Corona and Its Possible Impact on Economy, Society and Politics

by Prof. Dr. Ronald G. Asch (University of Freiburg)

Is it wise to make any predictions what the world will look like after Corona? Definitely not, because it is far too early to anticipate the long term impact of the crisis we are undergoing now. We do not even know whether there ever will be a world ‘after Corona’. It may well be the case that the disease will remain with us for a long time to come, if not for ever, if it proves impossible to develop an efficient vaccine. Nevertheless, a provisional audit of war may be possible even at this point in time, which takes account of the impact the epidemic has had so far, while risking some guesses about the future. Some readers may find this analysis, which has no ambition to be soothing, to be somewhat disturbing, but in times as these a grim realism is the order of the day. The halcyon days of the past are definitely over, even for a country like Germany where citizens sometimes have a tendency to feel protected against crises which affect the rest of the world.

I. The economic and fiscal dimension

Ever since the 1980s, the developed world has seen a staggering growth of indebtedness. If one considers government, company and household debt as a whole then the global ratio of debt to GDP was 225 % at the end of 2017 (Mbaye/Badia) most of it not, as one might be tempted to assume, government but corporate and private household debt (countries such as Japan and Italy form an exception to this rule though). And by and large, the mountain of debt in countries with a developed economy is far higher than in emerging markets or countries which lack any strong industrial potential and thus find it difficult to issue bonds nominated in their own national currencies. There are, of course, economists who would argue that the size of debt in still reasonably prosperous countries does not matter as long as everybody is determined to believe that it is not a problem. With no disrespect to eminent economists such as Paul Krugman, one is all the same tempted to call this and the new MMT (modern monetary theory) the Münchhausen theory of debt. As we all know, the Westfalian Baron was able to draw himself out of a bog by getting hold of the tail end of his wig en queue, strangely enough a deed which ever since proved difficult to replicate.

There is no doubt that in the Eurozone, in particular in countries such as France and Spain (and in Italy as well which, however, has fairly low corporate and household debt and only a tiny deficit in its external net investment position), the existing debt crisis will be greatly exacerbated by the impact of Corona. The same is true for the United States and Great Britain, however, although they have their own national currencies. It seems increasingly unlikely that the countries concerned or, for that matter, the Eurozone as a whole will be able to outgrow this overhang of debt in the foreseeable future.

So what is the solution? The European Commission and all the more so the French and southern European countries are keen on mutualising debt in one form or another in the EU and/or in the Eurozone. In the short term, that may be enough to keep the show on the road.  In the longer run, it could very well hasten the decline of the German economy, which would become overburdened by taxation – an economy which is undergoing a painful transformation at the moment anyhow. Moreover, such policies could move the Dutch, followed by the Scandinavians, to leave the EU altogether, once Britain has proved that life outside the EU is not that bad after all. Continued membership could become just too costly for them. Inflating the debt away may be a less controversial way out than financial transfers. If the European Central Bank (ECB) ‘prints’ enough new money by buying government and corporate bonds, inflation may finally rise. If interest rates are kept low at the same time by a policy of financial repression, real interest rates (already strongly negative for German government bonds) would generally become negative and thus, in due course, the debt would be eaten away by inflation.  Of course, one hardly needs to add that such a policy would be bad for all those who do not own assets which have a real internal value, such as real estate or company shares. They would be significantly impoverished. But such is the way of the world.

In some ways it might be even easier and more effective, however, if a large part of the existing debt were monetized outright, as the economist Daniel Stelter has argued (Austrian Institute; Stelter 119-125). That is the ECB (the FED and the Bank of England could possibly follow a similar course of action for their countries) would buy up all government bonds in the Eurozone up to a certain percentage of GDP (let us say 60 % or even 75 %) and transform these bonds into perpetual loans (such bonds, first issued in 1751, used to be called consols in Britain). Interest on these bonds would go to the national banks in the Eurozone and add to their profits. The net profit would then be paid to the relevant finance ministries, so that the bonds would in reality be interest free.

