A Post-War Playbook for a Post-COVID Recovery
The pandemic’s impact on major economies has so far been four times worse than that of the 2008 global financial crisis, while entire sections of many developing economies have been wiped out. Any policy intervention should treat the fight against COVID-19 like a war and the hardest-hit economies like conflict zones.
ROME – The world is not yet sufficiently alarmed by how much the COVID-19 pandemic has ravaged the global economy. We track the daily numbers of infections and casualties. But we are oblivious to the job losses and lives upended, especially in the developing world, where the pandemic has barely elicited a public-health response.
The pandemic’s impact on major economies has so far been four times worse than that of the 2008 global financial crisis. In the second quarter of 2020, US GDP fell by 9.1% compared to the previous three months, dwarfing the 2% quarterly contraction in the same period in 2009. The eurozone economy fared even worse, shrinking by 11.8%. Many developing countries, meanwhile, have had entire sections of their economies wiped out, as if in a war. Planning, investing, and rebuilding therefore require a post-war mindset.
To be sure, G20 governments have spent a whopping $7.6 trillion (and counting) on fiscal stimulus, and leading central banks are pumping out money to revive the global economy. The US Federal Reserve is spending $2.3 trillion to support businesses and financial markets, far exceeding its 2008 rescue package of $700 billion. These measures are providing a lifeline for many, from laid-off restaurant workers to small-business owners, who now have access to unemployment insurance and social-security programs.