What happens when ‘black swans’ have help: China’s failure to act

The U.S. stock market finished March with its largest drop since 2008. The S&P 500 fell by slightly under one-fifth; the Dow Jones industrials, by almost one-quarter. All this, despite a multi-trillion-dollar emergency package and rate cuts by the Federal Reserve and other major central banks.

Concurrently, Saudi Arabia and Russia’s “price war” over oil continues. The old Russo-Saudi price pact, dubbed OPEC+, fell apart after a drop in Chinese demand prompted a Saudi request to cut overall output; Russia refused, resulting in Saudi Arabia’s massive overproduction, which Russia matched in kind. Both energy juggernauts have currency reserves. Nevertheless, Saudi Arabia’s previous price war in 2014, intended to undermine American shale production, took a toll on the kingdom’s economy in a much more stable international environment.

These two events alone demonstrate the relevance of geopolitical “black swans” like the COVID-19 pandemic. “Black swans” are random events that trigger cascade effects across a complex system. A sufficiently competent organization can identify certain threats but the precise scale, timing and effects of a black swan are unpredictable.  A major outbreak like the coronavirus pandemic was likely at some point, as the SARS and avian flu outbreaks showed. Indeed, the World Health Organization identified coronavirus, like SARS, as having high outbreak potential. Nevertheless, all socio-political events are subject to and defined by the contingencies of their moment; the COVID-19 outbreak is no exception.

The unpredictability of black swans exposes the strengths and weaknesses of global and national institutions. They demonstrate how individuals, organizations, and societies react when pushed to their limits. Italians, Spaniards and Frenchman, for example, have shown a remarkable degree of resilience under adverse conditions; public morale appears to be high despite nationwide lockdowns. The weaknesses of national public health systems are similarly apparent; Italy, which is now experiencing what appears to be a flattening of reported infections, could not initially contain the outbreak, while the United States and United Kingdom’s health systems could be overwhelmed as a result of delayed responses.

It is at the purely political level, however, that the COVID-19 pandemic has been especially revealing. Methodological extremism strips back the obfuscations surrounding a regime’s true nature. Its priorities, and its weaknesses, are laid bare.

Nowhere is this more apparent than in China. The Chinese Communist Party (CCP) propaganda apparatus persists in its effort to falsify the global narrative. An April 1 Bloomberg News article notes a U.S. intelligence report to the White House, stating that China’s account of infections and fatalities is deliberately false. Consistent with this, the CCP published a book outlining China’s response to the epidemic and demonstrating the alleged strength of Chinese institutions compared to those of the West.

A brief review of COVID-19’s spread, and Chinese responses, reveal this as a blatant lie. An independent investigation of Chinese government documents by the South China Morning Post identified the first case of COVID-19 in mid-November. However, public health authorities in Wuhan did not identify an outbreak until mid- to late December — the Chinese Center for Disease Control identified several cases of “pneumonia with an unknown cause” and began investigating the novel virus. Despite medical recognition of the threat COVID-19 posed, the CCP refused to take action, instead suppressing social media traffic discussing the “Wuhan SARS” outbreak and arresting doctors who discussed its dangers. State media only reported the outbreak on Jan. 12, a full month after public health officials and the CCP determined a crisis in Wuhan was imminent. Moreover, the CCP allowed free travel throughout the weeks leading up to the Chinese New Year, facilitating COVID-19’s spread in China and elsewhere.

China only froze movement in Hubei Province, the epicenter of the outbreak, more than a month after the CCP’s leadership knew a dangerous new virus existed and several weeks after public health officials in Wuhan informed the government that an outbreak was imminent.

Thus, the Hubei Lockdown, rather than being a resounding success, was a last-ditch containment mechanism necessitated by inexcusable inaction on the part of President Xi Jinping and CCP central decision-makers. For weeks after identifying COVID-19, the CCP allowed an unknown number of exposed individuals to travel within China and abroad, infecting any number of people they contacted upon arrival. Like any black swan or major disaster, a chain of human errors facilitated the expansion of a critical threat. COVID-19, however, emphasizes the malfeasance of Chinese political authorities.

This stems from the deep-seated paranoia that defines the Chinese regime. President Xi leads a party that, under its deified first leader Mao Zedong, slaughtered millions of Chinese. Mao’s “Great Leap Forward,” a systemic economic, social and cultural transformation, killed 30 million to 40 million over three years; the subsequent Cultural Revolution killed up to 20 million, specifically targeting intellectuals. Mao institutionalized a system of forced labor camps still existing today, even after President Deng Xiaoping’s significant reforms. The contemporary CCP inherited a butcher’s bill of between 45 million and 65 million.

Since 1979, the CCP has promised the Chinese people economic prosperity and political stability in return for the party’s continued rule. But if economic conditions deteriorate, Xi and his fellow party elites know they will face significant resistance from their people. Economic growth has slowed, potentially prompting China’s transition under Xi to a more bellicose, anti-American foreign policy intended to secure international export markets and natural resources while defending national pride. Similarly, the Taiwanese democratic, market-based alternative to the Beijing regime terrifies Chinese leaders, prompting China’s concerted drive towards “reunification” by whatever means they deem necessary.

COVID-19 shows the lengths to which China’s elite will go to maintain power. The CCP essentially left Wuhan’s 8 million residents to their fate, accepting that a high proportion of the elderly and those with pre-existing conditions would die. It refused to report or act to contain the outbreak because it feared the economic effects; if, for example, surrounding nations and the West had restricted travel months earlier, the global economic shock might have been mitigated — but China would have suffered more.

Compare China’s response to Taiwan’s: As March ended, Taiwan had 298 cases and five deaths out of a population of nearly 24 million. Taiwanese businesses, schools and cafes remain open. While greater infection is possible, the government is prepared; economic and social life continues normally in Taiwan, which is donating 2 million facemasks to the U.S. and 10 million to the international community. Its preparedness is surely linked to a national immunity generated by China’s across-the-board spectrum of threats, isolation, misinformation and bullying.

Open, truthful and effective when mobilized, the U.S. will experience more hardship but will survive and prosper. But black swans will not disappear: The contrast between democratic Taiwan and authoritarian China’s responses is a lesson to remember when we have weathered the storm.

Seth Cropsey is a senior fellow at the Hudson Institute, a Washington-based think tank focusing on U.S. leadership in global affairs, and is director of Hudson’s Center for American Seapower. He served as an officer in the Navy and as deputy undersecretary of the Navy in the Reagan and George H.W. Bush administrations.