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Chinese economy

China’s economy: the risk of a second coronavirus wave

Hopes for a strong recovery from a disastrous first quarter are at risk from new infections and a collapse in exports




On the same day that Chinese authorities began to relax a 77-day quarantine on Wuhan, the city that exported coronavirus across China and ultimately to every corner of the world, a small town on the country’s border with Russia was locked down for the second time in three months.

On April 8, residents of Suifenhe in northeastern Heilongjiang province were ordered to stay at home, with only one member of each household allowed out every three days to buy food and other supplies. Train services to Harbin, the provincial capital, were suspended. Like Wuhan, Harbin is a major industrial city with a population of about 11m people.

Most of the Chinese cities, towns and villages that were locked down at the peak of Wuhan’s epidemic in January and February were relatively unscathed by the first outbreak of coronavirus. At the time, Suifenhe was reported to have had no official cases.

But now Suifenhe faces a real crisis, after Chinese nationals returning home from Russia triggered a much-feared “second wave” of infections. The city has more than 320 confirmed cases and almost 1,500 people in centralised quarantine facilities.



A volunteer holds a sign with a QR code to indicate health status at an entrance to a residential compound following an outbreak of the coronavirus disease (COVID-19), in Suifenhe, a city bordering Russia in China's Heilongjiang province, April 15, 2020. REUTERS/Huizhong Wu - RC225G90XNHI
A volunteer holds a sign with a QR code to indicate health status in Suifenhe, where only one member of each household was allowed out every three days to buy food and other supplies © Huizhong Wu/Reuters

FILE PHOTO: A man walks past a giant statue of a Russian Matryoshka doll on a street in Suifenhe, China, a city in Heilongjiang province on the border with Russia April 12, 2020. REUTERS/Huizhong Wu/File Photo - RC266G9SEMJT
Suifenhe: 'Lots of small businesses here did not make it to March,' says Lin Xianfeng, who runs a renewables company in the city © Huizhong Wu/Reuters



“Lots of small businesses here did not make it to March,” says Lin Xianfeng, who runs a renewables company in the city that turns biomass, such as scrap lumber and forest debris, into energy.

“They just closed for good. Now we face a very tough time as well. I worry about my business every day.”

The situation in Suifenhe typifies one end of an extremely diverse spectrum in China, as President Xi Jinping’s administration struggles to restore the world’s second-largest economy to something approaching normality. At the other end of the spectrum, many large cities across the country appear to have bounced back from the lockdown, with the only reminder of the crisis being the number of people wearing masks on the streets, on public transport and in their offices.

US sportswear company Nike said this week that 80 per cent of its China stores were open in cities such as Shanghai, which shows few visible signs of the pandemic. Car factories in Chengdu, capital of southwestern Sichuan province, have restored operations with little disruption, other than the use of face masks and other protective gear and social distancing in the canteen.



BEIJING, CHINA - APRIL 08: Chinese workers and health officials wear protective white suits as travellers from Wuhan gather to take buses as they are processed and taken to do 14 days of quarantine, after arriving on the first trains to Beijing on April 8, 2020 in Beijing, China. China lifted its lockdown on Wuhan, the first epicentre of COVID-19 after 76 days, allowing healthy people to leave. China recorded for the first time since January 21st no coronavirus-related deaths. With the pandemic hitting hard across the world, officially the number of coronavirus cases in China is dwindling, ever since the government imposed sweeping measures to keep the disease from spreading. For more than two months, millions of people across China have been restricted in how they move from their homes, while other cities have been locked down in ways that appeared severe at the time but are now being replicated in other countries trying to contain the virus. Officials believe the worst appears to be over in China, though there are concerns of another wave of infections as the government attempts to reboot the worlds second largest economy. In Beijing, it is mandatory to wear masks outdoors, some retail stores still operate on reduced hours, restaurants employ social distancing among patrons, and tourist attractions at risk of drawing large crowds remain closed or allow only limited access. Monitoring and enforcement of virus-related measures and the quarantine of anyone arriving to Beijing is carried out by neighborhood committees and a network of Communist Party volunteers who wear red arm bands. Since January, China has recorded more than 81,000 cases of COVID-19 and at least 3200 deaths, mostly in and around the city of Wuhan, in central Hubei province, where the outbreak first started. (Photo by Kevin Frayer/Getty Images)
Beijing: Chinese workers and health officials wear protective white suits as travellers from Wuhan gather to be taken into 14 days of quarantine after arriving in the capital © Kevin Frayer/Getty

Travellers are seen inside Hankou Railway Station after travel restrictions to leave Wuhan, the capital of Hubei province and China's epicentre of the novel coronavirus disease (COVID-19) outbreak, were lifted, April 8, 2020. REUTERS/Stringer CHINA OUT. TPX IMAGES OF THE DAY - RC2D0G9M2R4V
Travellers gather in Hankou railway station in Wuhan after travel restrictions on leaving the city were lifted recently © Reuters



“Companies are all back to work and working without restrictions [although] wearing masks in the office is normal and wearing masks outside is normal,” says Paul Sives, head of the European Chamber of Commerce in south-west China, of the situation in Chengdu. Whether Suifenhe’s relapse — or Chengdu’s relative vibrancy — is the more accurate harbinger of China’s near-term future has enormous implications for both its economy and the rest of the world.

