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The Four Rules of Pandemic Economics

A new playbook

Growth evangelists are right when they state that severe lockdowns produce a parallel human misery of unemployment, looming bankruptcies, and extreme financial anguish. Yet, opening the economy too soon may produce mass death.

We need a new playbook for pandemic economics to govern our short-term reaction to the health crises.

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IDEA EXTRACTED FROM:

The Four Rules of Pandemic Economics

The Four Rules of Pandemic Economics

https://www.theatlantic.com/ideas/archive/2020/04/new-laws-pandemic-economics/609265/

theatlantic.com

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Key Ideas

A new playbook

Growth evangelists are right when they state that severe lockdowns produce a parallel human misery of unemployment, looming bankruptcies, and extreme financial anguish. Yet, opening the economy too soon may produce mass death.

We need a new playbook for pandemic economics to govern our short-term reaction to the health crises.

The false choice

“Save the economy or save lives” is a false choice.
A group of economists published a paper on the 1918 flu outbreak. Their findings revealed:

  • Early and aggressive interventions saved lives and triggered a faster rebound, such as job growth and banking assets.
  • Without a healthy population, there can be no healthy economy.

The hope is for a deep, short recession, to show that people have shut the economy down to limit the spread of disease.

A living wage

Asking millions of able-bodied workers to stop working creates a crisis of unemployment.

During this time, the U.S. is expanding unemployment benefits and are also delaying tax filing. In northern-European countries, the government is directly paying businesses to maintain their payrolls to avoid mass layoffs and furloughs.

A time machine

Many small-and-medium-sized companies face extinction during the pandemic shutdown. While their income is gone, they still owe wages and rent to landlords. 

This could lead to cascading bankruptcies. A time machine is needed, where grants, cheap loans, and debt relief would allow companies to shift their expenses to the future.

Science

A three-or four-month freeze is one thing, a full year of isolation and economic inactivity is disastrous.

Our lack of knowledge about the virus is our greatest weakness. More tests can reveal more information that should lead to defeating the disease as fast as possible. There is no such thing as a normal economy until we contain the virus.

SIMILAR ARTICLES & IDEAS:

Restarting the economy
Restarting the economy

The economy shut down almost overnight. But reopening it will not happen the same way. It may take months and possibly years to fully open, even under the most optimistic estimates.

Implementation is complicated

The proposed three-phase plan will allow many businesses to open in the first phase.

Schools and daycare centers can open in the next phase. But that means millions of working parents could be asked to return to their jobs before they have someone to take care of their children.

Partial reopening

In the early phases of reopening, businesses could be required to operate at a reduced capacity.

Offices might operate in rotating shifts, but other businesses could have a harder time. Restaurants may have tight profit margins even in better times. Operating at half capacity may mean working at a loss.

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Getting the economy back on track

While fighting the new virus economy worldwide has seen a huge growth in unemployment. Therefore, measures are to be taken and this as soon as possible. Maybe the most significant factor into getti...

Immunity vs. privacy

Getting the worldwide economy back on track requires workforce. Providing this workforce requires healthy individuals able to work hard enough to help things get better. Governments are now trying out ways to officially have people's health checked: by providing different types of certificates, for instance. The major concern, however, is in regards to everybody's privacy: while these certificates do prove our immunity, research institutions are working on developing tools that can also protect our data.

Certifying immunity and its advantages

It might be that only by certifying workers' immunity, states can help their economy know growth again. However, in order to make the people who get certified take up positions that require direct contact with customers, there will be a need for encouragement from employers' side, such as pay raises. As this is maybe the only real option, countries worldwide are going to have to apply the method.

Economic Free Fall
Economic Free Fall

The current pandemic has led to an economic free fall which is unparalleled in history. In the US alone, the unemployment rate plummeted at such a speed that more than 10 million have claimed unemp...

The Lockdown: U.S.

The Pandemic Lockdown in the U.S. directly affects the livelihood of a shocking 80% of American workers who work in retail, real estate, education, entertainment and restaurants.
Many of these offices and stores are not going to open after that.

The Lockdown: Europe And Asia
  • In Europe, The north of Italy, which is the main tourist hub, is seeing a collapse in economic activity, along with Germany, which is falling at a steeper rate than the United States. Even countries like Japan, which are not hit that hard, are about to witness an apocalyptic fall.
  • In India, with the abrupt 21 days shutdown, which was recently extended by another 19 days, only a small percentage of the 1.3 billion population is covered by any social security, and millions of daily wage or migrant workers, have no hope, future or place to stay.

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Understanding recessions are vital
Understanding recessions are vital

Recessions are part of the fabric of a dynamic economy. The average investor fears recessions because they mean lower home prices, lower stock prices, and less or no work.

Several things ca...

Naming a recession

Recessions are really "depressions," but the term "depression" seems too terrifying. After the Great Depression, economists began to use the word "recession" instead.

The 2007-09 recession involved a financial crisis, high unemployment, and falling prices, and was named the Great Recession. Our current recession is still without a name.

