Economic ruin is the most democratic side effect of COVID worldwide
Despite having one of the lowest death rates amongst developed countries, Japan will fully share in one of the unhealthiest side effects of COVID-19: economic recession
Japan is the latest country to slip into recession over the global economic dislocation caused by the virus. The first quarter of 2020 showed Japan’s economy shrank by 3.4 percent.
Japan demonstrates that no matter the depth of the COVID crisis at home, every country in the world has been hit hard economically.
“Japan has been mildly affected by the coronavirus compared to the rest of the world,” says Voice of America, “with more than 16,000 confirmed infections, including over 700 deaths. But Prime Minister Shinzo Abe imposed a state of emergency for Tokyo and six other prefectures last month out of fear the outbreak would overwhelm Japan’s health care system, then briefly expanded it for the entire country.”
China’s official numbers, for its economy and COVID, are highly suspect. The economic numbers, however, show the Middle Kingdom’s economy contracted for the first time since 1976. Officially, China — the source of the virus — will admit that its economy contracted by 6.8 percent in the quarter.
But the pandemic is just another expression of the growing realization that foreign businesses have increased risk in China, which was highlighted by the trade imbroglio last year.
“As Chinese government aggression increases,” says the Australian online magazine The Strategist, “the business risk for all companies trading with China is growing. The pandemic is an example, but it has really just highlighted a problem that was growing before it.”
While some economists are forecasting zero-to-one percent growth for Beijing this year, don’t count on it. We’ll have a better idea of what happens in China when we see the second-quarter numbers from the West, which right now don’t look good.
Even before the coronavirus outbreak the U.S. had cut imports of manufactured goods from China by 17 percent. Subsequently, China has taken to a Twitter communist “charm” offensive threatening everything from the U.S. and Dutch drug supply chain to Australian wines, which won’t help the Chinese economy at all.
Last week Germany reported a 2.2 percent drop in GDP, the lowest amongst continental European countries, with hard-hit France posting a loss of 5.8 percent and Spain dropping 5.2 percent. Overall the Eurozone economies are down by 3.8 percent in the first quarter.
But the real hardship remains in the next quarter.
The U.S., for example, saw first-quarter GDP shrink by 4.8 percent. The latest forecast from the Atlanta Fed’s GDPNow shows a drop for the next quarter of 42.8 percent. By contrast, 1932, the worst year of the Great Depression, saw GDP shrink 12.9 percent.
That’s why opening the economy now is so imperative. Each week of delay could mean larger and larger losses. Assuming a 42 percent contraction would mean a loss of 3.5 percent of our GDP each week.
The country can’t magically stop and start this economy.
Imagine all the people who were supposed to retire this year. Imagine all the people who had businesses that were barely making it. Imagine all the people who live paycheck-to-paycheck.
Amongst the many side effects of COVID-19, economic ruin is the most democratic, worldwide and long-lasting, but easiest to cure right now if we act.
Scroll down to comment!