Dennis J. Snower outlines three long-term lessons for policymakers in a Brookings Institution blog piece.
Governments around the world are trying to both contain the coronavirus pandemic and mitigate the resulting economic fallout. But what will happen after the crisis? In an opinion piece on the Brookings Institution's Future Development blog, Hertie School Professor of Macroeconomics and Sustainability Dennis Snower cites three main "far-reaching, long-term" lessons for policymakers from the pandemic.
First, Snower writes, there is no excuse for the lack of preparation. The evidence that such a pandemic would occur has been readily available for a long time, but was largely ignored by governments. "The worldwide failure to insure against a pandemic is the result of complacency and neglect," Snower writes.
Second, viruses know no borders. The only way to deal with such a crisis is through multilateral efforts, and governments should be pooling their efforts. "If there was ever an event that proves beyond a shadow of a doubt the importance of multilateral cooperation, this pandemic is it," he says.
Third, the same policies used in the 2008 financial crisis will not work for this one. Aggregate demand is not falling everywhere, he says, instead some sectors are "imploding" while others are "exploding" - restaurants shutting down vs. Amazon deliveries that can't meet demand, for example. Snower calls this “the Great Economic Mismatch". "Governments should be subsidising the movement from the contracting sectors into the expanding sectors," he writes. "Hiring and retraining subsidies, relocation benefits, and investment credits for transforming production processes from physically integrated to physically disjointed activities would be appropriate."
Read the full piece published on the Brookings Institution Future Development blog on 27 March 2020.