Member of the European Academy of Sciences and Arts: We Need A Consensus on Human Destiny in the Post-epidemic Era

Ulrich Blum: Member of the European Academy of Sciences and Arts; Founding Director of the Materials Economy Institute of Fraunhofer-Gesellschaft; Chair Professor of Economic Policy at Martin Luther University Halle-Wittenberg; Once served as Founding Dean of School of Economy at Dresden University of Technology; Founding Director of Halle Institution for Economic Research

FENG Xiaohu: PhD Supervisor at University of International Business and Economics and Humboldt University of Berlin; Professor at University of International Business and Economics（UIBE）; Director of the Research Academy Chengdu of UIBE; Director of Sino-German Economic, Trade and Cultural Center

1. We made our strategy clear - “put resources into fighting against Covid-19 epidemic”

Feng Xiaohu: From the historical perspective, large-scale plague always brings great disasters and changes. In the 1840s, the outbreak of the Black Death in Europe killed more than one million people in Britain, while Britain only had a population of four million people at that time. The plague led to a series of wars between Britain and France lasting for more than 100 years, known as the “Hundred Year’s War”. According to statistics, the Black Death caused a total of 25 million deaths in Europe, which is an unbearable page in European history. However, the plague greatly shaken the dominating authority of the Catholic Church, giving birth to a large number of brilliant literature works led by Boccaccio’s Decameron. All these works paved the way for Renaissance, the most glorious chapter in European history.

After the outbreak of Covid-19, China successfully blocked the spread of the disease, which is an indisputable fact. When the epidemic raged globally, China did its best to fulfill international responsibilities and provided a lot of assistance to other countries. What’s your opinion on this?

Ulrich Blum: There is no doubt that global cooperation will become more important. In the long run, this epidemic, like all disasters in history, will also bring about tremendous institutional and technological changes. However, it is an ill wind that blows nobody any good. As we’ve learned from the world financial crisis, some countries are reluctant to admit that relying on the resources of other countries is not a reliable way to succeed, and they are unwilling to admit that part of the problems they are faced with were caused by their own. The epidemic has made these problems fatal. It never rains but it pours. During the epidemic, there were also the earthquake in Croatia, the extreme drought in the United States and some more serious non-natural events like the collapse of oil market and tourism, the dramatic reduction of public revenue and so on.

China has been successful in fighting against Covid-19. Europe wasted several precious weeks that China had won before it realized the seriousness of the epidemic. But then we made our strategy clear - “put resources into fighting against the epidemic”and implemented it. Germany donated a large amount of medical supplies to China in January and we are also very grateful to China for helping us when we need it most!

In terms of the medical equipment and vaccines, we must follow the principle of market first, and meanwhile, make good use of them to serve the world. Governments should save for a rainy day, setting standards to facilitate the global use of patented equipment, drugs, and vaccines to prepare for the next pandemic.

Feng Xiaohu: “There will be a totally different version of world after this pandemic, but what it is like depends on how we face it. This epidemic is a test of human nature, because the good and evil of human nature are fully exposed in front of it.” German President Frank-Walter Steinmeier’s speech delivered at the Easter this year touched me deeply and reminded me of US government’s response to Covid-19. Although the World Health Organization (WHO) issued an alert to the world in early January, the US government has always claimed that it is “just more severe than flu”. Their inaction has led to the spread of the epidemic in the United States, and now they has the world’s most confirmed cases and deaths. However, some people in the United States have been busy passing buck to China, WHO and other countries. For a long time, the United States has been inclined to pursue trade protectionism, especially in this administration. Will Covid-19 be an excuse for the US to pursue protectionism?

Ulrich Blum: The epidemic situation may become regular in the future. As long as the world takes the fact seriously, the influence of these groundless accusations is untenable. Donald Trump’s speech about Covid-19 is obviously against the fact. He wants to take the lead in the coming general election and also occupy the moral high ground in the trade war with China. His words and deeds will have a long-term and profound impact on Sino-US relations, depleting the goodwill between the two countries. Europe does not want to get involved in this debate.

The most sensible step for all countries to take is to make all governance measures more transparent. After the first infection case of Covid-19, it is necessary to assess the speed of its spread and quickly come up with a plan. Germany is lucky to have a large number of inventory of intensive care units and ventilators, which are three times the average level of other industrial countries, so the epidemic situation in Germany is well controlled. Now, Europeans are starting to take China’s approach, and there are more and more passers-by starting to wear masks.

The German experience shows that epidemics are more severe in cities than in rural areas, not only because of the low density of rural residents. We must consider improving the city’s “robustness in the face of extreme risks”. The German government is improving the relevant laws and regulations, because we have no regulations on dealing with emergency of epidemic diseases at present. The German law enacted for emergency only covers war, “antique” enacted in the Cold War period. In this respect, we need to improve a lot.

