From Pandemic to Endemic: COVID-19 and the Economy
The novel coronavirus has created unprecedented challenges that were unforeseeable two years ago. The University of Denver Newsroom has been speaking with faculty experts about issues that have arisen or have been exacerbated because of the pandemic. Yeo Hyub Yoon is an assistant professor in the Department of Economics in the College of Arts, Humanities & Social Sciences. He shares his thoughts about the economic impact of COVID-19 in this interview with the DU Newsroom.
Now that we’re two years into the pandemic, what may be long-term disruptions to the global economy?
Observing the empirical patterns over the last two years of the pandemic, recent studies commonly found that the impacts of COVID-19 have been extremely unequal across different industrial sectors, workers and families. While high-tech firms, financial institutions and upper-income people have mostly benefitted from the pandemic either by accelerated automation or by asset market boom, people who are the most vulnerable in terms of income, health and social/biological statuses have been hit harshly by the disease, unemployment, income loss and other societal shocks. In the macroeconomic dimension, exacerbated inequalities will worsen the demand side structure of the economy. Furthermore, badly hit sectors of the economy are likely to create knock-on effects on the rest of the economy, whereby making full economic recovery impossible.
The other important dooming disruption in the global economy is financial market instability. This problem is rooted in socially harmful rent-seeking behaviors of global financial investors. Exploiting governments and central banks’ desperate commitment to the economic recovery and by betting on a belief that central banks will backstop private financial markets especially during the global health crisis, financial investors, high tech firms, and top-income families have increasingly taken risky financial investment, which in turn ends up shaping another extreme mania in the history of asset bubbles. Many experts predict that there will be financial panics and debt restructuring crises in the domestic and global economies, but we don’t know whether they will be orderly or not.
We haven’t had a pandemic of this scale in 100 years. Were there any surprises in how economies responded to COVID-19?
I think the novelty in the COVID-19 crisis compared with past health crises lies in an epistemological issue upon which the economic actions are grounded. Although every crisis carries a certain degree of uncertainty that hurts household consumption and business investment, the current COVID-19 has been a case of fundamental uncertainty as to its nature and the future course of its impact. A convention in handling future events is to presume that tomorrow would be similar to today and by doing so we were able to avoid panic.
Back in early 2020 when we found that many key aspects of the disease spread, such as the speed of transmission, the mortality rates, and widespread asymptotic infection cases, are dramatically different from past endemics, it became clear that only rational response to curb its spread was an economy-wide lockdown. As some commentators said, I also think that it was a crucial political decision in the sense that the global political community decided to prioritize the protection of life and health over the short-term profits of markets. Further, the implementation of social distancing and people’s increased fear of contact-based services have created new opportunities for some business enterprises, such as Amazon and Zoom. They could easily exploit the current health crisis by increasing new online services and delivery services. Apparently, the pandemic has widened the threat of automation, negatively affecting high contact-based service workers and low-skilled jobs. All of these changes are likely to aggravate income inequality for a while.
Are there economies which have become stronger and more resilient since the pandemic?
Over the recent four decades, there has been people’s insufficient attention to the importance of public health care and continuous budget cuts to the most essential social protection programs in most parts of the world. The combined effect of these, coupled with deepening economic/social inequalities, has made people more vulnerable to a virus and a pandemic.
However, across the world, there are still substantial differences in how this COVID-19 crisis has been coped with in regard to how successful countries have been in ensuring the health of their people and in promoting socially beneficial behaviors. As examples of successful countries, New Zealand, Taiwan and South Korea have done a great job in containing the virus while minimizing economic losses during the pandemic. They are the countries where a universal national health care system exists; where there has been an already established public health emergency system being learned from past epidemics; in which citizens know how their behaviors could affect others’ lives and freedom; where citizens’ trust in science and their government has been high; and in which there’s a well-functioning social provisioning system for the people under lockdowns.
COVID-19 may be here to stay in one form or another. How might economies prepare for future disruptions?
Overall, events that unfolded in the pandemic have manifested a complete failure, especially in coping with the public health crisis, of current global neoliberal capitalism in most of the global economies. Expanding the main criteria for a successful economic system to resilience, sustainability and equitable growth suggests possibilities of and the need for alternative ideas of value in our society. In that sense, I believe that we should envision a post-pandemic economy with valuing social provisioning, public health and multi-dimensional social/biological equities.
In the profession of economics, our COVID-19 experience has magnified our consciousness about how the framework of neoclassical economics that has dominated our economic thinking over a century, rooted in individual utility/profit maximization, is socially dangerous to be learned by young students. Note that dominance of neoclassical economics and neoliberal capitalism did not emerge from a void, instead, it had been achieved by continuous, intentional class actions of financial rentiers, big business and conservative politics and academia. As a college teacher in economics, I believe that high school and university-level economics education is critical for shaping the next generation’s worldview. The post-pandemic world requires many of us to step into reforming economic education by addressing financial, ecological and social crises that we are currently facing; and with a methodological framework incorporating interdependence, cooperation and conflicts into economic analysis.