As a global crisis, the Covid-19 pandemic requires a global, coordinated response between nations, both to prevent the spread of the disease and to protect the economy. The challenge of this "double disaster" may be unprecedented, but governments can and should embrace certain principles.
The Covid-19 pandemic has given the world an economic and health crisis at a level that few could have foreseen. The important thing is that everyone must now confront it together.
If all nations do not enhance global coordination and cooperation, the worldwide social stability may be at stake. Economically, many economists and policymakers appear to be assuming that an effective stimulus policy is sufficient to minimize recession.
In fact, the problem is much more complicated, and it will not be solved by the conventional stimulus, as reducing social interaction is important to minimize the spread of the virus.
Therefore, most people are unable to work (unless they are in essential industries), and when people are not working, they will have little (or no) income.
However, even if it is an unprecedented serious situation, it does not mean that we lack principles to direct our actions. To prevent pandemics and rescue the world's economies, we must follow 5 special rules.
First, protecting human health and life is and should be a top priority, and in order to do so, we must reduce the flow of people and goods in society.
As we have seen, this will certainly reduce economic activity. However, the sooner we fully implement the measures, the sooner we will be able to revive the economy, as nothing could be done for the economy until Covid-19 was defeated.
Meanwhile, we must also boldly think about how to ensure the supply of essential goods and services, supporting healthcare providers.
Gas masks, ventilators, oxygen, and even common masks are seriously deprived in too many places. We must act decisively to alleviate these deficiencies, otherwise, they will lead to greater losses of life and social stability.
The second principle is that in addition to protecting those who are (or are at risk of) getting sick, it is also important to protect those who are in economic freezing.
Recently published monthly data for the United States shows that the number of people applying for unemployment insurance has skyrocketed in the past 2 weeks.
In many countries, the majority of the population works in the informal sector and therefore is not covered by unemployment insurance.
For these people, the need for protection is even greater. Meeting the needs of the most vulnerable requires a three-dimensional strategy. First, governments must provide cash large enough to sustain a living income to all households in need.
Second, they must extend unemployment insurance so that fired workers do not fall into despair before the end of the pandemic. And third, they must protect the current jobs by providing subsidies for the fields seriously affected by the crisis, which will still be valuable to the economy when the crisis is over.
This is not the same as protecting profits or shareholders. The crisis requires special policies aimed at preserving production capacity and operational know-how in both small and large companies.
The results of research conducted to address the Covid-19 crisis, as well as the therapies should be shared and provided globally at affordable prices.
Keeping valuable knowledge to oneself, while countless lives at stake, is an unforgivable crime. Moreover, it's actually a counterproductive act, because we are all connected through the global economy, and if there is a virus in any country, the pandemic is still likely to flare up again.
To provide liquidity at the global level, we must use the entire set of economic policy instruments, as well as try to test new instruments.
For example, the bilateral currency swaps between central banks in developing and advanced economies must be expanded, or the special drawing rights of the International Monetary Fund need to be expanded to meet the challenge at hand - as suggested by IMF CEO, Kristalina Georgieva, at the G20 Summit this week.
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