How Has The Corona Virus Affected The Global Economy?

“The point is simple: talking about the problems of the world without talking about some accessible solutions is the way to paralysis rather than progress.”- Abhijeet V. Bannerjee

The world order as we know is unraveling. In one sweep, the pandemic has managed to exert drastic constraints on how we conduct our lives, limiting us to our homes. The general fear of human contact, measures of social distancing have caused an unwarranted disruption in global supply chains and limited human interactions. Containing the disease has its own short-term as well as long-term costs. All this has struck a fatal blow to global market which was already at the brink of recession, at a scale which experts say is perhaps greater than the 2008 financial crisis.

With no models in place to predict the effects of Coronavirus, humanity is navigating through an unchartered territory in dealing with this damaging economic scenario. All forms of social consumption, including recreational activities such as going to the theatre, dining out and travelling, have arrived to a thorough standstill, as they are deemed to be non- essential services. This has plummeted consumer spending. An inevitable fall in shares, diminishing investments, slumped G.D.P growth, collapse of stocks and halt of major industries such as aviation and tourism have battered the interdependent financial ecosystem. The Baltic Dry Index, developed in London, which maps shipping and global trade, is shrinking.

While there has been an obvious spike in unemployment figures, we also need to take into consideration the decline in opportunities that would have been available in the usual context. The developing and the underdeveloped countries like Iran, India and South Africa would especially have a hard time in dealing with the long-term damage given lack of means and various political, social and economic problems they were already facing before the outbreak.

Disrupted work schedules of the quarantined population also shift responsibility on the government’s shoulders to take over, provide infrastructural support, encourage borrowing and ensure the continuance of public spending- it remains up to the government to decide what degree of a stabilising role it can play. It would also be an imperative to examine the consequences the informal labour sector, wherein the most vulnerable sections do not have the financial safety net or the luxury to ‘work-from-home’ during the lockdown.

The onset of the blanket spread of the virus has also brought into sharp focus the major kinks in the global value chains. In a paper published by the Harvard Business Review, political scientists Henry Farell and Abraham Newman argue that the global economy “is a hierarchical imbalanced network, with critical hubs that exert outsized influence.” These ‘critical hubs’, in turn infect the other economies heavily dependent on them for means of production. But there is some light at the end of the tunnel, as some experts argue that new alternatives and actors in the global economic scenario might emerge, which have not been previously thought of.

As long as the crisis stretched out, there would be gradually increasing chances for a rise in insecurity in food and other supplies, shortage of medical support and infrastructure. It is a collective responsibility for the global population to not hoard supplies, nor engage in panic buying and extend aid to the worst hit areas; the private sector worldwide should pitch in as well in keeping the smaller businesses afloat via subsidies and relaxations in lending measures. International institutions need come together to build a robust framework that provides a balanced framework for tackling such emergencies, while keeping the national interests in mind.

We cannot ignore that the harsh economic impact of corona overspills into the social and psychological well-being of the global populace as well. Every day that the businesses remains shut, is another day that increases the distance to economic recovery. Perhaps coronavirus’ lingering impact will call for a radical change in how we transact socially and economically, calling for a more traditional approach of localised systems of exchange and a flourishing of certain domestic sectors. Only time will tell how humanity chooses to reinvent itself. So far, however, this pandemic is proving to be the hardest litmus test for the survival of the global market.