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Jeffrey Sachs: The aftermath of a tsunami like pandemic

On 30th of March, world-renowned developmental economist and Columbia University Professor Jeffrey Sachs was the inaugural guest of the “Corona Dialogues” series, launched by the Center for International Relations and Sustainable Development (CIRSD) in which CIRSD President Vuk Jeremic talks with highly-regarded experts from different fields in order to better understand the coronavirus pandemic and the consequences it will cause globally.

During the discussion Sachs said the virus will have devastating consequences, similar to those of an earthquake or tsunami, and that the crisis will last for at least two years after the pandemic ends, underlying that "things will never be the same again”.

“New York City became the epicentre of the epidemic in the last week. The hospitals are packed, there is a shortage of equipment, and the entire city is in lockdown. This is also happening in other parts of the world, but some places are a week or two ahead. The United States and New York were not prepared at all, and by the time the people realized the magnitude of the disaster, the virus had spread greatly", Sachs said.

Jeremic described the pandemic as an unprecedented event and said that the world has been overwhelmed by chaos, as nearly one-third of the world's population is in some kind of isolation and the rest is likely to follow in those steps.

Commenting on the repercussions on the global economy, Sachs said the measured downturn of the gross domestic product will be the sharpest decline recorded in modern history.

"The drop in trade and difficulties in global supply chains are likely to persist for the next year or two. Countries should be able to come out of the extreme lockdown within 60 or 90 days, but we will not return to normalcy in this world for one or two years minimum. At the end of this we will have a ‘new normal’ or a ‘chronic abnormal’. We will not simply bounce back”, Sachs said.

Sachs pointed out that the current disruptions are serious and will be persistent, and that it will be difficult for poor countries to recover from the damage in the short term.

"The economy will be restructured, more things will be done online and virtually. We will have more e-commerce and more ways to use the digital infrastructure", Sachs emphasized.

Sachs said the U.S. economy generates $ 21 trillion annually, so the recently adopted $ 2 trillion emergency relief package makes up around 10 percent of the national income that America can withstand. He added that the International Monetary Fund should also give countries money in order to cope with the epidemic and take care of the long-term consequences later.

"A global response and global cooperation is needed to defeat the pandemic," Sachs said.

Jeremic pointed to the example of Sweden that did not impose drastic measures, and asked his interlocutor what will be the economic cost of a complete lockdown and whether this is the only way to deal with the pandemic.  

Sachs replied that the assumptions of the world's epidemiologists are that half of the world's population could have been infected in a few weeks or months had the virus spreads uncontrollably.

"An uncontrolled epidemic in the U.S. could infect 250 million people, 25 million of whom would be taken to hospitals, and two to three million would die. This is beyond imaginable. The lockdown solution originated in China, and we are now all looking at that experience. It seems from the data the reported number of new cases and deaths stopped rising. The question remains whether the data is accurate”, Sachs said. 

Jeremic asked whether democracy will be another victim of this crisis, and if we were in a danger of living in a "Big Brother society", to which Sachs replied that if democracies get the pandemic under control this will imply that basic democratic institutions are not "fatally weakened". If democracies prove unable to act, the consequences for political institutions will be much greater.

"In the 1930s it was said that democracy is dead and only fascist regimes can recover the economy, which turned out to be a disastrously wrong idea. Democracies flourished after World War II and proved wrong those who claimed the ‘death of democracy’”, Sachs concluded.

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