The Great Lockdown: Worst Economic Downturn Since the Great Depression
The trying times, which we are right in the midst of, are in no way close to normal. The new normal that we are forced to migrate is the initial aftermath of something worse than the great depression.
The great lockdown has shunned every aspect of human life into complete dismay. But none has received the extent of battering that economic health of the nation in this short period.
The IMF during the initial phase of lockdown predicted that the rate of global growth will shrink by 3%. But as we enter into the phase of unlock, the contraction rate has been increased to 4.9%.
The nature of economic fallout during the great depression closely replicates the current economic depression caused by the pandemic. The only difference is the scale, as the current economic depression has a lot more sting.
What started as a normal recession in 1929 quickly escalated into this great depression and after four years i.e. 1933, the US saw an unemployment rate of 25%.
Today nearly after 4-5 months of the Pandemic, nearly 22 million, which come around to 13% of the US labor force, have a field for unemployment. Until some concrete medical solutions arrive, the numbers will rise with every passing day, month, and year.
Generally, when we calculate the impact of economic harshness of the situation, experts try to paint a picture wherein a developed country has the gut to absorb the shock. It is the developing economies that face the ruthless badgering at the hands of recession.
However, Covid-19 seems to have levelled the playing field in terms of the adverse impact that recession has on both developed and developing economies.
The great lockdown: developed and developing economy
The developed and developing economies are facing something unprecedented. But with limited power to work around with fiscal and monetary policy, the developing economy is facing the heat.
The point here is as we are heading towards the phase of reopening in the economy, amidst the fear of a second wave. The health infrastructure of the developing economy can provide 2.2 doctors for 1000 patients, while a developed economy has 14 doctors to attend the same number of patients.
The gradual decline in the health of manufacturing and the service sector with disruption in supply has brought the developing economies to their knees. The only way out here is a collaborative effort for a win-win situation for both the economies, is what the current situation demands.
As of the latest update IMF is already coming to the aid of a weaker economy, and nearly 90 of them initially plead for financial aid to the IMF.