Author: Carmen Reinhart, Vincent Reinhart
Affiliation: Harvard Kennedy School, Managing Director Chief Economist and Macro Strategist in BNY Mellon, USA.
Organization/Publisher: Foreign Affairs
Date/Place: September-October 2020/USA
Type of Literature: Article
Word Count: 3837
Keywords: COVID19, Pandemic Depression, US, Global Financial Crisis
Brief:
The article discusses the “Pandemic Depression” that has ascended with COVID-19 and the mitigation efforts by governments around the world in the form of lockdowns and travel bans. The current global economic crisis has grave consequences because Coronavirus does not respect national borders, and this has put a larger proportion of the global community in recession than at any other time since the Great Depression. The author explains the uncertainty of the environment and pinpoints three indicators that the recovery process is slow. 1) Due to border closures and lockdowns, global demand for goods has contracted, hitting hardest the export-dependent economies whose exports had already decreased by half from 2008-2018 and have decreased more recently due to the US-Chinese trade war that US President Donald Trump launched in the middle of 2018. 2) The mitigation efforts increased unemployment due to which some in the labor force will exit permanently, and some will lose skills and miss out on professional development opportunities during the long spell of unemployment, making them less attractive to potential employers. 3) The regressive nature of the pandemic within and across the countries, and the ongoing economic dislocations are falling far more heavily on those with lower incomes. Such people generally do not have the ability to work remotely or have the resources to tide themselves over when not working. The author appreciates the stimulus packages announced by governments to support the people and businesses; but according to data of the previous pandemics, the estimated time for recovery is almost eight years. The author concludes that there is no one-size-fits-all solution to these problems, but one prudent course of action is to prevent the economic conditions that produced these pressures from worsening. The officials need to press on with fiscal and monetary stimulus and they must refrain from confusing a rebound for a recovery.
By: Razia Wadood, CIGA Senior Research Associate
