Individualism, Polarization and Recovery from the COVID-19 Crisis
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DOI: 10.1007/s10272-020-0928-7
End of previous Forum article
Barry Eichengreen
Individualism, Polarization and Recovery from the COVID-19 Crisis As Intereconomics and CEPS hold their annual conference, the United States and Europe are experiencing another wave of COVID-19 cases. When analyzing the causes and consequences, it is important to be aware that the situation is continuing to change – that one is aiming at a
Barry Eichengreen, University of California, Berkeley, USA.
ZBW – Leibniz Information Centre for Economics
moving target. Moreover, every national case has its distinctive characteristics, though I will argue that one can still discern some regularities, albeit with exceptions that, as they say, prove the rule. © The Author(s) 2020. Open Access: This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (https://creativecommons.org/licenses/by/4.0/). Open Access funding provided by ZBW – Leibniz Information Centre for Economics.
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Containment and recovery A first regularity is that success at containing the spread of the virus and economic recovery go together. In a National Bureau of Economic Research working paper issued in October, Fernánde-Villaverde and Jones (2020) analyze data through the second quarter of the year. They situate different countries and US states in a twoby-two matrix, with COVID-19 deaths (high or low) on one axis and GDP loss (high or low) on the other. They show that most countries fall along the diagonal – high for both or low for both. This illustrates the well-known point that without successful containment of the virus, there can be no sustained economic recovery. Without containment, consumers will be reluctant to go shopping. Families will be reluctant to eat out. Businesses will be reluctant to invest given this subdued consumer spending and virus-related uncertainty. There are exceptions, to be sure. Compared to other countries and US states, California has relatively low COVID-19 deaths but high GDP losses. This may reflect the idiosyncratic preferences of California’s leaders and their constituents, Californians being notoriously idiosyncratic. More seriously, California is the bluest of blue, or Democratic-leaning, states and blue states approach the problem differently from red, or Republican-leaning, states (more on partisanship below). Or it may be that California’s real-estate and high-tech heavy economy has been disproportionately affected by the pandemic. Another exception is that the US economy recovered well in the second and third quarters of 2020 despite the country’s poor performance on the public-health front. My suspicion is that this anomaly will resolve itself through weaker consumer spending going forward. The US hit a fiscal cliff in the third quarter, with the expiry of significant portions of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Substantial parts of the country that had avoided the virus have now become COVID-19 hotspots. There is a considerable likelihood of t
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