Summary of the book "Shutdown" - By Adam Tooze

Key Concepts in this book:

1. The virus was able to bring public life to a halt due to widespread, purposeful unpreparedness.
2. The regime's legitimacy was bolstered by China's resolute response to Covid's appearance in Wuhan.
3. Covid's response in the West was slow and unorganized.
4. The United States took drastic measures to save the global economy as we know it.
5. While the EU and the US grappled with the pandemic's new budgetary realities, China continued to rise.
6. Emerging markets were able to stay afloat by relying on tried-and-true means of obtaining credit.
7. Covid swept through the United States in the fall of 2020, worsening the country's wounds.

Who can benefit the most from this book:

• News junkies and history buffs alike.
• Those who know that economic policy matters.
• Anyone seeking perspective on our tumultuous times.

What am I getting out of it? Getting your mind around the year 2020... Based on the statistics, one might conclude that the planet was impacted by an asteroid.

SARS-CoV2 afflicted 95 per cent of the world's economies, resulting in the most severe and widespread economic downturn ever recorded.

At the very least, tens of millions became ill, and well over three million perished. Three billion individuals have lost their jobs or been laid off. Almost 1.6 billion children were forced to miss school. COVID-19 brought practically everyone on the planet's public life to a halt for days, weeks, or months.

Despite how amazing Covid continues to be, public health professionals knew something similar was on the way. Covid was a grey rhinoceros, and like that charging beast, it posed a tremendous, recognizable menace to humanity.

More grey rhinos are charging, so we'd better learn a thing or two from 2020.

• You'll learn how Covid was both unprecedented and predictable.
• What the world's governments did right and wrong.
• And how the economic lessons from Covid can help us prepare for the next devastating threat in this summary.

1. The virus was able to bring public life to a halt due to widespread, purposeful unpreparedness.

Whatever history books write about the pandemonium of 2020, US President Donald Trump will undoubtedly play a prominent role.

Trump flirted with Covid denialism throughout the crisis. He waffled over social distance, advocated quack cures, and sneered at the greatest science available. He stoked international and internal tensions at a time when the world needed unity the most. His performance was extremely ill-advised and had a significant impact.

The circumstances that gave Covid its world-shaking potency, on the other hand, extend far beyond the United States and predate Trump's presidency.

The main message here is that a virus was able to bring public life all over the world to a halt due to widespread, purposeful unpreparedness.

For decades, we've known that our modern lifestyles cause more sickness, not less. Endless encroachment into the wilderness, industrial farming, mega-urbanization, antibiotic abuse, worldwide mobility, and fake medical news, to say nothing of climate change, all contribute to the emergence of new diseases.

More particularly, following SARS in 2003, swine flu in 2009, and MERS in 2012, virologists expected that a new and contagious flu-like virus will emerge soon. Mild lethality, if it spreads over the planet, would result in a death toll greater than WWI and WWII combined.

A flu-like virus could also spread along global trade and transport corridors, according to public health specialists. They were well aware that it had the potential to annihilate poorer people. Take Sub-Saharan Africans, for example: in 2017, they were already 12 times more likely than Europeans or Americans to die from a communicable disease. In the case of highly contagious sickness, the numbers would very certainly be substantially higher. Within countries, the same imbalance would exist. Respiratory infections cause 80% of communicable illness deaths in the United States, and poverty enhances the prevalence and mortality of those diseases, a sobering reality that is especially true in poor Black, Latino, and Native American populations.

Governments realized that 7.8 billion people would rely heavily on the World Health Organization, a critically underfunded institution with a budget of $4.4 billion, nearly comparable to one large hospital, in terms of a response. Americans in the United States would rely on a healthcare system that excludes tens of millions of people and a patchwork of institutions that are managed based on revenue and cost rather than preparedness. The grave stakes were well understood, but they were disregarded. Covid, on the other hand, struck first in a location that, in comparison to others, was as prepared as one can be.

2. The regime's legitimacy was bolstered by China's resolute response to Covid's appearance in Wuhan.

In Wuhan, China, a new virus began to spread from person to person in November 2019. Within weeks, the city's hospitals were overflowing with sick people. Many people died as if they were suffocating, gasping and afraid.