The first country to have a significant outbreak of the virus, China is also the first large economy to try to reopen after a lockdown. How Beijing fares in trying to restart economic activity without sparking a new round of infections will shape the response in much of the rest of the world.

On Friday, the National Bureau of Statistics reported the first official year-on-year decline in economic output in more than 40 years. First-quarter gross domestic product fell 6.8 per cent — something unimaginable in the pre-coronavirus era. However, a range of other indicators, formal and anecdotal, suggest China’s economy may have at least hit bottom in the first quarter.

Coal consumption at large power plants has recovered to 90 per cent of 2019 levels. China’s official unemployment rate also improved slightly in March, falling to 5.9 per cent from February’s all-time high of 6.2 per cent.George Lau, who runs an inspection and certification business in southern Guangdong province, says “the traffic jams are almost as bad as before”.

Eswar Prasad, a China expert at Cornell University, says Friday’s GDP numbers are “a bellwether of what the data for other major economies will reveal in the coming weeks”. He adds that while the “apparent stabilisation” in recent indicators has provided “grounds for at least mild optimism, the magnitude of this collapse makes it even more puzzling how China’s economy seems to be getting back on its feet despite the government’s relatively modest stimulus measures thus far.”

People wearing face masks, walk near a shopping complex after lockdown in Wuhan, the epicentre of China's novel coronavirus disease (COVID-19) outbreak, is lifted, in Wuhan, Hubei province, China, April 9, 2020. REUTERS/Aly Song SEARCH "WUHAN REEMERGING" FOR THIS STORY. SEARCH "WIDER IMAGE" FOR ALL STORIES. TPX IMAGES OF THE DAY - RC241G9DESLK
People wearing face masks,walk near a shopping complex after the lockdown in Wuhan was lifted © Aly Song/Reuters


Workers assemble cars at the Dongfeng Honda Automobile factory in Wuhan in central China's Hubei province on Wednesday, April 8, 2020. Wuhan is a major center for heavy industry, particularly autos, and while many major plants have restarted production after a major disruption due to the coronavirus, the small and midsize businesses that employ the most people are still hurting from both a lack of workers and demand. (AP Photo/Ng Han Guan)
Workers assemble cars at the Dongfeng Honda factory in Wuhan. President Xi Jinping’s administration is now struggling to restore the world’s second-largest economy to something approaching normality © Ng Han Guan/AP


For Mr Xi, there are two main dangers to this incipient recovery as China starts to go back to work.

First, a resurgence of the pandemic in the world’s most populous country.

And second, a collapse in demand in the US and EU.

On Tuesday, the IMF predicted the US economy would shrink 5.9 per cent this year because of its even greater struggles with coronavirus, while China will manage 1.2 per cent growth for the full year. Chinese exporters are already bracing themselves for a fall in many of their main markets, wary that a modest recovery in shipments last month was flattered by orders that did not make it on to ships in January and February.

“External demand is one of three major economic headwinds ahead which will cause the recovery to be W-shaped instead of V-shaped,” says Larry Hu, chief China economist at Macquarie. The other two challenges, he notes, are falling property prices and deflation.

China and Russia border map

Ding Shunlian, whose company makes machine tool components in eastern Shandong province, describes the Catch-22 that Chinese exporters have experienced over the first four months of this year. “First we had orders but no workers to fulfil them,” he says. “Now our workers are back but we don’t have any orders.

“My only goal is survival, to make it through this year,” Mr Ding adds. “Hopefully after the virus, orders will come back to us.”

The Chinese government’s rapid reaction to the new outbreak in Suifenhe, and its extremely cautious management of cities such as Wuhan and Beijing over recent weeks, highlights just how worried it is about any new outbreak. That in turn is an indication of the even greater challenges that will confront New York, London and other metropolises when they too try to jump-start their economies.

Some 68,000 of China’s confirmed 84,000 cases, or 80 per cent, were in Wuhan or surrounding Hubei province, with no other region recording more than 1,600 infections. The US, by contrast, is well on its way to having multiple Hubeis, with nine states having more than 20,000 cases each.



