The Economic Impact of the COVID-19 Policies

The coronavirus has changed the world as we know it. The general population is largely afraid. This is the reason that they have given unprecedented rights to the government. In the past few days, governments all over the world have taken complete control of every aspect of the lives of the people. This has social and cultural consequences. However, most importantly, it has economic consequences too.

A lot of the policies which have been implemented in order to control the coronavirus pandemic can be considered to be socialistic. If any of these policies had been discussed in parliament six months ago, the odds are that they would not have been passed. However, desperate times call for desperate measures. This is the reason that even the most individualistic and capitalistic countries in the world, like the United States, have been forced to follow socialistic economic policies. The worst part is that these policies may not even be very effective!

In this article, we will try to understand why the effects of some of these policies may be sub-optimal, to say the least.

Lockdowns: Lockdowns have become a worldwide reality. Close to 50% of the population of the world is currently under lockdown. The problem is that lockdowns are leading to large scale unemployment and economic losses all over the globe.

The western media and the experts are of the opinion that lockdowns and social distancing are the only measures available in order to control the spread of the disease.

However, they are omitting important information when they mention these facts. South Korea and China are the only two countries in the world that have been able to control the coronavirus. Japan has also been successful to some extent. It needs to be pointed out that neither South Korea nor Japan have imposed large scale lockdowns when they controlled the problem.

In these countries, the issue was tackled by early identification of the potential ramifications of the problem. A private company in South Korea was quick to develop a test kit. This test kit was then used in mass to test people suspected of having coronavirus.

South Korea and Japan have used innovative methods such as drive-through to collect samples from suspected patients. Early identification and quarantining helped them to segregate the infected from the general population and prevent the spread of the disease.

This has not been done in western countries where government bureaucracies delayed the identification of the problem and the spread of the disease. Now, the situation has gone out of control.

However, lockdowns may not be the solution, particularly in poor countries. This is because, in countries like Mexico and Pakistan, a large percentage of the population lives from hand to mouth every day. If lockdowns are imposed, the population may follow it for a small period of time. However, as time passes, people will be out of food and essential supplies and may be forced to defy the government if they want to survive. This could lead to law and order problems in the middle of a pandemic!

Price Controls: Another policy being enacted by the government is that of price controls. Governments all over the world are expecting shopkeepers to keep selling products at prices that were prevalent before the crisis. This is almost certain to lead to shortages in the future.

This is because when people are working during a crisis, they are taking on excessive risks. The pre-crisis prices do not take into account the increased risks. If risks increase, people at every step of the supply chain will want a premium to be compensated for the same. For instance, workers may want more money to continue working in this dire situation. Also, people transporting these goods may raise the prices for their services. If they are not adequately compensated, people may choose not to work and stay within the safety of their homes. Hence, price control may appear to be an egalitarian policy. However, in reality, it is the exact opposite. If this crisis continues for a longer period of time, stock-outs may become common.

Inflationary Policies:

Countries all over the world have started giving bailouts in order to survive the coronavirus crisis. It is estimated that more than $10 trillion are going to be spent in various bailout packages. This would be good if the government actually had money and was giving it out to the people. The reality is that these governments are just going to print more money, debasing the currency, and use it to bail out certain companies. The selection of the companies and industries which should be given the bailout package is actually an ad-hoc task.

Economic history has shown that bailouts are inflationary and ineffective in the long run. They only lead to corruption as several industries lobby the government looking to get a free hand-out of taxpayer money.

Public Health Systems: Governments all over the world have seen their public health system reach its limits. This is the case, particularly in western nations such as Italy and the United Kingdom.

Free healthcare certainly has its benefits. However, public health systems have been slow to react to these crises. Also, the public health system has not been able to rapidly build up its capacity in response to the crisis.

Countries where health systems are in private hands, have been able to respond to the crisis better as compared to a country where the health system has been nationalized.

The bottom line is that many countries in the world are blindly aping each other and following certain socialistic policies. In many cases, they might not even be the best policies.

❮❮   Previous Next   ❯❯

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to and the content page url.