![\"\"](\"https:\/\/i0.wp.com\/www.mauritiustimes.com\/mt\/wp-content\/uploads\/2018\/02\/The-Conversation-e1535448713758.jpg?resize=146%2C15&ssl=1\")
<\/p>\n<\/p>\n
<\/p>\n
<\/p>\n
![\"\"](\"https:\/\/i0.wp.com\/www.mauritiustimes.com\/mt\/wp-content\/uploads\/2020\/05\/Claires.jpg?resize=640%2C427&ssl=1\")
<\/p>\n
The government will need to increase benefits for the thousands left unemployed due to the coronavirus lockdown. Shutterstock<\/span><\/p>\n Many opponents of the prolonged lockdown\u00a0argue\u00a0that as it is severely damaging the economy, ending it is the only way to bring the economy back to life. But the economy is already being damaged by this virulent, fast-spreading virus, to which there is no cure and currently no vaccine. Historical evidence from the\u00a01918 flu\u00a0shows that\u00a0extending public health measures to prevent the spread of a virus does less economic damage in the long run than letting it ravage the entire population.<\/span><\/p>\n History also shows that pandemics have a\u00a0long-lasting and severe effect\u00a0on the economy. Looking at 15 major pandemics in Europe, from the\u00a0Black Death\u00a0in 1347 to the 1918 flu, researchers found that interest rates \u2013 and therefore investment \u2013 was depressed for between 30 and 50 years following an outbreak. This suggests that a\u00a0\u201cV-shaped\u201d recovery\u00a0\u2013 where economic growth returns to its previous level by the autumn \u2013 is highly unlikely.<\/span><\/p>\n Already the coronavirus has reduced economic activity by 30%, more than in the 1930s\u00a0great depression, with unemployment rising to levels last seen in the 1980s\u00a0during the Thatcher years. The cost to the government of preventing a deep depression will far exceed the already\u00a0unprecedented sums\u00a0it is currently spending on providing short-term relief.<\/span><\/p>\n The government has exceeded its expectations in changing our behaviour. It is the fear of the pandemic that has made the lockdown successful. Lifting it will not remove that fear, which will continue to have a\u00a0profound effect\u00a0on consumer and business confidence, and economic output across the whole economy.<\/span><\/p>\n People will be\u00a0reluctant to return to work\u00a0or go shopping while the virus is still around. They will also hesitate to take on major financial commitments, such as\u00a0buying a house. And businesses will be reluctant to make major investments, or even re-employ all their\u00a0furloughed\u00a0workers while the\u00a0economic outlook is so uncertain.<\/span><\/p>\n The pandemic has administered a severe\u00a0supply-side shock\u00a0to a major part of the economy, with thousands of firms in the retail, travel and hospitality sectors, including British Airways and Debenhams, either\u00a0laying off thousands of staff\u00a0or going bankrupt. The\u00a0collapse of global supply chains\u00a0has also hit manufacturing. And our exports will be damaged by the\u00a0global recession.<\/span><\/p>\n The millions of workers who will be permanently laid off in these industries will reinforce the downward spiral, reducing demand for goods and services across the whole economy. It will also\u00a0negatively affect people\u2019s health. And the lack of jobs will mean dire prospects for young people who are just starting out.<\/span><\/p>\n Only the government can prevent this spiral of despair, by restoring business and consumer confidence, providing\u00a0income support to prevent mass poverty, and directly intervening to revive industry.<\/span><\/p>\n The government will need to take centre stage in restructuring our crippled companies. It must take a strategic role, using its leverage to back those sectors that will improve productivity, if necessary by taking strategic stakes in vital industries like transport and utilities. We must not repeat the mistakes of the 2008 bailout, where banks prospered while\u00a0real incomes for the majority stagnated.<\/span><\/p>\n To boost demand, the government will have to provide higher \u2013 and unconditional \u2013 benefits for the millions who will be unemployed, maybe moving towards a\u00a0minimum income guarantee. It might also provide temporary government jobs to improve our social and physical infrastructure, such as happened in the\u00a0New Deal\u00a0in 1930s America, which improved schools and hospitals, built national parks and planted trees, and took plays around the country.<\/span><\/p>\n With industry on its knees, the government must play a bigger role in increasing investment to boost demand and ensure that our economy becomes more productive and more resilient in the long term. This must include major investments in our run-down public services, especially research and education, health, and the tottering under-funded social care system.<\/span><\/p>\n And the government will have to take a much more active role in the labour market, heavily subsidising jobs and training to\u00a0encourage growth\u00a0in the key sectors needed in the future.<\/span><\/p>\n It has already abandoned economic orthodoxy in the face of the crisis with its programme of temporary relief. But it must go much further, accepting a level of government debt that would be unimaginable before the crisis, and a level of intervention in the economy that is incompatible with its belief in untrammelled free enterprise.<\/span><\/p>\n It would be inconceivable if the UK government sought to manage that debt by a\u00a0return to austerity. In the long term, the debt will be diminished by economic growth and modest inflation, while the recent drop in interest rates has reduced the cost of servicing it.<\/span><\/p>\n Over time, these measures could ensure not just an economic recovery, but also a society that is more resilient, fairer and more cohesive than what we have seen since the\u00a0last financial crisis in 2008. Unless the government succeeds in reviving the economy as well as defeating the virus, it risks losing any newfound trust in its ability to govern.<\/span><\/p>\n By Steve Schifferes,<\/span> * Published in print edition on 12 May 2020<\/span><\/p>\n","protected":false},"excerpt":{"rendered":" here\u2019s how the government can aid recovery<\/p>\n","protected":false},"author":139,"featured_media":26894,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[8348],"tags":[21808,2782,24883,23023,24882],"class_list":["post-26892","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-the-conversation","tag-coronavirus","tag-debt","tag-economic-recovery","tag-recession","tag-uk-economy"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/www.mauritiustimes.com\/mt\/wp-content\/uploads\/2020\/05\/Claires.jpg?fit=1200%2C800&ssl=1","jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/p8QzSF-6ZK","_links":{"self":[{"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/posts\/26892","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/users\/139"}],"replies":[{"embeddable":true,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/comments?post=26892"}],"version-history":[{"count":0,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/posts\/26892\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/media\/26894"}],"wp:attachment":[{"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/media?parent=26892"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/categories?post=26892"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.mauritiustimes.com\/mt\/wp-json\/wp\/v2\/tags?post=26892"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nA decade of despair<\/span><\/h4>\n
Long-term measures<\/span><\/h4>\n
\n
\n<\/strong>Honorary Research Fellow, City,
\nUniversity of London<\/span><\/p>\n
\n