The Communist Party's provincial leadership kept the problem quiet, suppressing any information that might reach the party's national leadership, which was holding annual sessions at the time. On January 6, 2020, however, China's President Xi Jinping received word of the disease's spread. Xi was prepared.

The crucial takeaway is that China's swift response to Covid's appearance in Wuhan cemented the regime's legitimacy.

Xi had addressed the party a year before receiving word of the Wuhan outbreak, warning members to remain wary of "grey rhinos," or threats that people overlook despite their high possibility. He tasked Chen Yixin, one of his proteges, with developing the party's plans of action in response to grave threats to the political, economic, and social order.

When Xi learned of the crisis in Wuhan, he dispatched Chen to carry out the plan. Chen took control of Wuhan, a well-connected metropolis with a population of 11 million people, half of whom were planning to travel to celebrate the New Year. Beijing declared a "People's War" on the virus, sending 40,000 construction workers and 40,000 medical personnel to build and staff emergency facilities. The state's security apparatus enforced the curfew, detaining demonstrators, kidnapping journalists, and removing opposition from the airwaves and social media.

To stem the spread, Beijing soon imposed curfews in Wuhan's province of Hubei and the neighbouring province of Jiangxi, and the government shut down the entire country by January 22. Factories and businesses shuttered, putting 132 million people out of work, the biggest labour market contraction in history.

The harsh techniques used by Beijing were successful. The World Health Organization announced China had effectively suppressed the SARS-CoV2 virus by the end of February, and China's economy showed strong signs of recovery within a few months. The novel coronavirus epidemic was not an existential tragedy for Xi and the Communist Party. Overall, it was a win, and it would only become better if the virus spread to the West.

3. Covid's response in the West was slow and unorganized.

Britain departed the European Union on January 31, 2020, after nearly four years of turmoil. UK Prime Minister Boris Johnson predicted that the country will usher in a new period of freedom and glory if it avoided illogical worries like "pandemic hysteria."

A week later, the US Senate acquitted Donald Trump for the second time of abuse of authority and obstruction of Congress. Trump celebrated by touring red states and holding rallies in front of adoring crowds.

Around that time, the EU met to tackle the COVID-19 crisis that was brewing. The focus of the discussion was on the potential for the disease to cause problems in Africa, rather than Europe.

As February progressed, the West's leadership neglected to notice the grey rhino's charge.

The main point here is that Western reactions to Covid were delayed and disjointed.

Covid, like a rhino, has two horns that have physical and economic consequences. The virus's economic impact was visible in the West between March 8 and 9, when the price of oil plunged by 65 per cent in just 24 hours. Why? For starters, China's blockade has reduced demand. The two countries then couldn't decide whether to cut output or compete on pricing. Oil, the lifeblood of the developed world, became nearly worthless overnight. The global economic downturn had begun.

Covid was discovered in 110 nations on the same day, according to the WHO.

The United Kingdom, the European Union, and the United States all responded in a disjointed and incoherent manner. Boris Johnson warned the United Kingdom to expect action, but his strategy consisted largely of advising the elderly to stay at home. Many countries in Europe have outlawed major gatherings, while others have held soccer matches, festivals, and marches. Meanwhile, Donald Trump has unilaterally blocked the United States' borders to Europe, with the exception of the United Kingdom and Ireland. He had no preparation for trapped Americans in other countries.

Within two weeks, the United States had the world's highest case count. State and local governments took action in the absence of a national policy.

Individual school districts were forced to close. Residents were ordered to stay at home by individual cities and counties. Businesses lead the social distancing campaign in locations where stay-at-home mandates are not mandatory. Workers in other industries, such as auto manufacturing, were the ones who forced the closures.

Individual governments, towns, corporate entities, and individuals were responsible for the majority of the US response to Covid in March 2020. With all of its resources and influence, the federal government was virtually absent from the attempt.

In contrast to China's government-imposed closure, the West, particularly the United States, responded with a shutdown from within.

