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IPFS News Link • Economic Theory

Destroying The Economy Is Not A Social Policy

• https://www.zerohedge.com, by Daniel Lacalle

The data on deaths and infected from the Covid-19 coronavirus epidemic is alarming. Let us remember the deceased, the infected and their families, and applaud the response of civil society, businesses, and citizens.

A pandemic crisis is addressed by providing safety protocols and sanitary equipment for businesses to continue to run and keep employment, not shutting down everything, which may create a larger social and health problem in the long term regardless of the massive liquidity and fiscal policies. Why? Because demand-side policies never work in a forced shutdown of all sectors. There is no demand to "incentivize" when the government orders the closing of all activities. And there is no supply to follow when the economic crisis creates a collapse in employment and consumption.

Many commentators are saying that shutting down the economy is an essential measure to gain time to control the virus. This analysis comes from people who simply do not understand the ripple effects and massive ramifications of a complete shutdown. They perceive that it is small collateral damage because they also believe that everything can go back to normal in one month. They are wrong. The impact is severe, widespread and exponential.

The decision to shut down the economy may cause long-lasting damages to job creation and businesses that cannot be unwound in a few months. Yes, it is essential to contain the virus spread and drastic measures are warranted, but we cannot forget that each month means millions of unemployed and thousands of business closures.


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