COVID-19 and the Structural Crises of Our Time – BOOK REVIEW by Chan Kok Peng*

By Lim Mah-Hui and Michael Heng Siam-Heng

SINGAPORE (IDN) — This is clearly an ambitious book spanning over 200 pages and covering the history of economic and philosophical thought, pandemics, climate change, different economic and political systems and recent financial developments. The authors’ objective is to argue that these subject matters are not separate but are all intertwined. In doing so, the three authors’ years of experience in academia, public and private sectors are clearly discernible in each of the six chapters. By entitling the book ‘COVID-19 and the Structural Crises of Our time’ the authors are aiming to ride on a topical issue and hence appeal to the broader general public.

At first glance, the general public—unless they are students of economic history—may find the introductory part of the book heavy going as the authors introduce the thoughts of Karl Polanyi who is a lesser-known personality than the other Karl whose name is identified with the founding of socialism. Fortunately, this quickly gives way to the authors’ excellent explanation of how the world financial system has evolved and the consequences of its structural shortcomings.

From a financial perspective, the book is a wake-up call with rising debt levels acting as one of the many alarm bells. According to the authors, total global debt surged from USD150t in 2007 to USD253t in 2019 or 320% of global GDP. An update by this reviewer shows the BIS expects it to reach USD300t by the end of 2021.

A 300% debt to GDP ratio, assuming an average 2% interest rate, requires global GDP to grow at 6% just to cover the interest. With COVID-19 measures likely to put a cap on economic activity and China expected to see slower growth in the next few years, the burden of interest payments is likely to be an escalating concern for many countries.

The key term used by the authors to help explain this borrowing binge is financialisation. The authors defined it as an addiction to and dependence on: debt for growth, the ascendance of capital markets over banks, a penchant for speculation over long-term investment, the proliferation of dubious financial products and activities, and the penetration of financial values and practices into non-economic spheres of society, like health, education, housing, financial security and politics.

In the US, the capital market now provides over 73% of the fuel to fund the nation’s economic activity compared to just 10% for China’s economy. That said, the addiction to debt and the shift to capital markets over banks especially in the US would not have been possible without the major central banks pursuing unconventional monetary policies aka negative interest rates and quantitative easing. The result is a massive mis-pricing of risk.  The general reader would surely be able to identify closely with such issues given they have been dominating the headlines in newspapers and other forms of media in the past few years.

While the book provides ample ammunition to critics of the current global capitalist system and its freewheeling ways, this does not mean that China offers a superior alternative in the opinion of this reviewer. While China appears to be currently winning the war against the pandemic and in terms of economic performance, has been better than its Western counterparts, it has its fair share of shortcomings as well.

Topmost among them must be its equally large addiction to debt and the over-reliance on the property sector as its single largest source of growth. Whether it is unfettered capitalism in Western democracies or state-directed capitalism as practised in China the issues of dubious financial products, wealth and income inequality exist in both systems. For China, this has manifested itself through the collapse of one of its largest property developers and the need for the authorities to tighten regulations over a large chunk of the economy. The authors could perhaps come up with a sequel to the book with greater attention given to China.    

Nearer home, the book also serves as a wake-up call for Malaysia. In the section where the authors discuss the financialisation of the Southeast Asian economies, the authors focus on the role of net financial flows as the main cause of the Asian Financial Crisis in 1997. While speculative inflows from advanced nations and their subsequent outflows from the region triggered the crisis, the problem for Malaysia now appears to be domestic investors leaving the country.

In a sense, it is a structural crisis for Malaysia as it has been experiencing net capital outflows consistently in the past twenty years with only four years of net inflows. By contrast, its ASEAN neighbours especially Indonesia and Thailand have experienced a more sustained and larger amount of net inflows. Malaysia’s loss appears to be the neighbours gain.

This reviewer applauds the authors for their effort to link climate change, the current pandemic and the rising tide of financialisation as three of the biggest threats confronting the world today. While policy measures for climate change and the current pandemic are likely to continue to play out and as the authors rightly point out, rendering some of the book’s conclusions redundant, there are nevertheless many lessons which the general public can learn from and be better informed just by reading the entire book.

*CHAN Kok Peng was formerly an Asian chief economist for a large French bank and prior to this worked in major Japanese, UK and US investment banks during which he travelled extensively to meet with global institutional fund managers. He currently lives in Singapore. [IDN-InDepthNews – 28 December 2021]

Collage: Image of the reviewed book (Credit: ISEAS – Yusof Ishak Institute) superimposed on a picture from

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