An official recession

A standard measurement for a recession is two-quarters of consecutive GDP contraction. But the official arbiter of recessions and recoveries, the Business Cycle Dating Committee of the National Bureau of Economic Research (NBER), prefers domestic production and employment indicators instead. Other signs of the recession include:

  • Declines in real (inflation adjusted) manufacturing, wholesale-retail trade sales, and industrial production.
  • Extended declines in production, employment, real income, and other indicators.

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WWI and women working
WWI and women working

Over a century ago, women in the UK weren't allowed to own property, open a bank account, or work in a legal or civil service job.

When WW1 broke out in 1914, over a million women j...

WWII and the NHS

The National Health Service (NHS) was established in 1948 and is funded from general taxation. Before the NHS, people were expected to pay the hospital or a private doctor if they needed to use medical services.

WWII necessitated government-supported medical services to become freely available for everyone.

More people go to university

Recessions and the lack of jobs that ensues can lead more people to pursue education. This progress also affects subsequent generations.

A more educated workforce tends to make an economy more productive and profitable. The knock-on effects include society's health, lower crime rates, voting, and volunteering.

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The influenza pandemic of 1918

It is often referred to incorrectly as the “Spanish flu.” Between 50 and 100 million people are thought to have died, representing as much as 5% of the world’s population. Half a billion people...

The origins of the "Spanish" flu

The so-called Spanish flu did not originate in Spain. The geographic origin of the flu is debated to this day, though hypotheses have suggested East Asia, Europe, and even Kansas.
The influenza pandemic from 1918 got this name most likely because of the WWI context: The major countries involved in the war were keen to avoid encouraging their enemies, so reports of the extent of the flu were suppressed in Germany, Austria, France, the United Kingdom and the U.S. By contrast, neutral Spain had no need to keep the flu under wraps. That created the false impression that Spain was bearing the brunt of the disease.

The end of mankind

The 1918 flu spread rapidly, killing 25 million people in just the first six months. This led some to fear the end of mankind and that the whole thing was caused by a form of super-virus.
Recent studies show that the high death rate can be attributed to crowding in military camps and urban environments, as well as poor nutrition and sanitation, which suffered during wartime.

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Changes you may see

If and when you return to your office after the pandemic, you'll probably notice some changes.

  • The doors of the building may open automatically, so you don't have to touch the handl...
Working from home

Before the pandemic, only 4 percent of the US workforce worked from home at least half the time. However, the trend of working from home had been gaining momentum for years.

It is estimated that within a couple of years, 30% of people will work from home multiple days per week.

Continued remote work
  • Before the pandemic, a lot of company management and leaders were skeptical regarding remote work. But the skepticism will go away because companies recognize that remote work does work.
  • The economic impact of the pandemic will likely force employers to cut costs. They may reduce their rent by letting workers work from home instead of layoffs.
  • Employers had to spend money on new technology and equipment to work from home - a departure from the norm.
  • Employees themselves are also spending more money to create better home offices.

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Two of the biggest innovations
Two of the biggest innovations

Two of the biggest innovations of modern times are cars and airplanes. At first, every new invention looks like a toy. It takes decades for people to realise the potential of it.

Innovation is driven by incentives

There are three types of incentives:

  1. "If I don't figure this out, I might get fired." It will get you moving.
  2. "If I figure this out, I might help people and make a lot of money." It will produce creativity.
  3. "If we don't figure this out now, our very existence is threatened." Militaries deal with this, and it will fuel the most incredible problem-solving and innovation in a short time.

During World War II, there was a burst of scientific progress that took place. The government was in effect saying that if a discovery had any possible war value, then it had to be developed and put in use, regardless of the expense.

The conditions for big innovations to happen

The biggest innovations seldom happen when everyone's happy or safe. They happen when people are a little panicked and worried, and when they have to act quickly.

In 1932, the stock market fell by 89%. It was an economic disaster where almost a quarter of Americans were out of work. However, the 1930s was also the most productive and technologically progressive decade in history. Economist Alex Field writes that in 1941, the U.S. economy produced almost 40 percent more output than it had in 1929, with little increase in labor hours or private-sector capital input.

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Seven universal plots
Seven universal plots

There are only seven plots that are so fundamental to the way we tell stories that every storyteller uses one of them: Overcoming Monsters, Rags to Riches, The Quest, Voyage and Return Rebirth,...

Economic history

Looking for a few universal plot patterns reveals things fundamental to how all people think, which are likely to be repeated in the future and relevant to your own situation. This idea also applies to how the economy works.

Economic history can seem complicated because it's part of politics, psychology, sociology, criminology, biology, military, technology, education, finance, etc. But within all that complexity is a lot of similarities.

The lens to look through
  • People seem to want the same economic things – security, power, admiration, fulfillment.
  • They tend to use the same tactics to acquire those things - work, risk, incentives, persuasion, theft, control.
  • They tend to fall for the same flaws pursuing those things - overconfidence, pessimism, underestimating how fast things can change, etc.

Although economic history may seem complicated, there are only a small number of broad story plots throughout the world and throughout time.

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