"They were not taught these things in their economics and finance classes."
"They were not taught these things in their economics and finance classes."
The coronavirus pandemic is creating a two-headed problem for governments. Economic policymakers are being forced to perform a delicate balancing act. As with all balancing acts, failure to achieve and maintain can produce dire consequences.
Normally economic downturns are the result of widespread and sustained loss of purchasing power following disasters such as financial-market collapses, political upheavals, trade disruptions and agricultural failures. In such situations, the makers of monetary, fiscal and trade policies know what they have to do: Maintain purchasing power by making it possible for producers to continue operating and for consumers to keep buying what the producers are producing and the distributors are selling. This they do by making appropriate policies in such economic policy tools as loan availabilities, interest rates, taxes and benefit payments.
But the downturn that the world economy is currently experiencing—without a doubt the most severe since The Great Depression of the 1930s—is by no means normal.
Unlike other economic crises since the 1930s, the current crisis has two heads like Hydra of mythology. One head is an economic head; the second head has no direct connection with economics. The non-economic half of the current crisis is, of course, the coronavirus pandemic, which thus far has produced over 31,000 infections and caused the death of just over 1,000 Filipinos.
Economic policymakers all over the world are poised on the horns of a dilemma. The dilemma is that they are called upon to accomplish two things at the same time: saving lives and protecting jobs. The two objectives, which have been characterized as lives-versus-livelihoods and deaths-versus-dollars, are to a large extent antithetical to one another. If communities are locked down, lives are saved but jobs are lost; if, on the other hand, communities are unlocked in disregard of established public-health protocols, jobs will be restored but mortality rates are bound to rise. Using tried and tested economic policy tools, it’s easy to increase purchasing power and thereby restore jobs. But this remedial operation must be carried out in a manner that does not cause surges in infection and monthly rates. Keeping people from getting sick and dying versus making it possible for people to continue earning a living: this is the delicate balancing act that the world’s economic policymakers are called upon to perform in these times.
It’s an exceedingly difficult balancing act, but it has to be performed. Lives cannot be saved at the expense of livelihoods and deaths cannot be preferred over dollars.
For most economic policymakers, this is unchartered territory. To bring down infection and mortality rates and eventually contain the coronavirus, how much economic reopening should be done, and how and when? The economic policymakers were not taught these things in their economics and finance classes. In the present crisis they are making policy decisions according to best judgments based on economic principles and ethical and Christian precepts.
Surges in infection and mortality rates in countries that have not consistently observed the health safety protocols, and sharp increases in infections and deaths in countries that had been declared COVID-19-free, indicate that achieving and maintaining the right policy balance in the present crisis is very much a work in progress.
Policymaking has never been like this for today’s economic policymakers. When the current crisis shall have been solved, they will hope that they won’t have to do this kind of policymaking again in their lifetimes.