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 장하준 영국 케임브리지대 교수(경제학)
 장하준 영국 케임브리지대 교수(경제학)
ⓒ 김종철

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"It's really serious. There will be another global economic crisis. Everyone says it's a "war"... We need to prepare for the global recession."

His voice was surprisingly calm, I could even feel its coldness. The weather was gloomy in Cambridge (United Kingdom) with patchy drizzle and strong wind. In early March, England was passing through the remains of winter. When I met Ha-Joon Chang, a professor (Economics) in the Political Economy of Development at the University of Cambridge, on 6thMarch, Chang was taking a short break from lectures due to the University and College Union (UCU) strike across the UK. 

Initially, the conversation with him was not about the Coronavirus epidemic (COVID-19). The main topic of this interview was supposedly Chang's outlook on the future amid recent changes in the global political and economic landscape, including Britain leaving the European Union (Brexit) at the end of last year, the US presidential election this year, and South Korea's parliamentary elections etc.

However, COVID-19 changed everything. Due to this infectious disease of a completely different level than any from the recent past, the world is engulfed by "panic" and "fear." At the time I met with Chang, it was around the start of the outbreak of mass infection in South Korea and thousands of confirmed cases in northern Italy were recorded. The UK, however, had not seen much change in daily life.

That afternoon, I met Professor Chang at Cambridge station. He drove his own hatch-back car out. Due to the university strike, our conversation took place in a restaurant and a cafe in the school vicinity. 

In his car, I said, "COVID-19 is unusual, but the UK has just started to talk about it". Chang sighed and said: "It's just a matter of time.". He said that he was "worried that the NHS (National Health Service) system has almost collapsed here."

Around ten minutes later, we arrived at a traditional British restaurant. The restaurant was quite crowded even though it was a weekday afternoon. After we had ordered fish and chips, he said, "The weather seems particularly bad this year.". In fact, it has recently rained heavily with strong winds every weekend in the UK. The north has also suffered an unusual amount of flood damage in the winter for the first time in a hundred years.

Q: The whole world is confused because of COVID-19. 
"This is probably the result of globalization. Although the virus started in China, it's only a matter of time before it spreads through Asia to Europe and America. The movement between countries is much more free than in the past, and they are closely linked socio-economically so there will be a severe economic shock.", said Chang.

Q: It is completely different from the SARS or MERS cases. 
"COVID-19 is said to be highly contagious, but SARS or MERS had higher fatality rates instead. I heard that it was 10 percent during the SARS and 35 percent during the MERS, but the fatality rate of COVID-19 is still around 1-2 percent. The problem is that there are a lot of people who have no symptoms or have minor symptoms, and the virus spreads rapidly through those people who can't be identified and confirmed easily. It is much scarier."

The prediction became reality...

He seemed concerned about the responses of Western European countries such as Italy and Britain and of the US to COVID-19. This is due to Europe's personal liberalism and the welfare cuts caused by the emergence of conservative political forces in recent years, and that the US has no NHS. "Other European countries are also in danger if Italy is this serious.", Chang said. "Britain and the United States are going to have a massive pandemic imminently.".

His prediction became a reality after the interview as time went by. Italy has already overtaken China's number of confirmed cases and the death toll last month, whilst the whole of Europe, including Spain, Germany and France, was thrown into more and more chaos. The United States is now the world's No.1 most infected country with its number of confirmed cases reaching over 200,000, as the virus is spreading rapidly from the New York state across the country.  
 
코로나19 환자 4천명 수용할 런던 임시병원 영국 정부가 24일(현지시간) 코로나19(신종 코로나바이러스 감염증) 임시병원으로 전용할 계획이라고 밝힌 런던의 엑셀 센터 전경. 영국 정부는 이곳에 4천개의 병상을 갖춰 환자를 수용하기로 했다.
▲ 코로나19 환자 4천명 수용할 런던 임시병원 영국 정부가 24일(현지시간) 코로나19(신종 코로나바이러스 감염증) 임시병원으로 전용할 계획이라고 밝힌 런던의 엑셀 센터 전경. 영국 정부는 이곳에 4천개의 병상을 갖춰 환자를 수용하기로 했다.
ⓒ EPA=연합뉴스

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Q: I think the atmosphere here is quite different from Korea. The first part of the BBC's news yesterday was a report of Prime Minister Boris Johnson's interview regarding COVID-19. They broadcasted footage of primary school students sitting and singing to encourage hand washing to combat coronavirus. 
"Washing hands in the early stages may be a major prescription, but I think it's beyond that level now. Overall, people here have a strong tradition of respecting individual freedom, and they don't want to take strong measures if possible and in the current circumstances, it is difficult to get tested and properly treated."

