COVID19: Economic Policies for War
Countries empty schools and universities, closing their borders, people locked in their homes for weeks, overwhelming hospitals, and the global economy dropping drastically; the COVID19 pandemic is a crisis like no other.
COVID19 is making headlines for causing an outbreak of respiratory illness around the globe.
It feels like a war in many ways. Numbers are increasing, and people are dying. The pandemic is humankind’s war against an enemy we can’t see, and the soldiers are Medical Professionals who are ready to be deployed to their battlefields, putting their lives on the line.
War is won through massive spending on armaments that stimulates the economy and through essential services that are only available through special provisions. The economy is directly affected during a crisis because things are more complicated. The public sector’s role during any crisis increases since they are directly affected.
There are two phases that the policy needs to distinguish at the risk of oversimplifying.
First is the war. The epidemic is always everywhere and always on the move. To save people’s lives and the economy, the government sacrificed major economic activities as they intensified measures to fight the war.
Second is the post-war recovery. The fight does not end with the containment of the virus.
Infected bodies should heal, and continuous containment measures should be considered. Vaccines and drugs should be provided to raise the immunities of everyone and to defeat the pandemic effectively.
The economy will return to normal functioning as restrictions are lifted.
There is a more significant challenge for low-income and emerging economies that face capital flights; they will have to require financing from the global community.
Wartime policy measures
The fall of output in this crisis is not driven by demand, unlike other economic downturns. The economic policy’s rule is hence not to stimulate aggregate demand, and the system has three objectives.
Firstly is to guarantee the functioning of essential sectors. The COVID19 resources of testing kits and treatments must be boosted. All utilities like regular healthcare, food production, and distribution, necessary infrastructure must be maintained.
Another essential thing to consider is the survival of everyone who was affected by the crisis. There is a need for extended measures to ensure that workers get resources as they work at home. Support for displaced workers needs distribution to affected people. The self-employed and those in the informal sector also need the attention of the support of everyone.
Economic disruptions need to be avoided to win this war.
It is vital to safeguard the interests of all stakeholders, including workers and employers, producers and consumers, lenders, and borrowers, to ensure that businesses continue after the emergency subside.
Limiting the movement of people is necessary for containment, and these domestic policies need to be supported by maintaining international trade and cooperation, which are essential to defeating the pandemic and maximizing the chances of a quick recovery.
From shelter-in-place to recovery
Advancing the recovery will have its challenges, including higher levels of debts and possibly the downturn of the economy under government control.
Government grants for investors and businesses should be provided in more advanced economies to ensure balance in the supply chain and to avoid future inflation.