Menu Close

The shape of the recovery: Those who tell don’t know

Dean Baker

There have been a number of pieces in major news outlets telling us what the recovery will look like from this recess- ion. Most have been pretty negative.

The important thing we should know about these forecasts is that the people making these forecasts don’t have a clue what they are talking about.

The shape of recovery will depend first and foremost on the extent to which the coronavirus is contained or is treatable, areas in which most of our prognosticators have zero expertise. I can think of a scenario in which we have a very robust recovery.

Suppose that in three months we have developed treatments to the point that the disease is not much more deadly than the standard flu. In that case, we would look to restart the economy while trying to protect the most vulnerable segments of the population.

Recession (Mike Cohen, 22 July 2018, Flickr cc)

If this happens, there will be lots of people with money to spend (many are getting full pay cheques, plus a lump sum from the government). They have gone three months without going to a restaurant, seeing a movie, or any other form of recreation. There will also be lots of pent-up demand for houses, cars and many other things. This could lead to quite a burst of spending that could keep the economy going strong for some time. (Look for some inflation, insofar as a poorly designed economic survival package didn’t focus on keep- ing workers tied to employers, so that businesses could restart quickly without having to hire and train workers.)

Will this happen? Ask those who know something about the virus, not me.

The point is that the course of the recovery will depend on what happens with the progress in containing and/or treating the coronavirus, and anyone who cannot speak authoritatively on that point has no clue what the recovery will look like.

Source: Real World Econ Rev, 1 Apr 2020

Comments from Ikonoclast

April 1, 2020 at 10:30 pm

Many assume that there will be a post- corona virus world. But this is not certain. COVID-19 might become endemic. Now that it is loose, infection could be maintained

indefinitely at a baseline level in any given large population in a given geographic area without external inputs. A vaccination might not prove possible. So far no vaccine has been created for any serious coronavirus threat and maybe not for any coronavirus at all (though I cannot confirm this latter contention yet).

According to Precision Vaccinations:

“ Coronaviruses without preventive vaccines are the Middle East Respiratory Syndrome (MERS-CoV) and Severe Acute Respiratory Syndrome (SARS-CoV), and the novel coronavirus SARS-CoV-2, which causes COVID-19 disease in humans.

“ The need for human coronavirus vaccines was first identified in the mid-1960s. The emergence of a highly pathogenic corona virus (CoV) in the Middle East has sparked new interest in human coronaviruses around the world. MERS-CoV was identified in 2012, almost 10 years after the highly fatal human SARS-CoV emerged from China in 2003.

“ As of April 1, 2020, the US Food and Drug Administration has not approved any preventive or therapeutic coronavirus vaccines for use against the SARS, MERS or SARS-CoV-2 (COVID-19) coronaviruses.”

There is also some concern that COVID-19 might be bi-phasic. That is, it could reoccur or be reacquired another one or more times. Some bi-phasic diseases are much more dangerous the second time round. Of course, these are speculations but then so are assumptions that we will arrive at a post- coronavirus world and economy.

Not so long ago, there was much discussion and concern about our fat demographic tail. Everyone was assuming that people would live and live actively to 90 years or more. All these life hopes and economic fears (funding the aged demographic) now look possibly rather foolish. Each of us in the older age bracket must readjust our expectations and face a nearer approach of our own morality. I once thought I might live to 90 (given family history) and seeing what I’ve seen I feared that. I did not welcome it. I don’t have to worry about that anymore. If we experience season after season of COVID-19, which is still very possible, I reckon my life expectancy from current age 65 will be about 10 years. A lot of people will be in the same boat as me. Such is life. Entropy always wins.

As baby boomers we thought we owned the world. We thought it was always going to be our little oyster. Now we find the world owns us after all. This was always the case. We just didn’t know it. Our hubris was extreme. Economics in praxis has been sclerotic, run by near-senile billionaires and their ideological lackeys and functionaries. Economics in theory was captured by anti-scientific beliefs that the economy was not embedded in and conditioned by the real biosphere, by real ecology (including viruses) or by the real capabilities and limitations of human beings.

Finally, the field will progress again. Economics will advance one funeral at a time.

RIP Capitalism – Killed by COVID-19.

Leave a Reply