Jože P Damijan is a full professor at the University of Ljubljana, School of Economics and Business, and a visiting professor at the University of Leuven, Belgium. His research interests and teaching cover international economics and trade policy, globalisation, FDI, innovation, firm performance, labour markets, corporate governance, corruption and development. Over the last 10 years, he has published more than 30 peer-reviewed academic papers, served as the Vice President of the Council of Economic Advisors to the Prime Minister of Slovenia, President of a Board of Reforms and Minister for Growth in the Slovenian government. Since 2008, he has been a special economic advisor to various ministries of the Slovenian government and to the parliament on various economic policy issues.

The coronavirus crisis signals a radical transformation. You recently wrote in your blog that "In two years, we will all be Keynesians and fans of public services," can you expand?

This pandemic has proven, once again, that public healthcare systems cope better with extreme emergency events of any scale and usually remain the only provider of healthcare services. Private healthcare providers were built for "good weather conditions" to skim the whipped cream, and they are very efficient in this. But, as they are motivated by profit, they avoid any unprofitable activities and so in this pandemic the private hospitals generally declined to provide testing or to accept COVID-19 patients for medical treatment. This is what led to the situation where the Spanish government decided to nationalise private hospitals to gear up for the pandemic. The lesson of this crisis is therefore very clear, that countries need strong and efficient public healthcare systems. More money is needed for funding public healthcare systems as well as for public medical and pharmaceutical research.
Another lesson is that public infrastructure and utilities are essential in keeping the economy going during extreme emergency events, such as natural catastrophes, pandemics, financial crises. I think most people now realise how important it is to have the system that steps in in such events and that makes sure that the basic services are provided. So, the historical wave is turning towards Keynesianism, it started to turn with the financial crisis of 2008, while this corona crisis will finish it.

Is there any "best practice" public healthcare system you would highlight?

To my experience, the German and Austrian public healthcare systems work very well, although, the Slovenian system is also working quite well in international comparison. The OECD comparison shows that the Slovenian system is above the OECD average efficiency and mostly up to, or better than, the German in many instances.

The OECD warns that the coronavirus presents the biggest danger to the global economy since the 2008 financial crisis. Will the corona crisis lead to an economic and financial crisis?

The corona crisis poses a much bigger threat to the economy than the 2008 financial crisis. This crisis is like a global war with biological weapons. While in "normal" world wars there was still production internally, now we have an almost complete economic shutdown for several months. While the financial crisis of 2008 was a big financial crisis turning into a prolonged recession due to depressed demand, this crisis adds a new dimension - the supply-shock due to the shutdown of whole economies and disruptions in global value chains. Imagine that half of the economy is in a lockdown for several months with revenues falling to zero for companies in many industries, the companies are unable to pay wages, pay rents and mortgages, and to settle the liabilities to other companies. Without the state to intervene massively by paying the wages to the workers and self-employed, by writing off or delaying the payments of taxes for many months, by taking up the liabilities of companies, by imposing a moratorium on mortgages repayments, the whole system will collapse, leading to massive unemployment and a wave of bankruptcies. My estimation is that governments will have to step in with fiscal injections of 10% to 20% of national GDPs, half of it in the first three to four months of the crisis, and more will be needed later on to stimulate aggregate demand. We have to be aware of the fact that when the coronavirus will eventually be defeated, there will be a very slow recovery as demand will pick up slowly and the global value chains will only gradually be restored.

How do you see the position for multinational companies (MNCs)?

I would say that this corona crisis might be more "efficient" in destroying, or at least slowing down globalisation, than all of the efforts by the US President Donald Trump to curb international trade by starting trade wars. This crisis has demonstrated how fragile international production and trade patterns are where one quite "primitive" obstruction can lead to severe disruptions in global value chains that can last for months. Imagine a car producer with 20,000 components and where only one missing component can bring to a halt the entire production; no MNC can afford this fragility. Add also increased protectionist tensions in the USA and the EU, and the practices imposed in these countries to curb the competition from China. I believe that, in the course of this crisis, many MNCs will rethink their production systems and organisation of their value chains.

Despite online shopping, is it possible that trade will be limited within the domestic customs territory in the mid-term?

Protectionism is on the rise in the advanced countries in response to the globalisation that went too far. Public backlash against globalisation, presented by the so called "China shock" over the last decade, has triggered the rise of political populism. The latter has evolved in economic policies that restrain international trade and put barriers to foreign suppliers from participating in public procurement. See, for example, the almost universal ban of Chinese Huawei in setting up the 5G network all over the advanced countries or the exclusion of Chinese and Turkish construction companies from public procurement in EU countries. Combining this rise in protectionism and fear of MNCs regarding the stability of their value chains leads to the natural outcome that western MNCs will increasingly start shortening and relocating their value chains towards "more stable" environments. Trading inside the domestic customs territory seems to be the safest - safe from potential trade restrictions and disruption in value chains.

Do you think some might profit from this crisis?

Sure. Crisis are the ideal situation for so called "war profiteers". The shortage in the supply of certain goods lead to surges in prices and many companies will leverage it. On the other side, many governments will realise the importance of self-sufficiency in certain key goods such as food, energy, medicine, etc. So, we can expect a turn in government policies toward promoting domestic production of these goods. This will be the opportunity for certain industries that have been hurt by the intensive globalisation to regain their market position.

The European Central Bank (ECB) launched a €750 billion Pandemic Emergency Purchase program (PEPP) that is expected to last until the end of 2020, following the US Federal Reserve's move to cut interest rates to nearly zero. Is this, in your opinion, enough to help markets?

Probably not. This PEPP program accounts for about 5% of the EU GDP. As mentioned previously, to prevent the economy from falling into a deep recession, governments will have to intervene with fiscal injections of some 10% of national GDP in the first three to four months of the crisis and more will be needed later, I guess an additional 10% of GDP or even more, to stimulate aggregate demand and ensure economic recovery. Some countries, like Italy or France, might not be able to afford this due to unfavourable sentiment in the financial markets and so the ECB will have to come to the rescue and step up the PEPP program accordingly.