A toilet paper shortage. Disneyland closed. Travel from Europe partially banned. Empty streets. One thing is clear: the COVID-19 pandemic is unprecedented in the modern world. But the disease, which has been labeled a “public health emergency of international concern" by the World Health Organization, is more than just a health concern — it poses a real threat to the world economy.
If you swiped to the stocks list on your smartphone in the past few days, you probably saw the ominous sea of red squiggly lines. Last Monday alone, stocks fell 7% in a few hours, but overall they are 20% down from the last peak. At the time of writing, there was a hopeful but practically insignificant 2% rise in the market after the Federal Reserve declared its plan to stabilize the economy, but this in no way represents a total solution to the situation.
Unlike the 2008 recession, or even the Great Depression, a potential corona-induced crisis would be more than just the result of overspeculation, irresponsible behavior and risky loans. Even though economists agree that the high market earlier this year was a bubble, likely caused by excess liquidity, there is also a component of the recession that is far more tangible than stocks and bonds.
As flights and events and schools are canceled, people lose their jobs, which creates a snowball effect on the economy.
An article by the New York Times illustrates the effect of the virus on small businesses and workers. The combination of government-forced quarantines, popular fear and the loss of jobs all decreases consumer demand, which in turn causes more business to close.
Furthermore, this doesn't affect everyone equally. The article explains that, "the workers who are feeling the effects of the pullback first are the ones least able to afford it: low-wage, hourly employees, many of whom aren’t paid if they miss work."
The effect of this looming recession on students is of course unclear, but we can gain insight from the aftermath of the 2008 recession. In the years after the Great Recession, student debt grew by 80%, according to Forbes. Today, student debt still amounts to over $1.5 trillion. Although the issue of student debt is multifaceted and can be attributed to both political, private and personal actions, there is a consensus among economists that the 2008 crisis exacerbated the problem.
So what’s the solution? The unfortunate reality seems to be that there is no catch-all answer.
On one hand, the majority of countries, including China, Italy and the U.S., have engaged in a policy of containment. Large gatherings are banned, flights are canceled and people are encouraged to stay home. That’s why you’re reading this from your bedroom instead of leafing through a copy of the Loyolan at the Lair. But in taking these measures, we have to acknowledge that no matter how much money later injects into the economy, there will be a cost.
On the other hand, UK prime minister Boris Johnson gave a speech on Thursday stating that for the time being, Britain will not shut down events or schools, since “science” demonstrates that the cost of doing so would be greater than the advantage. Instead, the British government is considering a policy of herd immunity, which hopes to reduce mortality in high-risk groups by having enough low-risk individuals become infected, and thus create immunity among a sufficiently large portion of the population. However, even he acknowledged that it is likely that “many more families are going to lose loved ones before their time.”
Perhaps the best option, then, is to consider this singular outbreak in a wider scope. Currently, roughly 80 people have died of COVID-19 in the United States so far. In comparison, almost 50,000 Americans die from suicide each year. About 70,000 die from causes related to drug overdose. Up to 365,000 die from causes related to obesity according to the most recent statistic, which is from 2004. The coronavirus is different from all of these in that it is sudden, it is contagious, so many believe that getting infected with COVID-19 is out of your control, whereas some of these other conditions might not be — but is it so different that it merits tanking the economy?
In any crisis there will be compromises to make. We must acknowledge that a blow to the economy is a real compromise that will affect both the short-term and long-term futures of countless Americans.
This is the opinion of Veronica Backer-Peral, a sophomore film and television production, history and computer science triple major from Pasadena, California. Tweet comments @LALoyolan or email email@example.com.