The global economy may be permanently changed, even after it recovers
Who would have thought that a crisis that began with mortgage defaults in American suburbs in 2007 would lead to a fiscal crisis in Greece in 2010? Or that a stock market crash in New York in 1929 would contribute to the rise of fascists in Europe in the 1930s?
In the years ahead, we will learn what happens when the infinitely complicated web of interconnections that makes up the world economy is torn apart. And it opens the possibility of a global economy completely different from the one that has prevailed in recent decades.
“This is a period of radical uncertainty, an order of magnitude greater than anything we’re used to,” said Adam Tooze, a historian at Columbia University and author of “Crashed,” a study of the extensive global ripple effects of the 2008 financial crisis.
Crises have a way of bringing to the fore issues that are easy to ignore in good times.
One obvious candidate is globalization, in which companies can move production wherever it’s most efficient, people can hop on a plane and go nearly anywhere, and money can flow to wherever it will be put to its highest use. The idea of a world economy with the United States at its center was already falling apart, between the rise of China and the United States’ own turn toward nationalism.
There are signs that the coronavirus crisis is exaggerating, and possibly cementing, those changes.
More than 5.2 million U.S. workers filed for unemployment last week, pushing the four-week total to a staggering 22 million
The coronavirus pandemic’s devastation became more evident Thursday with more than 5.2 million workers added to the tally of the unemployed.
The latest figure from the Labor Department, reflecting last week’s initial unemployment claims, brings the four-week total to about 22 million, roughly the net number of jobs created in a nine-and-a-half-year stretch that began after the last recession and ended with the pandemic’s arrival.
It underscores how the downdraft has spread to every corner of the economy: hotels and restaurants, mass retailers, manufacturers and white-collar strongholds like law firms.
“There’s nowhere to hide,” said Diane Swonk, chief economist at Grant Thornton in Chicago. “This is the deepest, fastest, most broad-based recession we’ve ever seen.”
Some of the new jobless claims represent freshly laid-off workers; others are from people who had been trying for a week or more to file. “We’re still playing catch-up on multiple fronts,” Ms. Swonk said.
Each day seems to bring unwelcome milestones. On Wednesday, the Commerce Department reported the steepest monthly drop in retail sales since record keeping began nearly 30 years ago, and the Federal Reserve said industrial production had recorded its biggest decline since 1946.
The mounting unemployment numbers seem certain to fuel the debate over how long to impose stay-at-home orders and restrictions on business activity. President Trump has said some measures should be relaxed soon because of the impact on workers. “There has to be a balance,” he said at a press briefing Wednesday evening. “We have to get back to work.”
This story originally appeared on NYTimes