Economies won’t be able to recover after shutdowns

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Photo by Lisa Fotios on

As the lockdowns are getting lifted and life is slowly but surely returning to normal, analysts are debating what will come next, as far as the business and the economy is concerned. Some factors that will influence how the global economy will recover include the potential for a second wave of the virus, which many scientists and doctors are predicting will happen in the next months. Furthermore, we have the issue of how the economy will recover- whether it will be a V-shape, U-shape or hockey stick-shape, the third being the most likely scenario. And then there’s the consumer and how he/she will have to adapt to the new norm of social distancing and avoiding large-scale places in the long term. In this guest column, this economist is predicting that the global economy as a whole will have to adapt to these changes, which includes above all, veering away from the pre-Corona normalcy of big gains and progress. Looking at the graphs and the facts, it is a foregone conclusion that we will enter uncharted territory and live with the new norm as we saw with the Great Depression and the post World War II times.

Our Finite World

Citizens seem to be clamoring for shutdowns to prevent the spread of COVID-19. There is one major difficulty, however. Once an economy has been shut down, it is extremely difficult for the economy to recover back to the level it had reached previously. In fact, the longer the shutdown lasts, the more critical the problem is likely to be. China can shut down its economy for two weeks over the Chinese New Year, each year, without much damage. But, if the outage is longer and more widespread, damaging effects are likely.

A major reason why economies around the world will have difficulty restarting is because the world economy was in very poor shape before COVID-19 hit; shutting down major parts of the economy for a time leads to even more people with low wages or without any job. It will be very difficult and time-consuming to replace the failed businesses…

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