By: Neha Vazarkar
The coronavirus pandemic, which has now spread to over 185 countries and has more than 8 million cases, has hit the world hard and has many analyzing its costs on the economy. The United States economy is struggling to recover from months of being almost shut down and dealing with the effects of the delayed government response to the virus. Many stores have taken a turn for the worse and have been forced to close due to financial struggles, and as the pandemic continues, more stores could go “in the red.” As states have begun to reopen in the past month, many expect the economy to improve. And while signs of improvement are definitely visible there is still a long way to go. New spikes in cases threaten to bring about a second wave that could lengthen the negative impacts of COVID-19 on the economy even further.
To get a good understanding of the status of the economy, it is important to understand what has already happened due to the coronavirus. The number of unemployed people in the United States has jumped, ending the 11-year “bull economy” that began following the 2008 financial crisis. Total unemployment claims have hit over 45 million since March, with 1.5 million people applying in the week of June 14 – 21. While unemployment percentages have decreased slightly from April to May, the potential of a second wave has reinstated fears that the decrease is not permanent. According to the International Monetary Fund (IMF), the global economy is expected to shrink by 3% this year, signaling a potential recession. However, if the coronavirus situation significantly improves in the second half of the year, the IMF expects that global growth in 2021 could be 5.8% as things reopen and the economy strengthens.
One of the largest impacts of the coronavirus is the shift in mentality on globalization. For decades, countries have begun to trade more and more with each other, becoming more reliant on other nations to supply necessities. Leaders have historically felt that if there had been an issue in their country, they could always count on other countries to supply them with the goods that they needed. The coronavirus changed that viewpoint drastically. Overnight, countries were left to fend for themselves in a world in which countries saved supplies for their own people. Especially in the United States, hospitals struggled with getting enough masks and ventilators, worsening the situation. The world has clearly learned that it is not always possible to depend on the world as a solution to internal problems.
As for when the economy will be able to fully recover, there is nothing but uncertainty. The chairman of the Federal Reserve, Jerome Powell stated that he believed the economy would only be able to make a full recovery when herd immunity was established either through enough people getting infected or through a vaccine. Based on the number of OpenTable bookings since May, it is clear that while states are opening up, people are still unsure of eating and going outside, and this uncertainty could last for months. Many families have been victims of unemployment and large hospital bills as a result of the virus, and as a result, might limit their spending to regain a “cash cushion” to fall back on if there are more financial struggles. It is important to realize that eventually, people will learn to live with the virus in some way if it continues, and life will return to normal as the virus “slips into the background.” The economy is expected to recover much faster than during the 2008 financial crisis because there is no fundamental issue with the economy but rather a health issue that has prevented the economy from functioning regularly.
Overall, the coronavirus has taught many lessons about the economy to world leaders and regular people, from learning to create better and more efficient supply chains to knowing when and how to shut down the economy to save lives. Hopefully, as a result of the lessons learned, we will be much more prepared to face a crisis like this in the future.
The Academy Journal for Global Affairs 