Prolonged Pandemic Will Bring Deeper Economic Crisis

As the COVID-19 pandemic continues to spread, the risk of deeper, longer-running economic crisis intensifies. Across the US, elected officials have wavered between strict, science-based public health response measures and a rush to re-open local economies. The result is a less than thrilling, grossly inadequate relative increase in economic activity, and a catastrophic further spread of infection and death.

As of this writing, the Johns Hopkins University Coronavirus Resource Center reports 170,065 Americans have died from COVID-19. Public health experts warn that total COVID-related US deaths have already surpassed 200,000.

Politicians are notoriously impatient with economic hardship. Their fate largely rests on whether most people feel they are better off, economically. Even in authoritarian systems, dictators can find it impossible to hold onto power, if economic hardship becomes too much the norm for the people. This impatience has made it difficult to mount a coordinated national response, or for some states even to slow the spread at all. Some states are seeing mass death and deeper economic hardship that could have been avoided, had the public health response been stronger and more sustained.

It is already visible, in the lived experience of the country right now, that failure to adequately slow the spread, reduce infection rates, and save lives, will lead to more widespread and more long-term loss of income and opportunity.

If millions of people—let alone tens of millions—are forced out of their homes, with little or no income and few prospects, the United States will find itself in the midst of an economic catastrophe of unprecedented proportions. Those evicted people will not suddenly turn up somewhere with money to pay rent; the banking system will be at risk of a rapid collapse, and the humanitarian crisis, which will be far beyond anything seen in the 2008 crash, will preclude a bank-focused economic bailout.

It is not feasible for the United States, or for any country, to simply “live with” escalating rates of novel coronavirus infection and rapidly increasing rates of COVID-19 death. There is no path back to economic normalcy in such a scenario. The Devil May Care approach to pandemic economics has been tried, and it has been shown to be something like a national suicide pact.

The problem is that even in the rosiest scenario, the economic fallout is catastrophic. The World Bank and International Monetary Fund are projecting global economic losses more than double those seen during the Great Recession.

Political divisions could leave us stuck with a far worse and more prolonged pandemic emergency—as one state gets wise and tries to flatten the curve, another will be ripe for a terrible outbreak, and that will have ongoing ripple effects. While Trump and allies call for relatively modest “stimulus” and seek to reduce economic relief to workers and families, the Biden campaign is calling for “the largest mobilization of public investments in procurement, infrastructure and (research and development) since World War II”.

The US is one example, but there are others. Too much of the economic policy discussion, across the world, is focused on “growth” in total national “output” (GDP), and not on the much more immediate question of whether actual human beings can afford to live. The scale of the current crisis is such that using words like “stimulus” suggests a lack of understanding of what is at stake: The world is not facing a downturn due to a slowing of market activity; we are facing an unprecedented disruption from a deadly pandemic that is far from resolved.

Our situation is not static; we are not choosing between now and before. Everything is evolving, and the deepening spread of sickness and death is changing our baseline reality. What this means is: We need sufficient ongoing economic relief to get people (and local economies) through this disruption, or overwhelming amounts of future economic opportunity will be lost. A detailed analysis from Cambridge University found the global economy could lose $82 trillion in economic activity over just 5 years.

We are already going to have to build back from a situation in which many millions of people are now experiencing deprivation and hardship they were not experiencing before. Each new wave of infection hurts our chances of a cost-effective and humane recovery. We need to invest now, in a coordinated science-based response that starts with aggressively flattening the curve, reducing infections and saving lives, and then follows up with future-oriented resilience-building investment to build back better.

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