Q: The UK is still known as having a good medical welfare with the free National Health Service (NHS)
"The (NHS) system itself is well-established. But it needs to be financed properly to operate, and the Conservative government hasn't been financing it enough over the past 10 years of austerity, and there's been talk of the collapse of the system on the ground. COVID-19 tests cannot be done here as much as they are in Korea...", said Chang. He said when coronavirus really starts to spread, the key question would be "whether there are enough manpower, facilities, equipment, etc to properly treat that many patients."

In the middle of last month, the British government put in place a policy of herd immunity to be caused by mass infection, rather than putting in place a strong quarantine policy. The reason being the lack of hospitals across the country that can accommodate COVID-19 patients, as well as a shortage of medical staff.

However, the UK government's gamble was reversed when the possibility of up to 200,000 deaths was raised. Since then, the government has closed schools, businesses, restaurants, and pubs etc and under new shutdown policies, they announced a lockdown of London and other strict social distancing measures.

Q: - Some say the biggest obstacle to Trump's re-election in the US presidential election is COVID-19. 
"The medical system itself is wrong in the US. The US's spending per capita on health care services is 17-18 percent relative to national income. Other developed countries are, however, 8-9% and 11% at the most. Those countries are Sweden, France, Switzerland, and the UK with only 9 percent. The US spends 1.5 times to twice as much on health care as other developed countries, nevertheless health indicators are the lowest in the developed world and some indicators are lower than Cuba."

Q: Why do you think that is? 
"In the US, hospitals, pharmaceutical companies, insurance companies, lawyers, etc., take money out of the medical care service. Also, there are many people who can't go to hospital because the country doesn't have a basic NHS system and so the people can't afford expensive hospital bills."

"China bars foreign visitors during the early stages of the coronavirus epidemic? Are they introducing Heungseon Daewongun's closed-door policy?"

Q: An American YouTuber has recently revealed the receipt of COVID-19 test, saying it cost him about 4 million Korean won even though he has health insurance...

"Really? The US citizens therefore won't be able to be tested, and if you get it, it's not that you don't go to the hospital, you just can't. And because there are so many flexible workers such as delivery workers around the world these days, people like that can't even rest if they're sick." 

"And a severe pandemic may be inevitable if those workers are infected with coronavirus and no one would know how far and how much COVID-19 will spread. Coronavirus reveals the blind spots of neoliberalism and globalization.", he added.

Q: There are still questions over the initial quarantine process in South Korea, particularly in whether they should have banned all Chinese visitors from entering the country. (Arguments for banning the entry are now raised due to the recent increase in number of confirmed cases of foreign visitors.)
"There must be a lot of political and economic links with China so how could we have imposed an entry ban at the start?  If they had done so, it would have become an issue of diplomacy... That wouldn't actually make any sense.", he said. 

"There are also people with coronavirus who show no symptoms, so I don't think it would have been easy to identify when, where, and how they got it from the beginning. If that were the case, we would just have had to implement a closed-door policy like it was during the Daewongun era of the Joseon Dynasty.", Chang added.

"There are people like that in Britain, too.", he continued.

"Britain is an island country, and people claim that we could have prevented this epidemic from happening if we had banned entry of visitors from China from the beginning. However, numerous schools in this country depend on Chinese students and Chinese companies are building railways and nuclear power plants. The London property market would also suffer a significant shock if there were no Chinese purchasers. In short, it's an accusation made for accusing. Do you really think the people contained in the country will not get the virus if you impose a closed-door policy?"

Q: Recently people abroad have been talking about learning from South Korea's quarantine system and its strategies.
"I know. South Korea is being a model in controlling COVID-19, which is quite surprising. Furthermore, the South Korean government provides everything from tests to inpatient treatment, which can't be done in the UK or the US. It's the same as in Italy, where there has been such a rapid increase in the death toll. The fact that the state was able to effectively impose controls, and the transparent and quick state measures demonstrate that the society is well organized and well prepared. Now we need to be as good at protecting socially and economically vulnerable people as  we are at quarantine procedure."

Q: The U.S. Federal Reserve, the European Central Bank, and South Korea have come up with a number of measures, including interest rate cuts, to prepare for the economic shock due to COVID-19.
"The current situation is not a problem that can be solved by (each country) simply injecting cash. People can't move around right now. It only becomes a useful policy if consumers spend money at the same time, but people can't at the moment... In some countries where delivery economies are advanced like in South Korea, of course, money could be used.  But this doesn't mean much. To have delivery services, you need things to deliver it.", he said.

As Chang said, each nation's governments and central banks announced their plans of increasing cash liquidity in the market and providing massive cash aid etc. as if they were in a competition throughout March. 

The financial market, however, remains volatile, showing a steeper decline than it did during the 2008 financial crisis. "It's a completely different level of problem from the recession we've been through,", Chang said.