4. The United States took drastic measures to save the global economy as we know it.

There isn't much of an economy when people's physical safety isn't assured. As COVID-19 spread from one person to the next in the spring of 2020, the global economy began to disintegrate.

The number of people flying has decreased by 94%. Salons, Gyms, dentists' offices, stores, tourist attractions, schools, and a slew of other establishments that bring people together came to a halt. COVID-19 put the supply of products and services in jeopardy, decreased demand, and put millions of people's livelihoods in jeopardy, resulting in the steepest global economic slump in history. The safest collection of assets in the world, the market for US Treasuries, was soon shattered by this shockwave.

The main lesson here is that the United States took drastic measures to salvage the global economy as we know it.

Treasury bills are extremely safe since they are, first and foremost, guaranteed IOUs from the US government. Furthermore, because the Treasury market is so large - tens of trillions of dollars – individuals who choose to sell them will always find purchasers.

However, this was not the case in early March 2020, when a large number of investors hurried to pay out their notes. Because not enough individuals wanted to buy, the value of the property plunged. Panic had taken hold.

No other asset in the global economy was safe if US Treasuries were not. Markets of all colours plummeted, with a total loss of $26 trillion.

In response, US Federal Reserve Chair Jerome Powell reduced interest rates, which normally encourages investment. It accomplished nothing this time. As a result, Powell shifted gears, instructing the Federal Reserve to purchase the treasury notes that no one wanted. In essence, the US government purchased its own IOUs and steadied the world's largest market. The Federal Reserve had $7.5 trillion in treasury notes by that summer.

Governments, particularly the United States, have previously purchased their own debt through a procedure known as quantitative easing. But it was the first time it had been done on such a large scale, and the Fed went on to break other rules by lending directly to businesses, providing credit, and purchasing hundreds of billions in corporate debt.

Meanwhile, the United States Senate ended a decade of near-total legislative stagnation by overwhelmingly passing the Coronavirus Aid, Relief, and Economic Security Act – or the CARES Act – which is the world's largest single stimulus package.

Neoliberalism, which demands minimal government and free markets, has been the prevailing economic ideology in Washington, D.C. for decades. Covid defied neoliberal orthodoxy in spring 2020.

5. While the EU and the US grappled with the pandemic's new budgetary realities, China continued to rise.

Covid initially appeared in Europe in February 2020, affecting a group of villages southeast of Milan. Rome placed the region under lockdown and surrounded it with police and military forces to enforce the quarantine.

While the media correctly focused on the human toll, Covid's economic contagion — the supply, demand, and labour shock – was as terrible, and Italy was highly susceptible in terms of fiscal policy. It owed $1.9 trillion, which was roughly one-half of its GDP. The disease then spread to France and Spain. The European economy would face a doom spiral if Covid dragged their GDPs below their total debt.

The crucial lesson here is that, while the EU and the US grappled with the pandemic's new fiscal realities, China continued to rise.

Thankfully, Europe had learned from the 2008 recession and subsequent Eurozone crisis. Instead of enacting austerity policies, the EU eased expenditure constraints for member states, the European Central Bank purchased trillions in debt, and the European Commission approved Nextgen EU, a rescue package totalling roughly 750 billion Euros, in July.

The EU, like the US, has cushioned its economic free fall with massive quantities of money. Unfortunately, the United States and the European Union had similar improvised responses to the epidemic. The pandemic thrived in the lack of genuine coordination.

Meanwhile, Beijing's unambiguous response to Covid has relegitimized the Chinese Communist Party's grip on power. Beijing, emboldened, used a new rule to punish criticism to suppress Hong Kong's independence movement. Beijing then proceeded with plans to merge Hong Kong, Macau, and the province of Guangdong into a single economic entity. The party continued to deploy loyal cadres through the country's enterprises after billionaire rebel Jack Ma fled.

China has recovered both economically and politically. For one thing, it created half of the most sought-after items on the planet: medical-grade face masks. China's purchasing power surpassed that of the United States by the end of the year, and Chinese enterprises received more foreign investment than any other country in the globe. China has regained its dominance.

