The Coronavirus is not only a world health emergency. Lockdown will have a heavy and lasting cost to the economy. With supply and demand severely hit, many firms have been forced to shut down or downsize and workers have been dismissed or furloughed. Governments and central banks have promptly stepped in with financial help for both sides of the market and will increase government debt by tens percentage points. We should expect the economy to be in recession or worst, a depression, for many quarters. The bottom line is tough times lie ahead.
However, no matter how negative it might be, each situation also carries positive features. I want to focus on the silver linings behind the clouds of this difficult situation and pinpoint key areas likely to be positively affected by the current crisis.
- Environment: Almost everywhere in the world, levels are falling and global emissions will see their first fall since the 2008-9 financial . The lockdown measures implemented in many countries are leading to a fall in transport use and industrial production. There will be a drop in pollution-related illnesses, such as asthma, lung diseases and heart attacks. The current situation is also helping biodiversity, for example by boosting the number of bees and rare wildflowers. If there ever was a favourable moment for advocates of renewal energies and the, it is exactly now. In critical situations like this, when many countries will review their social contract, environmentalists’ proposals are much more likely to be considered.
- Crime: In the UK and around the world, over the last few weeks there’s been a sharp decrease in most types of crime. Crimes -such as burglary, robbery and knife crimes saw percentage drops hardly seen in fe. Although domestic violence and online frauds are on the rise, the total number of recorded offences this year will be much smaller than expected. Why so? In urban areas, there’s less opportunity to commit crime, especially property crime: the lockdown measures led to lower potential pecuniary benefits, higher probability of arrest and higher probability of . Although lower economic growth is generally associated with more , many societies will likely experience lower crime rates for some time as social distancing measures will be kept, at least until a vaccine is discovered.
- Society: The outbreak has spurred a series of local and national initiatives to help those most hurt by the crisis. This happened everywhere in the world, starting in China, where the virus hit first. Initiatives include fundraising, advocacy, small-community groups delivering essential supplies to the elderly, etc. Along with this improvement in horizontal , a good response to this emergency is based on trust in the government directives and experts, representing the vertical social capital. Higher levels of social capital in a society have been shown to relate to social and economic outcomes, such as, and . If the current crisis leads to permanent higher level of social capital in societies, then the crisis might have positive effect in the future.
- Consumption: It is well documented that negative economic shock affects , both short and long-term. One possible consequence of the crisis is going to be on saving patterns. Although governments reacted rapidly to support those who have lost income, it might take some time for people to actually receive this money. Also, some people might be excluded from the assistance schemes. As such, many people around the world are forced to use their savings to survive in such unexpected circumstances. However, large fractions of the population have little or no savings that could help them buffer the effects of such a situation. This experience will raise awareness about the importance of savings and, consequently, lead to greater savings, whenever possible. In turn, the economy will benefit from this higher propensity to save, especially when the financial sector is back in action.
- Homeworking: the process of performing some jobs remotely started some years ago, especially since the spread of broadband. The coronavirus outbreak sensibly accelerated the process as it has for government workers. It is likely many jobs will continue to be performed from home, even when things get better. Will this process have any economic payoff? The economic literature finds mixed results about the impact of teleworking on . Moreover, the effect is likely to vary across job types. For example, a paper published in found that productivity increased for more creative jobs, whereas repetitive jobs saw no change. Teleworking might also lighten state bureaucracy, cut pollution from transport and offer workers more work-life balance by cutting out the commute.
This is an edited version of a blog soon to publish by .