Of course, such a radical action would have to remain a one-off move. Otherwise, confidence in the currency could be permanently destroyed so that investors try to escape at any price possible. A capital flight into other currencies, or alternatively gold or real estate (preferably outside the Eurozone, in countries with a more favourable debt to GDP ratio) could be the result and ultimately a currency reform. But we have not reached that stage quite yet. If, however, we want to avoid travelling down this road, a one-off monetizing of existing debt would need to be complemented by other measures. Governments in Europe would need to spend more on investments and less on panem et circences handouts. These measures are designed to keep the electors happy, but are too costly in the long run for societies which find it difficult to increase productivity and battle with the effects of an aging population.

But will this happen?. It does not seem very likely, in particular given the fact that the Eurozone has an innate tendency to follow the rules governing the tragedy of the commons and that most politicians have become accustomed to be very economical with the truth regarding the future of the welfare state. The last major politician in Germany who dared to mention something remotely resembling the truth regarding Germany’s economic prospects and the sustainability of the welfare state was chancellor Gerhard Schröder and we all know what became of him and his party.

II. A revival of the nation state or more transnational cooperation?

This leads us on to a second area of debate. Who will benefit in the long run from the Corona crisis, the  nation state or transnational or international institutions and organisations? At the height of the crisis, it was clearly the nation states which took up the fight, some with great success as for example Greece and Portugal, others in a more haphazard and somewhat chaotic manner. The WHO gave – belated – advice, the EU Commission was hardly anywhere to be seen. At the same time, many countries closed their borders, even those separating them from other EU-countries. It has been said the virus cannot be stopped by borders. That, however, may not be completely true as the examples of Japan, New Zealand, and Australia, admittedly favoured by unique geographical conditions, demonstrate.

But even in Europe, the virus is not spread by swarms of bats flying across the Italian-Austrian border or by hundreds of pangolins swimming across the Rhine from France to Germany. It is spread by human beings. And, up to a point, you can stop the movement of human beings or strongly reduce it, even in Europe, and such measures can have an effect when they are implemented early on. Equally, national governments came to realise that the complete reliance on fragile global supply chains was perhaps not such a good idea after all, at least as far as pharmaceuticals and health care equipment were concerned, but even to some extent regarding other goods. So there are clear tendencies to strengthen the ability of the nation state to react with full force in a crisis like this one and to produce more goods at home and not abroad where production costs are much lower. The French president in particular seems to pursue such a strategy and will certainly try to impose it on the rest of the EU. After all, the health and survival of many people depend on decisions being taken at the national level and on the strength of the national health care system. This is a lesson voters may not forget any time soon. From this perspective, Corona could well presage the end of ever stronger globalisation, but also spell doom for the dream of a borderless global society, which was never very realistic in the first place.

On the other hand, it stands to reason that a global pandemic cannot be fought successfully by isolated nation states on their own. The same holds good, to some extent, for the economic fallout from the crisis. So, more transnational cooperation may be imperative under such circumstances. Having woken from its slumber, the EU Commission now plays this card and tries to accomplish the perhaps greatest power grab in its history. It wants much more money for its budget, the ability to issue bonds in its own name – initially 750 billion, later, as one has to assume, trillions more –  and the power to tax citizens and companies directly. As many European states need financial support and find it difficult or too risky to drive up their national debt any further, this attempt to increase Brussels’ power has so far been largely successful .

More European co-operation and solidarity sounds good, of course, but what does it mean? It means more power is transferred from nation states with their democratic constitutions to a higher level, where one would look in vain for such democratic mechanisms in their classical form. The EU treaties have been designed to create consensus when decisions are being taken, or, if that fails, to hide conflicts behind a semblance of consensus. This impression is created, if needs be, by a lack of transparency, and by pleasant but empty formulas and fudged compromises, whereas true democracies benefit from open, institutionalized conflict (Bickerton, Pérez). But that is not possible in Brussels, because everything would fall apart immediately once the façade of consensus is demolished, not least because conflicts between different nation states cannot be decided by majority vote. Thus, trying to overcome the nation state could well lead to an end of democracy as such, at least in its classical form as Philip Manow and others have pointed out (Manow: 151-170; cf. Brown).

