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Toward a Coherent Economic Strategy for COVID-19

Although the COVID-19 crisis has been widely compared to the 2008 market collapse, a better analogy is the terrorist attacks of September 11, 2001. After that tragedy, the US government identified the root cause of the economic fallout and devised an effective strategy to address it.

STANFORD – The United States needs a clearer economic strategy to deal with the COVID-19 pandemic. While the crisis is unique in many ways, the economic-policy approach following the terrorist attacks of September 11, 2001, seems to be the most useful historical analogue.

Like today, that episode involved a sudden, surprise attack that threatened the entire economy, and thus required a rapid response. The immediate task was to sever al-Qaeda and its collaborators’ sources of financing without disrupting financial flows, economic activity, and the reciprocal relationships needed for economic growth. In the end, this strategy proved successful. The economy did not tank, and the 9/11 Commission later awarded the economic-policy response its only “A” grade.

Having a strategy is essential. But equally important is that the strategy accurately describe the economic problem at hand. It then must offer specific short- and long-term policies to confront that problem, and it must explain clearly how those measures will achieve their intended ends. Finally, the strategy also must include a plan to guide implementation by the relevant departments of government, the private sector, and US allies around the world.

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