by John Mauldin
A stock market crash wasn’t 1929’s only big event. Coca-Cola (KO) launched a new slogan: “The Pause That Refreshes.”
Coke’s marketers sensed the economy was headed down. How do you sell a completely unnecessary beverage to a struggling country? It’s simple, really: You remind consumers that treating themselves is important, too.
Now, in 2020, the entire world is paused. COVID-19 is horrible in more ways than I can count: lost lives, suffering, job destruction, shattered dreams and more.
None of it is refreshing. But the word has other meanings.
For instance, if you are working on a spreadsheet and refresh your screen, you see new, and possibly better, numbers.
Could this crisis, as bad as it is, “refresh” the world and solve some of our problems? Maybe.
Speaking at Mauldin Economics’ first-ever virtual Strategic Investment Conference in May, Eurasia Group and G-Zero Media’s Ian Bremmer said it’s possible.
Long before this pandemic, Ian was saying the world is in a “geopolitical recession.” The old order has been breaking down without a clear replacement, leaving what he calls a “G-Zero World.”
Part of the problem relates to a Milton Friedman quote: “Nothing is so permanent as a temporary government program.”
Think of the global institutions that arose from World War II and its aftermath: NATO, the UN, the World Bank, International Monetary Fund, the EU, etc.
Some have outlived their usefulness. Other need major reforms. But all still exist because over time they developed constituencies that fight hard to preserve them.
The same is true within national governments. In the US, we have institutions like the Federal Reserve, Social Security, Medicare and assorted regulatory agencies.
They do some good things and could do more. But none work as originally intended.
Ian suggested the pandemic might have a silver lining if the failures it exposes let us replace failed institutions with better ones, more suited to current needs.
Which institutions to whom? Take your pick.
- The Federal Reserve is trying to control market outcomes. Which means we don’t really have “markets” as such anymore. This has to stop but I see no chance the Fed will change course voluntarily.
- The sudden ejection of millions from their jobs exposed huge shortcomings in the US safety net programs. A top-to-bottom overhaul might let them work better and cost less.
- Our inability to provide adequate COVID-19 testing and get protective gear to medical workers revealed serious problems. Not just in the healthcare industry, but also the agencies like the CDC and FDA that govern it. The regulatory processes clearly impede progress, and it has been made manifest for all to see.
- Across the pond, the EU’s prized openness and solidarity proved less so in a crisis. Members like Italy had to largely fend for themselves. The alliance needs a major overhaul if it is to survive.
- Numerous emerging market states are heavily indebted and completely unprepared to handle this crisis in large part because the IMF made them so. That has to change.
Those are just a few things we could “refresh” in the coming months and years. I don’t know if it will happen but, as Rahm Emmanuel famously said, we shouldn’t let a good crisis go to waste.
Heck, this one could still bring positive change.
Just ask any of the 40 economic and investing all-stars who presented at Mauldin Economics’ recent virtual Strategic Investment Conference. We have all the video footage, slides and transcripts in one easy-to-access space. You really need to hear for yourself what’s in store for our post-coronavirus world.