The Viral Economy

How the Coronavirus is Affecting More Than Just Immune Systems

By: Harrison Getches and Max Boubin

Since emerging in the Chinese city of Wuhan late last year, COVID-19 has spread to 185 countries and territories, infecting more than 2,700,000 people and killing over 190,000 globally, according to data from Johns Hopkins University. It is a strange time we are living in, with most shops and stores closing as the streets go bare. It’s all due to Coronavirus, a disease that will impact every person’s life in one way or another.

Throughout this article, we will focus on three areas hit hardest by the virus.IMG_0494

The Economic Fallout

First, the economy. With most trade coming to a halt, stock markets are dropping points left and right. Dow Jones and FTSE 100 are down 18.5 percent and 24.5 percent respectively. The S&P 500 lost around 12 percent closing March: the worst we’ve seen since the 2008 market crash. While a V shaped recovery (a recovery where the economy regains quickly) is ideal, with the loss of thousands of jobs across the country, the chance of a fast recovery becomes slimmer. The longer the lockdown happens, the more small businesses will fail, and more money is lost in the market. This makes the recovery time longer once the virus has passed, as people have less capital to spend. Investors fear the spread of the coronavirus will destroy economic growth and that government action may not be enough to stop the decline, leading to further drops, as less money goes in and more comes out of the markets. This means that like most other countries, the United States will soon see its economy shrink. The International Monetary Fund (IMF) estimates that the global economy will shrink by three percent this year. They also predict that France, Japan, Italy, Canada, Germany, the United Kingdom and the United States, will all enter recession, shrinking at least five percent. They describe the decline as the worst since the Great Depression. As companies start cutting staff to make up for lost revenue, the worry is that this will create more downward forces on the economy when these newly unemployed workers can no longer afford to purchase unaffected goods and services. To use retail as an example, an increase in unemployment will extend the reduction in sales that happened due to the closure of shop fronts, pushing the crisis over to the online retail segment. It is this theme that has economists contemplating whether the COVID-19 pandemic could lead to a global recession on the scale of the Great Depression. Both China and the United States are reporting sharp declines in retail sales as lockdown measures during the pandemic have forced many stores to shut down and kept consumers at home. A surge in online sales reported by some retailers, such as Amazon, failed to brace the overall fall.  Governments have been doing all they can to slow the decline of the economy, and central banks in many countries have cut down interest rates which, in theory, make borrowing cheaper and encourage spending. This all means more money going into the markets, which should slow down their fall. The United States Senate also passed a two trillion dollar relief bill to help aid workers and businesses, which helped global markets recover a little ground.

On the contrary, oil prices are at an all-time low. While they were low before the coronavirus due to a dispute between Russia and the Organization of Petroleum Exporting Countries (OPEC) countries, with coronavirus, most people are now locked down and they find no need to buy oil. This created a perfect storm for the massive fall in oil prices, with no one traveling, and a massive influx of it into the market. Brent Crude oil has dropped to under $20 a barrel, the lowest level in 18 years. With massive oil surpluses all across the world, OPEC countries have begun to cease production. As sad as that may seem for the economy, it actually has a very bright upside. Because few flights are being taken, most factories are shut down, and less oil is being burnt, climate change has taken a turn for the better. Skies and waters are clearer, and much less air pollution is being seen across the globe.

An estimate showed that China, the world’s biggest polluter, emitted 25 percent less carbon than in the same four-week period the previous year. Even animals are benefitting. In a Hong Kong zoo, two giant pandas bred after ten years of attempts in captivity after a month of privacy. All of this is great news for the planet, but researchers warn that attempts to revitalize the economy could very well reverse all of this progress. However, this could bring bad news for renewable energy such as wind and solar, as they have been made far more expensive than its oil counterpart. 

Economically Unequal 

Second, poverty. Experts advise staying safe during these trying times by avoiding large crowds, stockpiling shelf-stable foods, staying home from work and contacting doctors when ill. However, there is a massive problem with that advice: lower-income people can’t afford to follow it. Perhaps the most at-risk people to COVID-19 are the impoverished. This is due to their weaker access to healthcare or proper safety measures. 28.6 million Americans have no access to healthcare. This, in turn, will stop many individuals from getting tested when they come down with COVID-19-like symptoms, thus furthering the spread. Compounding this, low-income jobs often cannot be done remotely, and offer little to no paid sick days, forcing lower-income citizens to brave the conditions and face the public. Even stocking up a pantry is an impossible task, with a 2019 Federal Reserve study finding 40 percent of Americans could not come up with 400 dollars to cover an emergency. There’s more to it: as local and federal governments scramble to address the COVID-19 outbreak in the U.S., they are shutting down schools, containing certain areas and enforcing quarantines, ideas that may be necessary to stop the spread of the virus but end up having unintended consequences on lower-income families. Many low-income children rely on free and reduced school breakfasts and lunches for food every day, for example, and low-income parents can’t always afford — or find — child care when their children are suddenly home all day. As countless schools begin virtual learning instead of instruction inside a classroom, millions of households that lack access to the internet are out of luck. Not only has the coronavirus harmed the already impoverished people, but it will also expand poverty a nearly unprecedented amount. The United Nations University’s World Institute for Development Economics Research warns that nearly half of a billion people could be pushed into poverty. This is due to crumbling economies across the world. Unemployment is on a large rise, moving towards 20 percent in the United States. Economists forecast that the Unemployment rate could rise from the lowest point in decades to the highest it’s seen since the 1930s.

