The COVID-19 pandemic has done what many people doubted would ever be possible. The national lockdowns enforced by governments across the globe has meant that the world economy has almost completely ground to a halt. While it is easy to argue that the lockdown has been necessary in our efforts to stop the spread of the virus in order to save lives, the true cost of stopping the economy will only likely be understood after the virus has been eradicated.
Difficulties for Small Businesses
The effect of the lockdown on many small businesses has been nothing short of catastrophic. With their revenue streams all but cut off, many small businesses have been unable to keep up with rent and other overheads. Unfortunately, this has spelt a death knell for many of our favorite bars, boutique shops and gyms that have been presented with no choice other than shut down for good.
Some estimates predict that the coronavirus and the lockdown imposed to get it under control will cost the world economy somewhere in the region of $4.1 trillion. This figure equates to around 5% of global gross domestic product (GDP). Other respected sources have predicted that the world economy could shrink by around 3% in 2020 alone. This figure is nothing to sniff at given that world GDP only fell by 0.1% at the height of the last global economic crisis in 2007. Time will tell whether we will see growth bounce back in a similar way after the pandemic has ended.
One of the most concerning impacts of the pandemic so far has been the fact that great swathes of the global population have been made redundant and have been forced to apply for unemployment benefits. Nowhere has the impact of mass layoffs been more keenly felt than in the U.S. As of May 14, the U.S. Labor Department had reported that 36.5 million Americans had filed for unemployment since the start of the pandemic, a number which is rising on a weekly basis. When you compare this to the number of people who were unemployed at the height of the Great Depression (15 million), the toll that this pandemic is likely to take on the job market is brought into sharp relief.
Although many of us harbor hopes that the pandemic may lead to a rebalancing of a politico-economic system that seems geared toward creating high levels of inequality, the reality may not bear this optimism out. It is far more likely that governments will look to get their economies back on track by engaging in long periods of austerity. This is likely to lead to cuts in funding for public services like health and education that could lead to a marked reduction in our standard of living.
The pandemic has thrown up a moral dilemma: should we look to save lives now or should we look to protect the future of our economy? Only time will tell whether the course of action on which we have embarked was the right one.