One might argue that the heyday of classical democracy is over anyhow and that the, at first glance mostly well intentioned, post-democratic and technocratic paternalism of Brussels is exactly what we need today. Many people think so, though probably more in Germany than anywhere else in Europe. However, democratic legitimacy is a resource which in particular in times of crisis and economic decline can be in very short supply and therefore be all the more necessary. No matter whether we look at the yellow vest protests in France, Brexit in Britain, the stubborn refusal of taxpayers to pay their taxes in some countries, or more recently the protests against the Corona lockdowns, a perceived lack of legitimacy is always to some extent at the root of such open or more silent revolts. This is too easily forgotten in this crisis, particularly in Germany, where citizens are normally docile and until recently have had more trust than elsewhere in their government and politicians.

Moreover, the history of the European Union demonstrates that its institutions are slow and hesitant in dealing with any sort of sudden emergency. Procedures are cumbersome and often less than fully efficient. We could well face a situation in the future where the ability of nation states to deal with emergencies of any kind or a sudden crisis is further undermined, while the EU acquires no corresponding capacity to compensate for the increasing impotence of individual states to act on their own within the ever more restrictive framework of European law. More centralisation could therefore well mean an even weaker and helpless Europe than the one we are facing now. After all, one can hardly say that highly centralised big nation states work generally better and are more prosperous and resilient than smaller or more decentralised states. But few people in Brussels seem to be aware of this fact or even prepared to allow an open ended discussion of this problem. ‘More Europe’ seems to be the panacea for every problem.

III. The erosion of trust and science’s embattled authority

In the end, ever more centralisation and less transparency in the way political decisions are being taken could undermine trust in the political process itself even further. Trust, however, is of essential importance in society. The erosion of this trust is a problem which was already visible before Corona, but became more prominent after the outbreak of the pandemic. A significant minority of citizens mistrusts both the political class as a whole and the mainstream media, and sometimes to an equal degree the advice of scientific experts. And there are politicians, the so-called populists (not a notion which has all that much analytical value, admittedly, but which is still widely employed and may have some heuristic usefulness), who play on this mistrust. The egregious current American president, who gave some of his most outrageous performances during the Corona crisis (watching them is not for the fainthearted, mind you), comes to mind here of course.

Admittedly Corona created a very special situation. We are confronted with a new disease which we do not yet know very much about, and the discussion among scientists – many of them just as vain as academics like us tend to be in general  – about the character of the disease is not just a polyphony, but often a cacophony. There are those who believe that the pandemic will sooner or later disappear even without a vaccine and not be that lethal in any case. There are others who consider strict lockdown measures as absolutely inevitable, if we want to avoid crude mortality rates (mortality among the population as a whole, not just among persons infected by the virus) of 1-2 % or even higher.  Having no prior medical knowledge, you can choose which expert you want to follow, the well-spoken Sunetra Gupa (Oxford) or the somewhat nerdy Neil Ferguson (Imperial College), the mildly melancholic Christian Drosten or the stern but optimistic Johan Giesecke in Sweden. Furthermore, what we do know is that the social and economic lockdown has inflicted enormous damage on the economy, but we do not precisely know which lockdown measures were efficient and which were possibly overdone and superfluous.

All this is true. But it remains nevertheless remarkable how many people are prepared to believe that Corona was and is just one giant conspiracy, a panic manipulated by devious billionaires like Bill Gates or by politicians who just want to curtail arbitrarily the freedoms enjoyed by citizens.  Of course, in times of pandemic diseases such conspiracy theories have often flourished. The Black Death in the late Middle Ages offers an example for this: Men and women, gripped by panic and inspired by religious fanaticism, tried to find culprits for the disaster and believed to have found these culprits in the Jewish communities.

One could argue that the refusal to believe that Corona is a genuine epidemic and that fairly drastic measures are required to contain and fight it, is just an example of general human dumbness and of the influence cynical politicians can have on people affected by the economic impact of lockdowns and therefore in despair. But this seems to be too simple an explanation. One feels that in some countries, and in Germany in particular, mainstream media have far too long followed a policy of ‘pas devant les enfants’. Yes, there are unpleasant facts which could make people nervous when they read or hear about them (such as the real dimensions of the on going Euro-crisis), so we better do not talk about such facts too openly. Also there is an increasing tendency to police language. Certain, allegedly dangerous opinions, become difficult to articulate, because the vocabulary you would need to articulate these opinions has been banned. But the result is that people who do not subscribe to the mainstream interpretation of reality recede into their own special bubbles in the internet or in face to face encounters. In the end, there they meet only those who are like minded and can easily agree that everything outside the bubble is fake news. This has had, one feels, an impact on the Corona debate. The chickens have come home to roost in a manner of speaking.

