"This is a new kind of economic policymaking."
"This is a new kind of economic policymaking."
The global war against the coronavirus (COVID-19) has created a monumental dilemma for the economic policymakers of the countries infected by the virus. The dilemma stems from the fact that the Covid-19 crisis has two elements: a medical/health element and an economic element. The medical/health element is the pandemic that is raging across over 100 countries on five continents, leaving over 700,000 infection cases and close to 50,000 deaths in its wake. The economic element is the virtual shutdown of the world economy, with thousands of business enterprises having to stop operating and millions of workers having lost their jobs.
It is a terrible dilemma for economic policymakers. If they accord priority to the COVID-19 pandemic and allow their national economies to progressively slide into severe recession, they will be accused of being insensitive to the dire situations of millions of families with jobless breadwinners and the hundreds of thousands of small and medium-size enterprises that are going out of business. On the other hand, if the focus of their thinking is preventing the economy from going into a prolonged recession, allocating more financial resources to relief measures for jobless workers and shuttered businesses rather than to the things desperately needed by the hospitals and health workers—especially PPE (personal protective equipment), testing facilities, ICU (intensive care unit) beds and ventilators—the economic policymakers will be charged with pursuing the wrong priority and of being uncaring about the wellbeing of the COVID-19-infected and the medial personnel and the plight of the national health care system.
The dilemma has been intensified by an increasingly contentious debate between the medical scientists, who believe that it is pointless to try and restart an economy while the COVID-19 storm is still raging, and the politicians, who believe that the battle against the coronavirus cannot be allowed to bring down an entire national economy. The politicians, with their eyes on the next election, argue that it is possible to allow workers to go back to their workplaces even while the infection and death rates are growing in number. The medical scientists counter that this is not possible; the scrapping of the stay-at-home and social distancing rules will, they say, only negate whatever progress has been made toward slowing the spread of COVID-19. The economic revival will come to a halt and necessitate a second round of lockdowns, they warn.
Are the medical scientists right? The world’s No. 1 politician—the president of the world’s most powerful country—doesn’t think so. And can an economy be restarted even if a pandemic is still raging? Donald Trump thinks it can.
Around two weeks ago, in the course of one of his White House press briefings, Mr. Trump told the American people (1) that the US economy was not built to be shut down and (2) that as a result of the “great job” that his administration had done, the time had come to restart the US economy. He set Easter as the timeline for the beginning of the restart: “It will be wonderful to see the churches packed on Easter Sunday.”
Predictably, the medical scientists who were standing behind the US President as he spoke, were stunned by Mr. Trump’s pronouncements and at once proceeded to politely contradict him. They said that restarting the economy would involve putting an end to social distancing, which the experiences of Japan, South Korea and Hong Kong had shown to be one of the most effective ways of stopping the spread of COVID-19. They argued that discarding social distancing before it had produced the much-sought-after results would be akin to prematurely taking one’s foot off the vehicle accelerator and, in the end, would only provoke a second wave of infections.
It is a terrible dilemma that Donald Trump and his economic policymakers are facing. On the one hand, they see more and more businesses—small and large—stopping operations, causing more and more workers to lose their jobs. And, on the other hand, they see hundreds of thousands of Americans being infected by COVID-19, with a rapidly rising number succumbing every day to this latest manifestation of the family of corona viruses. There is no precedent for the present situation in the history of US economic policymaking.
Thus far, Donald Trump is the only head of government who has resolved the economic-versus-health (or dollars vs deaths) dilemma in favor of economics. All the other national chief executives have opted to follow the lead of the medical scientists, who believe that the recovery of an economy is not possible while a pandemic continues to rage.
This is a new kind of economic policymaking. Today’s economic managers must be hoping that they never have to undertake it again during the rest of their lifetimes.