The crisis highlights the different views of different countries and cultures on the value of life. When society is under pressure and reaches its limit, like Wuhan, northern Italy, eastern France and other epicenters of the outbreak, it is necessary to decide how to establish a hierarchical diagnosis system, but it is hard for westerners to accept this.

2. Decoupling from China-an ideological fever

Feng Xiaohu: The US government began to deny globalization before the end of this epidemic. In my opinion, after the epidemic, the pattern of globalization may change, but globalization will not die out. There will probably be a “globalization without the United States” in a short period of time. When the United States realize that globalization is unstoppable, they will come back in.

Both developing and developed countries benefit from globalization, and the latter benefit most. The developed have been playing a dominant role in the global value chain, which is one of the reasons for “anti-globalization movement” in the world. Now the U.S. government wants to withdraw from globalization and pursue trade protectionism, while developed countries such as Germany, France, Britain and Japan rely on global trade for high national income. They are bound to oppose trade protectionism, and threats from the US can’t change it.

Ulrich Blum: In the future, the control of value chain will be a technology-driven competition. The challenge we are faced with is not the conflict between free trade and trade protectionism, but the contradiction between free trade and taking control of the value chain.

Feng Xiaohu: Actually, the United States has benefited a lot from globalization. It is a false proposition that the United States is “better off in seclusion”. I don’t think those American elites will truly believe this proposition. Otherwise, the United States is doomed to accelerate its decline. As economists, we all know that the slogan “bring jobs back to the USA” is just for swindling votes. Nowadays not many Americans are willing to work in a factory for $10 a day. If they had been willing to do it, American companies would never have come to China to build factories. Not long ago, a German TV station reported that a British farmer employed 20 Britons to pick asparagus. These British workers yearned to work comfortably on the green fields, but they gave up on the same day because of the high intensity of labor. One of the young girls said, “I really admire those seasonal workers from Romania.”

So far, the total investment of American enterprises made in China is still several times that of Chinese companies made in the US .I don’t believe that “decoupling from China” advocated by some Americans can succeed. Decoupling from China, which is obviously a huge market with strong sustainability, is totally against the nature of capital. It is just an ideological fever, which can not be sustained for long. What do you think of the world’s economy after this pandemic? Will the plague have a serious impact on the globalization process?

Ulrich Blum: In the past 20 years, the total import volume of some countries has continued to decrease. Only with absolute economic growth can imports be increased. In the future, more and more countries will adopt this “import substitution” policy to compete for the dominance of science and technology. In fact, there has been an anti-globalization trend for a long time. I think regional integration will take precedence over global integration. Perhaps globalization will take a “corridor” way（eg. BRI）or “cluster mode”（eg.the Mediterranean basin mode）to further affect the value chain. Rupture of the industrial chain is very dangerous. China has set an example in this regard and has been opening up further to the outside world in the past few years.

With regard to the impact of the epidemic on the world economy, we have seen that tourism is declining step by step, and the epidemic will drag some countries to the brink of collapse; aviation, shipping and transportation encounter a cold winter, because the more frequent international exchanges, the faster the epidemic spreads; European food prices have been rising, and will rise further, because the premise of farming for European labors is free movement. However, despite rising prices and poverty, the epidemic may also usher in investment opportunities for regional agriculture in places such as Africa. I predict that the world economy will shrink by about 5% to 10%. The specific situation of each country will vary according to their industrial structure and the degree of opening up. Only a few countries will recover quickly, and I think China and Germany will be among them.

3. The trade war does no good to the world

Feng Xiaohu: The current U.S. government is keen on “quitting”. Recently, it has announced to withdraw from WHO, claiming that this can protect the interests of the United States. I think the United States’ efforts to start a new business outside the WHO are likely to fail, and the frequent “quitting” makes the world extremely dissatisfied. What do you think of this behavior?

Ulrich Blum: In recent years, the United States has indeed withdrawn from many important international organizations, mainly because it wants to protect its own interests or to be partial to a certain country. In fact, only when a country becomes a member of an international organization can it have the influence to change it. After all, change should start from within. The United States is fighting a big trade war, and the gloomy atmosphere brought about by the war is not good for the world. We have to reach a consensus on the fate of mankind. I think “China’s rejuvenation”, “making America great again” and “Europe’s political leadership” can coexist.

Feng Xiaohu: At the beginning of the outbreak in China, We received medical supplies donated from Europe and the United States. But I have never heard or seen that China accuses Europe and the United States of trying to increase their international influence by donating medical supplies. On the contrary, China, from national leaders to ordinary people, are deeply grateful for these donations. Chinese culture is a culture of gratitude. After the outbreak of the epidemic in Europe and the United States, Chinese government and its people have donated and provided a large number of anti-epidemic materials to European and American countries. Chinese scholars awarded scholarship by Alexander von Humboldt Foundation built a wechat group for donation. Within one day, they raised 170,000 yuan and purchased 649 sets of medical protective clothing, and donated them to Germany through the German Consulate in Shanghai. I am personally involved in this issue, so I can be responsible to confirm that this donation is spontaneously organized by these Chinese scholars, having nothing to do with the Chinese government. If anyone thinks that this is a political action of the Chinese government to “enhance China’s influence”, it will hurt all the Chinese scholars mentioned above, including myself.

