Rumsfeld was parrying reporters’ questions about exactly what the administration knew about Iraq’s weapons of mass destruction (WMD) as a pretext for going to war.
“By any measure the coronavirus crisis was an unknown unknown in the sense that no-one predicted 2020 would dawn in the shadow of a potential health pandemic.”
As it turned out, Iraq did not have an unknown unknown WMD program.
The Rumsfeld quote has been used ever since as a parody for what officials say about unforeseen events that defy reasonable explanation - or any explanation at all.
In the early months of 2020 the world has been hit hard by an unknown unknown in the form of what appears to be an animal-born virus said to have originated in a live animal market in Wuhan, the capital of Hubei province in central China.
Researchers have isolated the coronavirus, as it’s called, but they remain unsure about the host of this flu-like threat to the health and well-being of not simply China itself but the international community and, by extension, the global economy.
By any measure the coronavirus crisis was an unknown unknown in the sense that no-one predicted 2020 would dawn in the shadow of a potential health pandemic or that a fragile global economy would be subject to a shock caused by a health emergency.
We might add the virus is now a known unknown – we know a lot about it but still don’t know how it will play out.
The coronavirus outbreak, in which hundreds of people have died and thousands more infected in China, is shaping as the most serious threat to global economic growth since the Global Financial Crisis (GFC).
As well as an unknown unknown it is a “black swan” event - a phrase coined by the futurologist Nassim Nicholas Taleb to describe a shock that has materialised seemingly out of nowhere.
Coincidentally, and completely unrelated to any black swan unknown unknown event such as the coronavirus crisis, the Bank of International Settlements (BIS) issued a paper warning of a potential “green swan” event.
The BIS outlined alarming scenarios in which fossil fuels could become “stranded assets” unwanted by investors in an environment in which issues of climate predominate. This could risk a “fire sale” of these assets causing the knock-on effect of a financial crisis.
As 2020, gets under way, challenges to the global economy abound from many different quarters, some predicted and some completely unforeseen.
Ones that are unforeseen can prove to be the most disruptive as witnessed by the GFC in which a collapse in a barely-regulated derivatives market for household mortgages risked bringing down the entire global financial system.
Neither the International Monetary Fund (IMF) nor the World Bank provided early warning of the dangers ahead. This was left to individuals like New York University professor Nouriel Roubini who was one of few economists who pointed out the risks associated with trading in a merry-go-round of near worthless credit default swaps.
Just how damaging the coronavirus contagion proves to be remains a matter for conjecture. However, early indications are it will constitute a much more serious drag on the global economy than the SARS outbreak of 2003. Then it was estimated disruption to travel and other forms of business caused by SARS represented a hit of $US40 billion on the global economy. SARS is estimated to have shaved 0.1 per cent off global GDP.
Much has changed since then, not least the size of China’s economy and thus its importance as the driver of global economic activity.
In 2003, China accounted for 4 per cent of global GDP. In 2020, its share is 17 per cent. Perhaps more important, China has been contributing one-third of global growth.
What also needs to be kept in mind is China’s importance to global supply chains is now much deeper than it was two decades ago. Companies like Apple are heavily dependent on their Chinese manufacturing facilities. Hyundai has just announced it has closed down production in South Korea because it can’t source key components from China.
If the global economy’s growth engine falters effects will be felt far and wide and nowhere more so than Australia.
These numbers reveal just how important China is to the Australian economy and its growth profile: in 2019, exports to China accounted for 34.3 per cent or $A118 billion of total Australian exports
Iron-ore and concentrates, coal, natural gas and gold represented the lion’s share of merchandise exports. On top of that education services and tourism accounted for an increasing chunk of Australia’s trade with China.
Education services and tourism together now rank second to iron ore and ahead of coal in trade statistics. Clearly, any further slowdown in China’s already slowing economy, or interruption to normal traffic, will have a deleterious on Australia’s own economy.
For example, ANZ Research released an update saying “we have revised our preliminary estimate of the impact of the coronavirus and now expect it to take around 0.5 percentage points off Australia’s GDP in Q1. Along with a small hit from the bushfire impact, we estimate GDP will now fall 0.1 per cent quarter on quarter in Q1”.