PERSPECTIVES: The New Normal 2.0
THE CONTEXT
The economic sudden stops associated with the COVID-19 health crisis have devastated livelihoods all over the world, with a particularly huge hit for the more vulnerable segments of the population.
Starting in China and neighboring countries, and then spreading to Europe and the United States, production and consumption were disrupted in a manner previously familiar only to failed states and communities hit hard by a huge natural disaster. Within just a few days, household incomes and corporate revenues collapsed in an unprecedented manner, unemployment in the more f lexible labor market economies surged in record fashion, too many were reduced to seeking assistance from food shelters, bankruptcies started multiplying, and a growing number of companies sought state emergency bailouts.
Responding to a cascading economic catastrophe that threatened a global depression, governments scrambled and threw all they could think of to contain economic paralysis and human tragedies. Simultaneously, central banks ventured far and deep into markets, intervening in a manner that quickly exceeded what they did during the global financial crisis. The scale and scope of the intervention was indicative of the extent to which the world’s most powerful central banks worried about the risk of a financial crisis compounding the economic breakdowns.
Both the economic damage and the emergency policy response it engendered quickly made the global financial crisis seem mild in retrospect—and, I suspect, no one who lived through this crisis would call it that. Within just a few weeks, unemployment in the United States rose to twice the level experienced in the Great Recession that followed the 2008 crisis. Chartist had to rescale y-axis after y-axis as readings on the economy—from gross domestic product contractions, the unemployment rate, and weekly job losses to the collapse in retail sales and both manufacturing and services—came
in literally off the (existing) charts.
Underlying all this was the sudden emergence of three complex contradictions for which there was no immediate resolution: between what the first stage of the public health response dictated (social distancing, separation, and isolation) and what the economy and society are wired for (the exact opposite); between country responses (putting national interests first with little regard to cross-border spillovers and spillbacks) and what a global health emergency requires (coordinated collective action); and between individual interests and collective responsibilities.