The global shutdown brought by the coronavirus pandemic has sent the world’s economy to a striking low. With people fearing for their jobs, companies shut down and entire countries in lockdown, the global economy is being affected gravely.
There is an article by the New York Times explaining a simple idea of how capitalism works and how it is in danger these days. First of all, one person’s spending is another person’s income. And without leaving our homes to prevent the spread of one virus, we cannot consume. That is a small but giant realization that the economy is about to take a big hit.
Despite these assumptions, this economic pandemic is something the modern world has never experienced before. Therefore, we do not know the extent to which it could lead and the consequences it may have.
According to a recent poll made by the World Economic Forum, concerns about employment and businesses have rapidly increased since February, particularly in Italy, France, the UK and the US. In these countries, economic concerns appear to have risen more steeply than concerns relating to the level of threat posed by the virus.
It is clear that the public sees coronavirus as a greater threat to the economy than to their health. Furthermore, economic rescue measures announced by governments do not appear to be calming concern.
The affected areas
In the next weeks with self-quarantines, there are main areas that are at major risk:
Transportation, which includes things like plane tickets, train, bus, and metro fares. People travelling for business or pleasure, to go to school or simply move from one place to another. This category does not include the purchase of personal automobiles.
Another area is entertainment, with billions of dollars being lost due to the large amount of cancelled sport events, concerts, festivals, etc. Movie theatres, gyms, and even casinos that are shutting down due to the new shelter-in-place recommendations.
And the market with the largest payrolls is food and accommodation, meaning restaurants and bars, hotels and other lodging. People are not eating out, going to bars or meetings and they are not allowed to travel due to the risk it poses to spreading the virus.
The five sectors experiencing the most direct and immediate collapse in demand or facing government-mandated shutdowns because of coronavirus are air transportation; performing arts and sports; gambling and recreation; hotels and other lodging; and restaurants and bars. Together they accounted for almost 10% of the total employee compensation in America (2008).
These industries where workers will not have enough compensations to fulfil their normal obligations to themselves, their families, and their countries. Simply the potential effects that empty airplanes and hotel rooms, millions of waiters, chefs and flight attendants, are devastating.
Although there are things with an offsetting effect such as more groceries being bought, shopping online and more investments on medicines and healthcare services, these things are hardly going to compensate for the huge void other sectors are leaving and the ripple effect this has on the banking system, on debt and unemployment.
What can be done to help?
Even though the overlook is grim, there are things that can help the global economy get back on its feet. First of all, contrary to the benefits of self-isolation to prevent the spread of the virus, the best thing that can be done for the economy is staying together. This means that even tough the borders of many countries are closed for health reasons; they should work together in collaboration to get out of the massive recession the world is facing.
First of all, the priority now needs to be the immediate needs of pandemic management, with governments collaborating to accelerate the development of vaccines, to produce urgently needed medical equipment and other supplies, and to coordinate restrictions on movement and the treatment of foreign nationals.
But the world also needs a coordinated economic response. Vulnerable governments that risk buckling under the strain of the pandemic require financial support to prevent the global health crisis from also becoming a financial crisis.
Apart from a coordinated response from international organizations, we need people to start consuming and supporting their local economy. Since people with small local businesses are likely to suffer almost immediately from the lack of customers, we need to help in any way we can.
For example, many businesses are implementing home deliveries of products like groceries, medicines and even things like fashion items. Let’s support local businesses and store-owners, instead of going shopping to the large supermarket chains, go to the local market, order your groceries online with your neighbor, give your freelancer friend some work, and with these small actions, we can all work together from every level to soften the economic blow that the coronavirus health emergency is bringing on us.