Up until the end of last year we were still worried about how we were going to contain COVID-19 – with all its variants – for good. Now we are well into getting vast portions of the global population vaccinated – in developing countries primarily. Fear and disbelief are still amongst our strongest affects, yet we are slowly acquiring the confidence that we desperately need. The question that has now come to bother us is therefore one of a very different kind.
For some time now, experts have been stating that this is the worst economical recession since the 1930s: “not quite as bad as the Great Depression”, but still much worse than the financial crisis of 2007-2008. Indeed, what we may now address as the ‘COVID-19 recession’ represents the worst economic crisis since the thirties, having surpassed in depth, and thus taken the place of, the infamous GFC – Global Financial Crisis.
“It’s probably not too surprising that when you tell the economy to shut down, the economy shuts down”, says Professor of Public Policy and Economics (UC, Berkeley), as well as Director of the Institute for Research on Labor and Employment, Jesse Rothstein. In terms of depth, he continues, we are definitely closer to the Great Depression; however, “what we don’t know yet is whether we’ll be able to bounce back quickly or whether we’ll linger on for a decade or…the way the Great Recession did”. That this is a “bounce and fade pattern of growth” we had also learnt from Professor Behravesh, as he explained that growth may fall, then bounce back up, and down again, then fade.
What we are now truly concerned with is no longer the question whether we will be able to contain the virus or not, but rather what lies ahead of us in terms of economical growth and, consequently, unemployment. Do we have the capability to bounce back, as some say, or are we actually going to have to keep our heads above water for another ten years or so? It is a very serious question indeed, and we do not have the answer to it as yet.
In the meantime, countries have already started reopening their activities; it is believed by many that this is a reckless decision. However, as Associate Professor of Economics (UC, Berkeley) Gabriel Zucman says: “There is no way to reopen the economy without controlling the outbreak of the virus…. This trade-off doesn’t really exist…. Controlling the outbreak…is what’s good for the economy, what will enable the economy to reopen and to recover quickly”. This means that, supposedly, albeit decisions to reopen while a virus is still circulating globally are always going to be risky, no country ever chooses to do this without knowing that things are somewhat under control. In this respect, deciding when to shut down and when to reopen is probably the biggest responsibility that any government has in a time of pandemic.
To continue along these lines then, people’s health and a country’s economics exist in a directly proportional ratio and are not to be regarded as opposites; on the contrary, it seems that one may not subsist without the other. If this is true, then in order to reopen as quickly and as strongly as possible, one has to find ways to “push out the frontier”: and in the current situation, that means investing in public health, as Professor Rothstein explains.
Unfortunately, the downsides of an economical recess are not to be attributed to lockdowns alone. People’s fear apparently plays a big role too: even when a country reopens, people may be reluctant to get to places because they do not feel safe and they want to avoid becoming infected (Sweden, for instance, chose not to go into a lockdown, yet its economy still suffered badly). This is surely one of the reasons – although perhaps not the most important one – why herd immunity is so crucial. Once again, we fall back to the point that without the proper financial aid towards the public health sector, things could never really move forward.
On a global scale, Europe, together with the “emerging world”, seems to have suffered one of the hardest hits. “Numbers are going up” in Brazil and India, but “they’re coming down” in many other parts of the world. Ironically enough, China seems not to have suffered a recession at all, while its neighbours South Korea and Taiwan have done “relatively well”. Although we saw a frightening increase in unemployment rates, these are now slowly decreasing in various countries, where ambitious plans are being presented. To mention one, the United States’ $22 trillion economy is being placed under considerable stress with brand-new, forward-looking spending plans, as announced recently by President Biden.
Our lives have changed, and, with them, our jobs. Our social division has even widened: those who were rich before the pandemic became even richer; it was the poorest who were affected the most. So many jobs are safe, owing to technology. The hi-tech sector and the digital world have experienced an actual market revolution, and so have pharmaceutical firms, whose profits have skyrocketed beyond imagination or comprehension. All customer-service related industries were brutally affected, starting from airlines to hospitality, catering and retail. The labor market was slashed, and most probably “forever changed”, as we are finding and experiencing new ways of working, producing, consuming, living. One solution to redistribute wealth equally may be the one proposed by Professor Zucman: “taxing excess profit”. This means taxing the fantastically disproportioned profits that firms such as Amazon or Pfizer, or the manufacturers of ventilators, gloves, masks and medical equipment, may have made; this is a practice that we are apparently well acquainted with, as it was applied many times in the course of our history, especially during wars.
The odds are therefore confusing: hopeful in some parts, discouraging in others. We are still left with the question: where do we go from here? Well, we can only go in one direction, and that is hopefully out of this pandemic and out of this new – unexpected? – recession. How long it will take, we do not know. We may only try our best and hope that it works, never forgetting “the importance of working together”, because we are “much stronger united than divided”; or, as Dean of the Goldman School of Public Policy Henry Brady puts it, recognizing the fact that “in this society we really have to think about everybody, and sometimes get beyond what some of our prejudices might be, one way or the other, because we really are all in this together.”
Written by Edoardo Cippitelli
Edoardo Cippitelli is a columnist at DecipherGrey.