Close Menu

What Is the Best Economic Response to the Coronavirus?

Dan Drezner says he thinks there are two ways to ease the economic impact of the coronavirus, via his Washington Post column.

Let’s stipulate that the Trump administration’s response to covid-19 has been less than ideal. Let’s further stipulate that there are unique aspects of this strain of coronavirus compared with past outbreaks. The lack of natural immunity and a long asymptomatic period mean it is very easy to spread. The unequal effect of its impact on people means that the healthy need to make sacrifices to flatten the curve of infection so as not to put unnecessary strain on health infrastructure. This means that large gatherings and long trips should be postponed. In other words, the optimal response generates outsize economic effects to avoid outsize health effects.

It is safe to say that markets have been roiled by the global spread of the virus. The spread of the virus walloped global supply chains. The supply shocks have since given way to demand shocks. China’s economy has ground to a halt. Italy’s economy is about to do the same. The travel and tourism sectors have been hit hard, and airlines are not far behind. Oil prices have cratered in part because of Saudi-Russian bickering but mostly because of the lack of demand.

Read More