Why the Global Recession Could Last a Long Time

LONDON — The world is almost certainly ensnared in a devastating recession delivered by the coronavirus pandemic.

“I feel like the 2008 financial crisis was just a dry run for this,” said Kenneth S. Rogoff, a Harvard economist and co-author of a history of financial crises, “This Time Is Different: Eight Centuries of Financial Folly.” Story continuesBut even after the virus is tamed — and no one really knows when that will be — the world that emerges is likely to be choked with trouble, challenging the recovery. Mass joblessness exacts societal costs. Widespread bankruptcy could leave industry in a weakened state, depleted of investment and innovation.

Americans boosted their rates of savings significantly in the years after the Great Depression. Fear and tarnished credit limited reliance on borrowing. That could happen again. When the pandemic emerged, initially in central China, it was viewed as a substantial threat to that economy. Even as China closed itself off, conventional wisdom held that, at worst, large international companies like Apple and General Motors would suffer lost sales to Chinese consumers, while manufacturers elsewhere would struggle to secure parts made in Chinese factories.

Trillions of dollars in credit and loan guarantees dispensed by central banks and governments in the United States and Europe have perhaps cushioned the most developed economies. That may prevent large numbers of businesses from failing, say economists, while ensuring that workers who lose jobs will be able to stay current on their bills.

Worldwide, foreign direct investment is on track to decline by 40% this year, according to the United Nations Conference on Trade and Development. This threatens “lasting damage to global production networks and supply chains,” said the body’s director of investment and enterprise, James Zhan.

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Calm your tits.

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