The world has been taken aback by the exponential spread of the Covid 19, catching government leaders by surprise. Needless to say, a universal concern is their country’s economy and to a larger extent, the world’s.
The number of cases of the coronavirus is still rising and its effect on the economy will largely depend on how long the infection continues to spread, what measures government leaders are taking to control it and what support the government is willing to provide to offset the effects of the disease on the economy.
The economic slowdown, at first thought to be China-centric, is now felt everywhere. Major stock market indices plummeted from beginning of January 2020 to end of March 2020. The Covid 19 outbreak in China has slowed down somewhat although the country still has the highest number of cases. Eyes have been focused on Italy, where the disease spread rapidly, from 3 cases to almost 74,000 in a month.
The UK, widely criticised for its slow response to the new coronavirus epidemic, is suffering the consequences of its leaders’ insouciance. It now has more than 9,500 cases of confirmed Covid 19 and 465 deaths in its population of 76 million, an astounding leap from only 9 cases a month ago.
In comparison, Japan located halfway across the globe is separated from China only by a narrow stretch of ocean. China was the epicenter of the coronavirus outbreak with more than 80,000 infected people and Japan had its first case of the disease in late January.
But Tokyo’s government acted quickly to halt its spread. Before January ended, it already had travel restrictions in place. Soon thereafter, Prime Minister Shinzo Abe and his Cabinet approved a bill giving the government free reign to enact measures to protect its people, while asking for the public’s understanding and support.
As a result, the contagion in Japan was relatively slower. For its people of 1.26 million, it had 1,300 infections and 45 deaths from Covid 19. The WHO data in Feb. 5 showed that Japan was #2 with the most cases outside of China. It has now slid down to #17.
The consequences of the coronavirus fear are real. Disruptions in the supply chain are affecting manufacturing in the various industries. Oil producers are maintaining current production levels in spite of falling prices. Companies are dealing with issues of protecting their employees, minimizing the financial losses, maintaining stability and handling market uncertainties.
Travel restrictions are hurting the economy, with airlines slashing fares, hotels facing vacancies, and employees taking compulsory leaves or facing layoffs. Once bustling tourist destinations have become ghost towns overnight, and local and chain retail and dining establishments are experiencing significant losses or closing shop.
How government leaders deal with the economic aftermath of Covid 19 determine in part the rate of recovery of their countries. Their initial reactions have been varied, from comical and ridiculous to practicable and judicious. For the former, these heads of state only took the coronavirus seriously when reality set in.
Pres. Trump’s unbelievable initial reactions to the outbreak: It’s very much under control in the USA. The Democrats are politicizing the coronavirus. The WHO’s death rate estimate is false and he has a hunch. Etc., etc.
Later, realizing the truth of the gravity of the outbreak, he promised a stimulus package that offered the following: 0% payroll tax rate for the rest of the year, extended paid sick leave, federal assistance for the shale industry as oil prices have been pushed back as a result of feuding Russia and Saudi Arabia, among them. More may be coming or withdrawn. US equity markets have responded accordingly, losing when panic peaked and rebounding with Trump’s announcement.
Then there’s UK Prime Minister Boris Johnson. On the coronavirus tragedy that befell the cruise ship Diamond Princess where 78 Britons were among the 2,600 passengers quarantined, the “part-time” minister was criticized for his procrastination in helping them.
Typical of his lackadaisical approach, Johnson announced a much-delayed COBRA meeting on the coronavirus outbreak in March, more than a month after the discovery of the first two cases in the UK. The four-part plan: contain, delay, research and mitigate. Wash your hands while singing Happy Birthday twice.
Now that the WHO has declared the Covid 19 a pandemic, and with an MP confirmed to have the disease, things have changed. Johnson, who complacently thought that Number 10 was immune from the virus, is now taking the threat of a sharp escalation of cases in earnest. His government is releasing £38 billion pounds to shield its economy from the impact of the coronavirus, the Bank of England declared an interest-rate cut, and public funds will be available for Covid 19-infected Brits.
Japan’s biggest challenge in the coronavirus outbreak came from the Diamond Princess quarantine where it was widely criticized for the spread of Covid 19 inside the ship. The Diamond Princess infections and deaths were treated as a separate category from the country as it was not Japanese-owned and the passengers came from 52 different countries.
Now that it is over, the next issue of greatest concern is the Tokyo 2020 Olympics that is scheduled for late July. With three months to go, cancellation is not yet an option.
Japan’s economy had already slumped in late 2019 as a result of tax hikes and a trade war with South Korea. The Covid 19 pandemic will further contract its declining economy until the disease is contained. Decreased consumer spending from a decline in locals due to sales tax hikes, a disrupted supply chain, and a sharp drop in tourism are projected to further hurt the economy.
To Japan’s benefit, it doesn’t have a blustering president who makes silly pronouncements or a prime minister who performs vanishing acts. Abe Shinzo takes full responsibility for decisions made, operations that failed and plans for mitigating the slowed growth to Japan’s economy.
But, is a country’s economy really dependent on its current leader? It’s a question that’s been debated by political analysts and economists for years. Some argue that leaders in democracies only have a few options, limited by legislative issues while in communist countries, a leader may order a total lockdown of a city and electronic surveillance of its residents. Neither have helped their economies.
Ultimately, a country’s economy is best helped by a knowledgeable and selfless leader with a clear vision of goals, a focus to achieve them, political will and courage, and humility to admit faults, accept change and listen.