Federal Response

Finally, the government. With all the turmoil the virus has caused, both federal and state governments are racing to come up with new ideas to help Americans stay afloat. All fifty states have declared that this is an emergency. On Mar. 6, the same day that worldwide cases passed 100,000, President Trump signed an $8 billion emergency measure. It provided funding to authorities already fighting to contain the outbreaks and allocated $3 billion for vaccine research. Support for the bill was nearly universal. Only three lawmakers voted against the bill: Representatives Ken Buck, a Republican from Colorado; Andy Biggs, a Republican from Arizona and Senator Rand Paul, a Republican from Kentucky. On Mar. 13, President Trump declared coronavirus a national emergency. He waited to do this in fear of the economy falling even further, which did not happen. Health and Human Services Secretary Alex Azar had already declared a nationwide public health emergency, over the coronavirus in January. The Federal Reserve’s first big move came on Mar. 15: they cut interest rates to nearly zero on borrowed money and announced a $700 billion quantitative easing program. On Mar. 18 the second coronavirus-related aid package called for more than ten times as much funding as the first. The $100 billion bill provided emergency paid leave for workers at big businesses, expanded unemployment insurance and sparked free testing. It passed with overwhelming support, 90 to eight, with two Republican senators missing the vote because they were self-quarantined. On Mar. 20, after days of mounting pressure, President Trump said that he would put the Defense Production Act in action to use private business resources to fight coronavirus. The act allows the government to oblige businesses to manufacture supplies needed in a crisis, which, right now are medical masks, ventilators, gloves and testing swabs. In foriegn policy, this may cause sweeping changes worldwide. China had already been seen by both Democrats and Republicans as an emerging threat, however with the demise of a record economy, a new cold war may be beginning, and coronavirus may have been just the wake up call. 

While the government has been making decent progress, there are still some areas in which they have struggled. First, they have failed to have widespread tests conducted. Tests are crucial to stopping the spread of the virus, as Harvard researchers have found that unless the US is testing 500,000 people per day by May 1, the economy won’t be able to open up. However, as of Apr. 20, the United States was only testing 150,000 people per day. That’s only twenty thousand more than Germany, a much smaller and less populated country. With that, a lot of governors are upset with the Trump administration, which has essentially cut states loose to figure testing out on their own. Other governors, such as Brian Kemp of Georgia, even disobeyed President Trump by reopening against the White House’s own recommendations. Finally. the Trump administration also downplayed the virus tremendously, saying that the flu is deadlier. Even if you air on the low side for COVID-19’s death rate, at one per cent, it is still ten times deadlier than the flu, which has a death rate of 0.1 per cent. Earlier, on Feb. 25, Trump promised that a vaccine would be available soon. “Now they have it, they have studied it, they know very much, in fact, we’re very close to a vaccine,” Trump said during a visit to India. Dr. Anthony Fauci, Director of the National Institute of Allergy and Infectious Diseases, estimates that it would be at least a year to a year and a half before a vaccine would be finished and available to the general public. On Feb. 28, Trump said that the coronavirus will “disappear” like a “miracle” while speaking at a press conference for his coronavirus task force. On Mar. 10, he told reporters that coronavirus “will go away.” In late February, he speculated that warm weather would kill the virus and slow or stop its spread. None of these statements are backed by experts within his own administration; although some diseases do diminish in warmer weather, like the flu, there is no evidence that COVID-19 will. Experts have hypothesized since the beginning of the virus that without drastic measures to prevent the infection rate from rising too high, or a hasty development of a vaccine, the coronavirus will likely continue spreading and become a regular disease, like the common cold. Finally, on Mar. 11, Trump made a statement to the nation. It was his most serious treatment of the outbreak to date; previously he, and the right-wing media, majorly downplayed the risk. This was a huge step in the right direction for the Trump administration. Unfortunately, it was also very wrong. Several of the statements he made, like the trade restriction with Europe along with his travel ban, had to be swiftly clarified by White House officials. Trump was unclear about leaving permanent American residents and citizens out of the ban, leading to large crowds in enclosed spaces at many European airports. He also said in his speech that health insurers, “have agreed to waive all copayments for coronavirus treatments,” which is egregiously false. In fact, major insurance companies have only agreed to COVID testing without a copay.

While the coronavirus has exacerbated these problems, these issues existed far before this disease hit our shores. What the virus has done is highlighted the problems that already existed. Those with compromised immune systems die in our hospitals. Those with small bank accounts see their savings wiped out. Small businesses wither and die, as large corporations like Amazon see record stock growth. With poverty stricken areas hit hardest, the coronavirus has only highlighted inequalities around the country. It is now our role to recognize these wrongs. There will be a day when this ends, but what we must never do is forget those who are stepped over in times like this. There is hope that good will come after the virus, that people will learn about what is wrong in our world, and when the virus does die, we will be prepared for change. 

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