The drama that has presided over the action of almost all governments due to the tremendous health threat posed by the coronavirus, is being transferred to the economy, which is currently sunk deeper than it was in the crisis of 2007. In In this context, citizens read and listen every day to catastrophic forecasts and revolutionary structural changes in the economy.
It is worth wondering if this scenario is the result of a state of academic paranoia and the fear that an unknown disease for which there is no cure has brought and which has largely paralyzed industrial production, commercial activity, etc. or, in fact, some very difficult years will come and workers will go out of this crisis late and much worse than they were last February.
There is no doubt that the economic damage that confinement and the stop of all or almost all economic activity have produced is enormous. What has been the cost in terms of GDP must be calculated by refining the everyday changing estimations. For the future, nothing is certain, but what does seem quite clear is that the forthcoming economic recovery will depend, rather than on structural changes in production and demand, on the evolution of the pandemic and on whether efforts in medical research are soon successful, so an effective vaccine or medicine against the disease is found.
Citizens, businessmen and workers have a lot to do in the economic recovery with the follow-up they will make of the instructions and recommendations that the authorities have been giving us to contain the pandemic. This is the lever that, from now and until a vaccine is found, will favor an acceptable economic reactivation. Because the problems that affect us are not the same, at least in their causes, to those we had in 2007, and fortunately the ECB is not going to take this time wrong financial measures.
Companies are ready, the financial system has not suffered, as in 2007, a crash after another, and the markets have not had a collapse, but rather a paralysis - except perhaps tourism if we cannot solve it to some extent this summer. Companies will resume their activity with their previous system and productive organization. Changes and adaptations will take place, which will possibly be an acceleration of those already started before (telecommuting and electronic commerce, fundamentally). But the economic activity of companies, their resumption, is fundamentally linked to health, to how the pandemic evolves and how we cope with it, rather than to the adoption of new technologies or production methods. We have seen these days, with the limited opening of the bars, how consumers have returned to the pleasant “job” of spending and consuming.
However, what is certain is that the support of the economic activity will cost much money to the State. It is already being the case, with skyrocketing expenses and small public incomes. The adjustments will come in future years. They will be very hard…. but this is another topic.
Our confidence and all the commitment of society and government are that companies start to normally work as soon as possible. But for them to work, and to create jobs, they will need, as always, Demand and Liquidity.
The first will take time to adjust to the supply, but as we have seen previously, it may not take longtime to get it since the market does not seem to have suffered major contractions. With the help of the government, and also of the European Union, the lack of liquidity will not lead the business to bankrupt, companies will be able to conserve the workforce, and ERTES (temporary workforce restructurings) will not become ERES (layoffs). This is the government's endeavor, for which the help of financial funds coming from European Union, will be essential.
The days and weeks go by, and the pandemic has greatly reduced in Spain, but it is still with us, and the rules that regulate the lives of citizens and economic activity, are numerous and very important to be followed. But capitalism has to rise from this prostration because it has no alternative, and it is within it - public or private research - that the definitive solution must be found.
We need to adapt to living with the virus, and the way we do it will greatly alleviate the serious problems and difficulties it has brought us. We will have to be flexible and disciplined, but removing the fear of consumption and avoiding excessive savings. The same can be said of the target countries of our exports and the origin of our tourism. There are many companies that have understood it in this way, such as those that have joined the initiative “This DOESN'T have to STOP”, which intend to tackle the new challenge of accelerating and activating the economy to overcome the social and economic consequences that the health crisis is provoking in the economy (El País 24/5/2020).
Very importantly, we have the right to demand a convincing and healthy government focused, above all, on health and on strengthening and helping the economy. It must be the leader of a society that wants companies to be supported to preserve employment. In this situation, we should, if necessary, postpone some reforms that need to be made because now may be not the right time. And especially, dialogue and dialogue…
Author: Nuria Alcalde Fradejas
(The opinions expressed in this article are the sole responsibility of the author)
