With the advent of this global pandemic (COVID-19), the governments, economists, industrialists and individuals have been forced to rethink in terms of sustained resolutions, for bear survival in many cases, forget about long run. This gives us an impression that the quote “in the long run we all are dead” was apparently thoughtful, as laid by Keynes. Amidst, a colossal question forward-facing with all stakeholders is that, will the economics and the understanding of economics in resolving issues in public welfare is going to remain the same in near future or not? We have already witnessed a sharp fall in growth globally and enormous thinking is constantly taking place in terms of recovery, V- shaped, U-shaped, W-shaped, L-shaped and many more. Perhaps, till date we are looking for a convincing answer that how possibly this global recession can be fought. To find such an answer we need to think about the economics under the circumstances of epidemics and pandemics.
Thinking on governments, an eye opening discussion is made in(Wyplosz, 2020) where he describes the fatal faces of government by taking several examples including autocratic and secretive regime of China and Iran, the early denial from USA, a late reaction from Italy and South Korea, blaming the trade unions by France, the elitism in Japan and catastrophes caused in low income countries such as Kazakhstan and Côte d’Ivoire. India in this sense has not been an exception. The second wave after the mutated version (s) of the virus has put many question not only the adequacy and preparedness of the government at centre and state level, perhaps the will to contest with the issues at the grass root level. This is worrisome indeed. What economics can resolve in the sheer lack of willingness of the governments just to protect their own face at the cost of society and its members?
Nevertheless, the rays of hope cannot and should not be left. What economics can do is beautifully summarized by Pigou, as he mentions that “Economics is what economists do”. Therefore, we shall focus more on what economists can do under these circumstances so that the faith in economics is not vanquished. A Pandora of thoughts has opened up among the researchers in fields of finance, baking, fiscal and monetary policies and sectoral priorities. For instance (Mauro, 2020) argues that macroeconomic mismanagement by the governments in the times of pandemic can cause a threat to the fundamental idea of globalisation. In fact, the Trump’s thought of de-globalisation had started flourishing in his early commencement, and that had led to an increase in confidence of the economy, the “animal spirit” as quoted in economic terminology stared improving. Along with this, the new age researches are building up arguments over the “globalisation of diseases”, and the threat that these bio-wars are creating to the world economies. It was aptly described by Bill Gates in 2015 that the wars in future will not be fought by nuclear weapons, instead the pandemics like theSpanish flue will be the major source of destructing national economies globally. And thereby a serious area of research has emerged today that how this so called “globalisation of diseases” is influential in breaking down the global economic chains and how one has to deal with this.
Another aspect is the large disruptions that are caused and likely to be continued in coming times on the international trade patterns globally. This pandemic in different from the pandemics that have occurred in the past in many aspects. For instance, in economics terms it has hit most severely the nations that control over 55% of the word supply and demand, about 60% of world manufacturing and about 50% of world manufacturing exports (Baldwin & Toumiura, 2020). One of the striking fact that (Baldwin & Toumiura, 2020) lay down is the “permanent damage”to the trade systems due to the ongoing trade war between US and China and the reactions of firms along with loose national polices to overcome the loss of productivity, employments and income. They argue that the global supply chains can break to an extent that cannot be restored since these supply chains are highly internationalised. This leads to a combination of supply shock that is clubbed with demand shock as the income and consumption at the global level is expected to fall sharply due to reduction in marginal propensity to consume and fall in incomes. The traditional economic thinking that is applied to mitigate the supply and demand shocks therefore is of minimal use in this scenario. The economic theories themselves need to be revisited and permanent solutions need to be thought off. There is huge scope of research in this aspect in coming times.
The global financial system is also part and parcel of the trading system. The breakdown of the global financial system may cause the malfunctioningof financial supply chains globally. (Beck, 2020) for example, lays down that what could happen to the global financial system due to extended pandemic situation, poor monetary mismanagement and regulatory reactions for banking fragility. The adverse solvencies in these times globally are the major concerns, and in case of India where the NPA’s are already very high this could lead to collapse of many banks that are fragile. Moreover, as (Beck, 2020) argues that panic and spill overs are rather powerful in spreading the negative and therefore it becomes outmost responsibility of governments to react in an appropriate manner to mitigate the effects. A well thought monetary stance with an improved regulatory management is becoming need of the hour for the national economies globally with the hit of this pandemic.
In summary, we can see that the scholars in the domain of economics are being challenged by these times. Challenges brings opportunities of many sought. It is up to us that how we convert these challenges into constructive opportunities via innovative thoughts and extended research. Economics being at the heart of Business and Finance makes it more lucrative for the scholars to think loudly and correlate with problem areas, some of those being discussed above. The role of educational institutions, Universities, research bodies and government institutions is far more determinable in this context. The way forward in terms of extending the body of knowledge seems of the bright even with the presence of the darkest time that global economies have ever seen in the history.
Baldwin, R., & Toumiura, E. (2020). Thinking ahead about the trade impact of Covid 19. In R. Baldwin, & B. W. Mauro, Economics in the times of covid 19 (pp. 59-70). London: CEPR.
Beck, T. (2020). Finance in the time of coronavirus. In R. Baldwin, & B. W. Mauro, Economics in the time of Covid 19 (pp. 73-76). London: CEPR.
Mauro, B. W. (2020). Macroeconomics of the flue. In R. Baldwin, & B. W. Mauro, Economics in the times of Covid-19 (pp. 31-35). London: CEPR.
Wyplosz, C. (2020). The Good Things About Coronavirus. In R. Baldwin, & B. W. Mauro, Economics in times of Covid 19 (pp. 113-115). London: CEPR
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