A second factor is also important, in particular with regard to the authority of experts from academia who, it seems, have become more embattled than in the past. Once upon a time, to achieve or maintain higher social status, you had to show that you were well educated (‘gebildet’). It was possible to define what a good education (‘Bildung’) was, as there was a canon of traditions, of authors and writings, of intellectual heroes and of great artists (most of them, unfortunately, fairly dead white men, in Europe and the US at least). That canon no longer exists. Doubts about the undemocratic elitism of such a canon, but much more recently also about its ‘maleness’ and the Eurocentric bias inherent in the canon, are one factor which has undermined this ideal. Another factor are social and cultural changes. Older social elites still had a distinctive ‘Standeskultur’, a certain cultural habitus meant to distinguish them from the hoi polloi. Such elites have been replaced quite some time ago by newer ones defined primarily by economic success and their ability to get things done or just by being able to get a good deal as canny property developers (the famous ‘Art of the Deal’). In Europe, the German Bildungsbürger is almost as dead today as the dodo or for that matter the well-bred English gentleman of the past, who of course always wore his scholarly education lightly.

This process has made the decline of the humanities almost inevitable. Their prestige has further suffered from the fact that many scholars argue these days that reality is in the end only a construction, and what construction prevails is dependent on which language games you choose to play or which discourses you buy into (for the consequences of this relativism combined with political activism see Pluckrose/Lindsay). Unfortunately, this is a game which two can play and which the anti-intellectual ‘know nothings’, who constitute a major factor in politics these days in many countries, can also make their own in a particular way. So why should Corona not be a mere cultural construct in the same way as being male or female is?

Of course, academic relativism is a phenomenon which primarily affects the humanities, not the hard sciences, one would assume. Nevertheless, the crisis of the humanities seems to have had an impact on the natural sciences in indirect ways as well. The prestige of the academic world in general is not what it used to be and may in fact be in serious decline. If we want to restore this prestige in any possible ‘After Corona World’, we have to be more self-critical. It is not enough to fight real or imagined fake news, although this may be necessary at times. The gap which today divides the world of academia mostly inhabited by liberal ‘anywheres’ and the Lebenswelt of many less academically minded people who are culturally conservative ‘somewheres’ (in the sense David Goodhart is using these definitions: Goodhart), would have to be reduced. For example, we might need a new canon defining what a good education is – more pluralistic, less euro-centric, perhaps, and with a greater place for both for the natural sciences and for economics than the old one, but still a canon. But whether that is possible at all or a mere pipe dream, is a different matter.


About the Author


Ronald G. Asch is Professor of Early Modern History at the University of Freiburg. He was Internal Senior Fellow at FRIAS from Ocotober 2016 until July 2017, during which time he worked on his project “On the eve of war: Europe between the Edict of Nantes and the outbreak of the Thirty Years War”.







Austrian Institute:, 27 May 2020


Chris Bickerton, The European Union: A Citizen’s Guide, London 2016.


Wendy Brown, “Wir sind jetzt alle Demokraten …“, in: Giorgio Agamben et al. (eds.), Demokratie? Eine Debatte (Berlin, 2012), 55-71


David Goodhart, The Road to Somewhere: The Populist Revolt and the Future of Politics, London 2017


Philip Manow, (Ent-)Demokratisierung der Demokratie (Berlin, 2020)


New Data on Global Debt By Samba Mbaye and Marialuz Moreno Badia, 2 January 2019


F. Seoane Pérez, Political Communication in Europe: The Cultural and Structural Limits of the European Public Sphere (Basingstoke, 2013)


Helen Pluckrose and James Lindsay, Cynical Theories: How Activist Scholarship Made Everything about Race, Gender, and Identity And Why This Harms Everybody, Durham N. C. 2020, forthcoming.

Stelter 2020:

Daniel Stelter,  Coronomics. Nach dem Schock: Neustart aus der Krise,  Frankfurt 2020.


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