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The Pandemic Stress Test

The COVID-19 crisis has exposed the underlying weaknesses in national economies, health systems, and even political ideologies. If there is any silver lining, it is that long-vilified experts and professionals have an opportunity to regain the public's trust.

CHICAGO – The coronavirus pandemic has taken the world by surprise and will now expose underlying economic weaknesses wherever they lie. But the crisis also reminds us that we live in a deeply interconnected world. If the pandemic has any silver lining, it is the possibility of a much-needed reset in public dialogue that focuses attention on the most vulnerable in society, on the need for global cooperation, and on the importance of professional leadership and expertise.

Apart from the direct impact on public health, a crisis of this magnitude can trigger at least two direct kinds of economic shock. The first is a shock to production, owing to disrupted global supply chains. Suspending the production of basic pharmaceutical chemicals in China disrupts the production of generic drugs in India, which in turn reduces drug shipments to the United States. The second shock is to demand: as people and governments take steps to slow the spread of the coronavirus, spending in restaurants, shopping malls, and tourist destinations collapses.

But there is also the potential for indirect aftershocks, such as the recent plunge in oil prices following Russia and Saudi Arabia’s failure to agree on coordinated output cuts. As these and other shocks propagate, already stressed small- and medium-size businesses could be forced to shut down, leading to layoffs, lost consumer confidence, and further reductions in consumption and aggregate demand.