A recent study found that nearly 150 million people have lost their jobs, creating a monstrous hole in the global economy. The virus has made an impact on every aspect of this economy, from global supply chains to wages and productivity. Researchers are now warning that things will only go from bad to worse if some key adjustments to our lifestyles aren’t made.
The Economic Effects Of The Coronavirus Pandemic
According to global economic data from the first quarter of 2020, there was a $3.8 trillion reduction in consumption in the US, which accounts for 4.2% of global economic output, or the equivalent of Germany’s entire GDP.
China – an important global supplier and the origin point of the novel coronavirus – was hit the hardest, while the US currently holds the highest death count due to its failure to take measures to halt the spread.
Researchers warned that the economic impacts of the virus are “poised to grow as the pandemic persists” and fewer jobs will be available in the future. This also applies to places that have managed to successfully halt COVID-19’s spread, such as New Zealand.
Small Changes Simply Won’t Do
Although the coronavirus is currently in the crisis spotlight, its impact is, in large part, a product of our economic structure, much like climate change. One may argue that both of them are “natural” and “environmental” problems. However, they are also socially driven.
Just as climate change can’t be explained away as the natural phenomenon of gases absorbing heat, the destruction of the pandemic cannot be blamed on the virus alone. To manage its effects, we need to be able to understand human behavior and its wider economic impact, just as climate change requires us to see how our social behaviors drive it.
Both problems can be tackled head-on if we lessen our non-essential activities. For climate change, less stuff being made equals less energy spent, which means fewer greenhouse gases will be produced. For the coronavirus, the less often people mix, the less scope the virus has to spread. Social distancing can help greatly when used in tandem with other control strategies such as isolation and contact tracing (where an infected individual and their contacts are identified and isolated).
The Impact Of COVID-19 On The Environment
With most economic activity, especially factory production, hitting the brakes, 2020 has seen a record-breaking drop in air pollution and greenhouse gas emissions, according to a recent report. The study also found that COVID-19’s effects were much bigger than the 2008 global financial crisis.
The researchers explained that “None of the attempts by any government or any international agreement in the 32-year history of intergovernmental climate policy has had such a dramatic mitigation effect.” About 2.5 gigatonnes of greenhouse gas emissions – roughly 4.2% of its total – dropped.
However, all this may prove to be temporary, with people appearing determined to go back to business-as-usual by any means, making way for “retaliatory pollution.” Researchers said that this record-breaking drop in emissions still couldn’t reduce annual warming to below 1.5 degrees Celsius, even if it happened every year until 2050.
Still, this economic shutdown can also be an opportunity to stimulate the development of clean energy technologies and reduce carbon-intensive travel by investing in teleworking, teleconferences, and other tech advancements.
There are four highly likely possible outcomes, depending on the responses to this pandemic, which are: State Socialism, State Capitalism, Mutual Aid, and Barbarism. These four outcomes are based on two driving forces: value and centralization. The former, in an economic context, refers to the economy’s guiding principle, while the latter concerns whether nations respond to the crisis in a centralized or decentralized manner.
State Socialism involves a centralized response with the protection of life as the guiding economic principle. All basic necessities, such as housing, food, and healthcare become nationalized to ensure they are no longer subject to market fluctuations. Payment to workers is no longer based on the exchange value they create but on the usefulness of their job.
However, if this approach is mishandled, then the state may fall into authoritarianism, which is undesirable. Conversely, doing this correctly may be the best way to defeat the COVID-19 outbreak.
State Capitalism focuses on exchange value as the guiding economic principle, but the state must intervene in crises like the pandemic, thus requiring a centralized response. Since many workers are either ill or fearing for their lives, extending credits and making direct payments to businesses may be the best option for this approach.
However, this strategy may only work in the short-term as the balance between keeping the economy afloat and minimizing casualties becomes increasingly hard as time goes by, forcing the authorities to take more ‘draconian’ measures to keep the state intact.
Barbarism prioritizes exchange value but the response to crises is decentralized, making this one the bleakest scenario on the table. Since there is no structured and centralized response, more and more businesses will fail, workers will starve, and hospitals will be overwhelmed.
This approach may be taken by accident or intentionally at the peak of the pandemic. Regardless, this path will lead to a collapsed state and the destruction of community welfare systems.
Mutual Aid, much like State Socialism, prioritizes the protection of life as the guiding principle of the economy, but the response takes place at a grassroots level (individuals and small communities), meaning it is decentralized.
This approach means that small groups won’t be able to effectively organize their needed resources to increase healthcare capacity. However, building community support networks that protect the vulnerable and police isolation rules means that the transmission of the virus is very likely to be halted.
Depending on the circumstances, Mutual Aid can be seen as a failure of the government to centralize their response or as an example of human compassion rising up in the face of an overwhelming crisis.