated with the responsibility for defending public health have been defunded over time.
- It’s also because people understand that this crisis is bigger than any single national government can handle — yet the relevant institutions of international governance (i.e. the WHO) have been defunded as well.
Flashback: There are echoes of the Global Financial Crisis. After the Lehman Brothers collapse in September 2008, markets were in free-fall as business and consumer confidence collapsed and lines of credit dried up.
- What broke the fall was the G20 Summit in London the following March, when the world’s largest economies decided to act together.
- They agreed on a coordinated global fiscal and monetary stimulus, a ban on protectionist measures to keep trade flowing, and a regulatory response including the future stress-testing of globally significant financial institutions to handle future crises.
The U.S. could have taken the lead by reaching out to Beijing at the height of the crisis — and Washington could still do so — to establish a Joint Coronavirus Taskforce.
- This could provide the political capital to break through any geopolitical nonsense currently impeding serious work on effective prevention strategies and vaccine development.
- Second, G20 health and finance ministers, including the WHO leadership, could meet weekly by video-link around a fixed agenda of work.
- Third, a virtual G20 summit could be held to agree on global economic measures to reduce the risk of global recession and any associated threats to financial institutions.
The bottom line: Unless and until both public opinion and financial markets see major global governments working together with a credible, substantive policy response, then what we’ve seen so far will only be the beginning.