In the 21st century, a country’s influence in the world comes from how it seeks a better life for its own people and the people of the world, rather than relying on malicious slander and exerting pressure. In my opinion, the best thing in the world now is unswervingly upholding globalization and multilateralism.

Ulrich Blum: I always firmly believe that we need more kindness. We should all look back on our life in the last few minutes before we die. Of course, we hope that these reviews are gratifying. If U.S. leaders want to have this feeling, it’s time to change their conduct. I don’t want to deny them completely, or as the German philosopher Nietzsche puts it, “since he is going to fall, you’d better give him another push”. I think we can learn from the German philosopher Kant’s three ideas: first, everyone has the right to get the maximum freedom to act, as long as the universal law based on this is compatible with the freedom of other people’s behavior. Second, people are the end, not the means. This is very consistent with China’s international image, because China always puts people first. Third, something of value must have a price, but something with a price may not have value. As economists, our bottom line is that we can’t simply materialize everything.

Feng Xiaohu: As British writer Charles Dickens wrote in A Tale of Two Cities: “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way.” The Covid-19 epidemic will eventually become a history, and mankind will continue to push ahead. As always, the road to light and happiness needs to be built by man himself. We should share weal and woe, rather than tit for tat. We should not only adhere to globalization, but also adhere to multilateralism.

Ulrich Blum: Multilateralism is irreplaceable and needs long term maintenance. In the intertwined world, we need mutual support and suggestions from all sides. We can’t solve the problem by passing the buck to each other.

4. Cooperation between China and Germany is not incidental

Feng Xiaohu: Germany launched two world wars and were defeated twice, but recovered rapidly. Its economic governance mode is worth studying. Ludwig Erhard was the father of German social market economy in the 20th century. He thought that economy was politics and insisted that economy was a means rather than an end. His monetary reform policy was to better realize social equity. The economic miracle of Germany after World War II proved the success of Erhard’s monetary reform, thus called “Erhard Miracle” at that time. You are the chairman of the International Committee of scientists of the Ludwig Erhard Foundation in Germany, and you must have studied this very well.

Ulrich Blum: We have translated Erhard’s Public Welfare together. I mentioned in the foreword of the Chinese reprinted edition of this book that there are some similarities between his ideas and Taoist thoughts. He believes that only through competition can social justice be achieved, and free market competition also needs social justice as the support. Erhard’s economic thought is not dialectics It is closer to the Taoist theory of “the combination of yin and yang”. The competition advocated by Erhard is “accelerator”, while social welfare is “brake”. With good braking, we can control the accelerator better. However, some European countries have adopted the economic policy of stepping on the accelerator and the brake together.

Feng Xiaohu: Finally, I’d like to say a few words about your research on new materials. One of the important fields of technological revolution is new materials. After the war, Germany has always played a dominant role in global value chain, largely because of Germany’s strong competitive advantage in this field. What’s your expectations on strengthening scientific and technological cooperation between China and Germany in the post-epidemic era?

Ulrich Blum: First of all, new materials account for 70% of German industrial innovation, which is crucial to the economy. Secondly, as China has shown, value chain control may be relaxed because of new materials. China hopes to promote its position in global value chain through new materials, such as those based on rare earth elements. In fact, according to a recent survey conducted by our institute, if we adopt new high-performance electromagnetic and related technologies, only China, Germany and Japan will be the world leaders. I believe that China still needs German wisdom, especially the intelligence of small and medium-sized “hidden champions” with unique German characteristics, to seek development for China. I also believe that Germany must promote its technology in the big market of China in order to make a difference. We should bear in mind that the Chinese and German economies are almost perfectly complementary. Benefit to one means benefit to all, whereas harm to one means harm to all.

Feng Xiaohu: What you said has been proved. On May 29, Anhui Jianghuai Automobile Group Corp. Ltd and the Volkswagen Group signed a strategic cooperation agreement on new energy vehicles with a total investment of 13 billion yuan at the Great Hall of the People in Beijing. German ambassador to China Clemens von Goetze attended this meeting, and the CEO of Volkswagen Group, Herbert Diess, participated in through the remote video. I believe it is not incidental that they chose this time and place. Let’s take a look at many countries led by Japan and South Korea who have chartered flights for employees, helping them return to work in China. BMW is ready to join the Great Wall joint venture, and Benz is going to take a stake in Foton. Tesla invested 50 billion yuan in Shanghai in 2018 to build a “super factory”, and the R&D center has settled down in advance.

Ulrich Blum: That is what we say “benefit to one means benefit to all, whereas harm to one means harm to all.”

Translated by Zhou Ning; revised by Zhou Bing