 "COVID-19 is fatal to our current economy... this could be the next Great Depression"
 
 코로나19(신종 코로나바이러스 감염증)이 국내 실물 경제에 가한 충격이 지표로 확인됐다. 지난달 산업생산, 소비, 투자 모두 얼어붙었다. 산업생산과 소비가 '구제역 파동'이 있었던 2011년 이후 가장 큰 폭으로 감소했다. 소비 동향을 보여주는 소매판매액 역시 6.0% 감소했는데 소매업태별로는 백화점 판매가 22.8% 줄고 면세점 판매도 34.3% 급감했다. 사진은 지난달 31일 오전 서울시내 한 면세점. 2020.3.31
 코로나19(신종 코로나바이러스 감염증)이 국내 실물 경제에 가한 충격이 지표로 확인됐다. 지난달 산업생산, 소비, 투자 모두 얼어붙었다. 산업생산과 소비가 "구제역 파동"이 있었던 2011년 이후 가장 큰 폭으로 감소했다. 소비 동향을 보여주는 소매판매액 역시 6.0% 감소했는데 소매업태별로는 백화점 판매가 22.8% 줄고 면세점 판매도 34.3% 급감했다. 사진은 지난달 31일 오전 서울시내 한 면세점. 2020.3.31
ⓒ 연합뉴스

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Q: What do you mean exactly by "a completely different level of problem'?
"What would be the point of supplying cash? Factories need to operate. If goods are not produced, then they're not supplied, and since people are staying at home, products will not be consumed...
Besides, the current world economy is very vulnerable to a crisis. They say the economy has recovered over a decade since the 2008 financial crisis, but it has not. It's like giving a patient with cancer some nutritional supplements to give them temporary energy rather than undergoing surgery. COVID-19 is generally more fatal to the elderly and those with chronic diseases. That's exactly the situation right now."

 Q: I think I met you here in 2008 and heard you talking about an economic crisis.
"When I was talking about the 2008 financial crisis, I called it 'robbing Peter to pay Paul'. Because when the high-tech bubble burst in the early 2000s, the US Fed dropped the interest rate from 6 percent to 1 percent. Then there was the housing market bubble and hence the 2008 financial crisis, so in another words, they 'robbed Peter to pay Paul', with the bubble." 

Chang said fixing the flaws of the financial systems were not their priorities, but instead they made the numbers on their financial institutional reports look "nice".

"The money that was released at the time did not flow properly into the real economy", he added. "People's lives have become increasingly difficult in particular, due to austerity measures that were imposed by countries including Britain. This has resulted in a reduction in consumption, fall in investment, and further rises in job losses, which has led to Brexit, the emergence of Far-Right parties, and the Trump's win in the presidential election.", Chang said.

Q: This time, it seems like there is a massive cash aid by the government.
"It may be different from the past, but now everyone says it's a war. It is not easy to identify how much we need to pour into the market. The problem now is that after the financial crisis, the debt of American companies has increased tremendously. Due to the low interest rate, the quality of the assets that hold up the debt will also be low. COVID-19 could hit directly at this time of which the amount of debt has already increased significantly, and the quality of the assets is deteriorating"

Q: In South Korea, there has already been a sharp fall in production and profits of major firms in the first quarter, and some industries are facing closures and job losses.
"This crisis will ultimately reveal the hidden flaws of both domestic and foreign companies. As I mentioned earlier, this time it's a real crisis. I'm not sure how effective it would be to simply supply cash, cut taxes, provide coupons to shop etc. We'll have to see, but there could be a global economic crisis that is similar to the Great Depression."

"COVID-19 will be controlled to some extent within in the next six months or year," Chang said. "We should take this crisis as an opportunity to think about and create a new social system.", he continued.
  
"Some like to talk about Chinese people's hygiene or eating habits, some think it is a 'disease' and therefore not much can be done about it. However, I don't think we should look at it that way. Even if a natural disaster occurs, who it would affect and how much impact it would have could depend on the social system.

Corona19 will reveal how frightening it is that the U.S. does not have a national healthcare service, how the UK has well-established institutions but cannot operate them for free, and South Korea will show how hard it is to be a flexible worker and delivery worker. Now we need to organize a new socio-economic system that can fix the weaknesses of each society."


As he finished answering the question, we moved to a coffee shop and continued our interview. I wonder what a new socio-economic system would be.

(Interview continues on the next article – "I oppose this kind of basic income" Chang, a welfare state advocate, concerns.)

 
 장하준 영국 케임브리지대 교수(경제학)
 장하준 영국 케임브리지대 교수(경제학)
ⓒ 김종철

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Written by Jong-cheol Kim
Translated by Ha-eun Grace Choi.

* This report is the English version of OhmyNews Korean article. If you want to read the original article in Korean, click here!

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