6. Emerging markets were able to stay afloat by relying on tried-and-true means of obtaining credit.

As the virus spread across the globe, a group of European and African governments petitioned the International Monetary Fund (IMF) to treble loans and help poor countries in April 2020. The United States, on the other hand, vetoed the agreement. According to reports from behind the scenes, Treasury Secretary Steven Mnuchin surrendered to Republican IMF critics led by Texas Senator Ted Cruz.

The IMF was able to put a hold on loan repayments, but medium and lower-income countries didn't require debt forgiveness in the midst of the pandemic. They were short on funds.

The main takeaway is that emerging markets were able to survive by relying on tried-and-true means of obtaining credit.

Despite the rich world's relative passivity, countries as diverse as Peru, Indonesia, South Africa, Thailand, and Brazil scrounged the credit they needed to see them through 2020, and they did so using strategies they established throughout their efforts to stay afloat in the global economy.

Many poorer countries had reduced their foreign currency borrowing, allowing them to generate money and pay in an emergency. They'd also learnt not to tie their currency to a specific exchange rate. While some investors were put off by this technique, it ultimately helped to stabilize loan flows. Furthermore, they forbade their own banks from taking risks that were routinely accepted in wealthier parts of the world. Finally, they avoided the sugar rush of mercurial foreign investment by controlling the movement of foreign money into and out of their banks.

These methods – each one fine-tuned to keep a shaky economy from collapsing – helped to soften the effect of Covid. The health of a country's financial sheet, on the other hand, is not the same as the health of its people. Covid wreaked havoc on healthcare systems in several nations in the Global South. In Peru and Brazil, bodies dotted the roads. Vultures turned circles in the sky over Guayaquil, Ecuador.

An independent authority to streamline relief was proposed during a UN conference late in the summer of 2020. The UN met with the IMF, the World Bank, and the G20 to discuss aid measures. There were resolutions made to get money to underprivileged countries. The idea, on the other hand, required US buy-in.

The United States was devoured by internal turmoil.

7. Covid swept through the United States in the fall of 2020, worsening the country's wounds.

A white Minneapolis police officer knelt on the neck of a Black guy named George Floyd on May 25, 2020. Floyd had allegedly tried to pass off a fake $20 cash at a corner store, and while being arrested, face down on the street, he told the cop who squatted on his neck that he couldn't breathe. A passerby captured the arrest on video, and millions would soon witness Floyd's death at the officer's knee.

The impoverished are the ones who suffer the most from Covid's terrible effects. Given US history and current imbalances, Black Americans were more likely than white Americans to be sick and lose their jobs in 2020. They had a higher chance of dying as well.

The essential message here is that Covid swept over the United States in the fall of 2020, worsening the country's wounds.

The assassination of George Floyd sparked a massive mobilization around the Black Lives Matter movement. Within two months, up to 26 million people participated in racial-justice marches. The Democratic Party supported the initiative, with Joe Biden as its presumed presidential contender, as did a slew of celebrities, high-profile bankers, and corporate executives.

President Trump, on the other hand, courted far-right support by raging against the "woke liberal establishment" and portraying protesters as anarchists and criminals. Any kind of cohesion that had existed since Covid's inception has vanished. Local lockdowns were met with armed residents protesting. Covid was dubbed the "Wuhan" or "China virus" by Trump at times, and he pretended it would vanish one day. Despite the CARES Act's tremendous popularity, which resulted in millions of checks featuring Trump's name appearing in mailboxes around the country, Trump was unable to gather his party's legislators behind a second stimulus bill before the November election.

With the arrival of autumn, the second wave of Covid infections raced over the United States. Despite months of social distance, the country appeared unable of implementing comprehensive public health policies that had reduced case counts in countries like South Korea and Vietnam, let alone China. Operation Warp Speed, a public-private partnership launched under Trump to speed up the development of a COVID-19 vaccine, was the last hope of shaking the virus.

The optimism was not misplaced, as it turned out.

COVID-19 handed the globe an unprecedented, yet mainly predictable blow, according to this summary. Much of humanity's persistent, collective irresponsibility allowed a virus to endanger the global economy's survival. Even without strong leadership, governments and other institutions were able to work together well enough to keep everything from collapsing. They altered the economy for the future along the way.