This is the best of times and the worst of times. As financial markets celebrate the coming vaccine-led boom, the confluence of epidemiological and political aftershocks has pushed us back into a quagmire of heightened economic vulnerability.
NEW HAVEN – Pandemic time runs at warp speed. That’s true of the COVID-19 infection rate, as well as the unprecedented scientific efforts under way to find a vaccine. It is also true of transformational developments currently playing out in pandemic-affected economies. Just as a lockdown-induced recession brought global economic activity to a virtual standstill in a mere two months, hopes for a V-shaped recovery are premised on an equally quick reopening of shuttered economies.
NEW HAVEN – It didn’t have to end this way, but the die is now cast. After 48 years of painstaking progress, a major rupture of the US-China relationship is at hand. This is a tragic outcome for both sides – and for the world. From an unnecessary trade war to an increasingly desperate coronavirus war, two angry countries are trapped in a blame game with no easy way out.
NEW HAVEN – In an effort to get a handle on the economic and financial consequences of the COVID-19 pandemic, the first instinct is to search for precedents and remedies in earlier crises. Many have pointed to the 2008 global financial crisis (GFC) as the most relevant example, especially in the aftermath of the extraordinary monetary-policy actions announced by the US Federal Reserve on March 15. That would be an unfortunate mistake.
NEW HAVEN – The world economy has clearly caught a cold. The outbreak of COVID-19 came at a particularly vulnerable point in the global business cycle. World output expanded by just 2.9 percent in 2019—the slowest pace since the 2008-09 global financial crisis and just 0.4 percentage points above the 2.5 percent threshold typically associated with global recession.
NEW HAVEN – With the benefit of full-year data, only now are we becoming aware of the danger the global economy narrowly avoided in 2019. According to the International Monetary Fund’s latest estimates, world GDP grew by just 2.9 percent last year—the weakest performance since the outright contraction in the depths of the global financial crisis in 2009 and far short of the 3.8 percent pace of post-crisis recovery over the 2010-18 period.
NEW HAVEN – Predicting the next crisis—financial or economic—is a fool’s game. Yes, every crisis has its hero who correctly warned of what was about to come. And, by definition, the hero was ignored (hence the crisis). But the record of modern forecasting contains a note of caution: those who correctly predict a crisis rarely get it right again.
NEW HAVEN – In the here and now of climate change, it is easy to lose sight of important signs of progress. China, the world’s biggest emitter of greenhouse gases, is a case in point. By changing its economic model, shifting its sources of fuel, developing new transportation systems, and embracing eco-friendly urbanization, China’s sustainability strategy is an example of global leadership that the rest of the world should consider very carefully. In the rush to demonize China over trade, the West has missed this point altogether.