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Bruno Maçães has an interesting piece in National Review that argues that the current crisis presents China a unique opportunity to wrest world leadership from the US. Maçães notes the propaganda efforts to compare the stability of China’s response with US’s chaos; the reopening of China’s economy; and the possibility of China playing the role of magnanimous victorious power as the world is rebuilt.

Maçães is not alone. This piece in Maclean’s makes a similar argument - and has interesting extra details on recent Chinese moves in electoral influence campaigns, internet infrastructure and other areas. But there are good reasons to question this narrative.

First, it’s not clear we should trust China’s data on the success of its response. Second, Singapore’s new lockdown, announced on Friday, suggests it’s premature to declare the crisis over, even in countries that appear “under control”. Third, and most interestingly, it’s unclear that China can disentangle itself from dollar finance, as this piece argues. The monetary effects of coronavirus look to be among the most complex and important. And, right now, the global shortage of dollars looks set to cause China extreme pain. World orders unravel, but rarely straightforwardly. 

One effect of coronavirus is that it reorders the value of what is physical and what is virtual. To sketch crudely, in the pre-coronavirus era the blueprint for prosperity was to have as much of your economy as possible engaged in knowledge work: live in the realm of ideas and IP and outsource as much of the messy business of the physical world as possible.

Now, suddenly, physical control of your supply chain is of paramount importance. Rich countries’ travails in acquiring face masks - recounted well in this Politico piece, entitled “Lord of the Flies: PPE edition” - hammer the point home (Plus, of course, IP is more mobile and vulnerable than it used to be). Dan Wang is the essential thinker of the moment (see previous coverage). His 2017 essay on definite optimism, which talks about the risks of virtualising the economy, seems especially important.

Of course, almost the opposite calculus applies to companies. Anyone who can run their business entirely virtually has a major advantage in the era of coronavirus. Cloud computing is the ultimate abstraction of physical - if not political - messiness. It’s not a new trend, but coronavirus amplifies the tension between increasingly economic nationalist states and ambitiously globalist tech companies. 

We talked a couple of weeks ago about the challenges of choosing the right moral framework for navigating coronavirus. Ben Hunt has a provocative post that argues that the right approach is to “minimise maximum regret”. He emphasises that this is about minimising regret not loss - that is, it’s a subjective, empathetic judgement, not a utilitarian calculation that assigns values and probabilities to different outcomes. 

In Hunt’s words, “Minimax Regret downplays or eliminates the role that probability distributions play in the decision-making process”. That might sound oddly anti-rational, but it reminds me of one of my favourite essays, Richard Zeckhauser’s “Investing in the Unknown and the Unknowable”, which argues that some of the best returns are available in situations where we can’t even know the states if the world, let alone assign them probabilities. 

Our current situation is certainly like that, but I nevertheless worry about Minimax Regret. An impressive but painful lesson the world is learning is just how possible it is to save lives if we’re willing to bear any cost. In a sense we should be frightened by our power. What’s true for coronavirus is surely true for many other things: we can presumably also eliminate traffic and pollution deaths if we’re willing to shut down the economy. Minimising regret is like a greedy algorithm - and it might eat the modern world. 

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Until next week,

Matt Clifford