For many people, including US president Donald Trump, China’s infection count seems too low to be true. The Chinese government waited at least a week before first publicly acknowledging that the disease could spread by human transmission. And Wuhan’s mayor said publicly that at least 5m people left the city, many of them flying overseas, before the city was locked down on January 23.

Yet, while most experts agree a large number of infections and deaths went unrecorded either intentionally or accidentally in the weeks and months before Wuhan’s lockdown, there has been no compelling evidence that outbreaks are currently being hidden or overlooked. While Wuhan on Friday raised its death toll by 50 per cent, the Chinese government remains on high alert.

“Containing infection remains a daunting task, with imported cases and sporadic local infections entwined,” a Chinese Communist party coronavirus task force headed by Premier Li Keqiang said on Thursday. “The situation demands full attention and allows for no slackening of efforts.”


BEIJING, CHINA - APRIL 15: Chinese commuters wear protective masks as they look at their mobile phones while riding the subway during rush hour on April 15, 2020 in Beijing, China. China lifted its lockdown on Wuhan, the first epicentre of COVID-19 after 76 days last week, allowing healthy people to leave. With the pandemic hitting hard across the world, officially the number of coronavirus cases in China is dwindling, ever since the government imposed sweeping measures to keep the disease from spreading. For more than two months, millions of people across China have been restricted in how they move from their homes, while other cities have been locked down in ways that appeared severe at the time but are now being replicated in other countries trying to contain the virus. Officials believe the worst appears to be over in China, though there are concerns of another wave of infections as the government attempts to reboot the worlds second largest economy. Since January, China has recorded more than 81,000 cases of COVID-19 and at least 3200 deaths, mostly in and around the city of Wuhan, in central Hubei province, where the outbreak first started. (Photo by Kevin Frayer/Getty Images)
Chinese commuters in Beijing. Authorities in the capital are enforcing strict quarantine rules that make business travel to or from the capital impossible © Kevin Frayer/Getty



People wearing facemasks amid the concerns over the COVID-19 coronavirus commute on a street in Beijing on April 7, 2020. (Photo by NICOLAS ASFOURI / AFP) (Photo by NICOLAS ASFOURI/AFP via Getty Images)
How Beijing fares in trying to restart economic activity without sparking a new round of infections will shape the response in much of the rest of the world © Nicolas AsfouriI/AFP/Getty


The nervousness is particularly evident in Wuhan. The city’s “liberation” has in reality been only a partial one. Residents from other areas of China who were trapped there when the city was quarantined have been allowed to leave — provided they pass medical checks. It is even harder for native residents of Wuhan and other areas of Hubei province to travel within China.

Min Zhou, a Hubei native, had hoped to resume her life as a migrant factory worker in southern Guangdong province after her hometown, Ezhou, reopened on March 25. In the end, she says, she chose not to use her return train ticket to Guangdong, fearing it would be difficult to find factory jobs as overseas orders dried up and that workers from Hubei might be shunned by employers because of more stringent health checks and quarantines required by local authorities. Ms Min has instead found work at an electronics factory in Ezhou, which is near Wuhan.

For their part, authorities in Beijing are enforcing strict quarantine rules that make business travel to or from the capital impossible. Anyone arriving from other parts of China must obey a strict 14-day quarantine, sometimes enforced with door sensors to ensure they do not leave their hotel room or residence.

The Chinese government also took the extraordinary step of banning foreign residents who possess valid residence permits from entering the country, even though the vast majority of recent “imported” infections involved returning nationals. This has complicated efforts by many multinational companies and smaller companies reliant on foreign investment to restart their operations.

“I worry that [the ban on foreign residents] is going to be for quite some time,” says Mr Sives.

“There will be a second wave of issues that companies will be affected by very soon.”

Many analysts believe that, for now, the resumption of normal work and life routines in Chengdu is more indicative of the current state of the Chinese economy than the continuing disruptions in Suifenhe, Wuhan and Beijing.

A business activity index created by Trivium, a Beijing-based consultancy, estimates the Chinese economy is currently operating at 83 per cent of “typical output”, compared with 66 per cent in mid-March. That is welcome considering China’s predicament in February but still represents a devastating drop from what might have been expected.

“If we get stuck at this level of output for much longer, there is no way the economy can expand this year compared to last year,” says Trivium co-founder Andrew Polk.

 “It was impressive to get to where we are, but now comes the hard part.”


Additional reporting by Qianer Liu

We must focus attention on our next steps

The lockdowns are necessary to get the disease under control — but they must be brief

Martin Wolf

Corona Forest
© James Ferguson


A journey of a thousand miles begins with a single step. The journey through this pandemic is going to be long and hard. We cannot know where it will end, although it is hard not to speculate.

What we must do instead is focus on the steps right ahead if we are to avoid falling off our narrow path into mass deaths on one side, or economic devastation on the other. If we do not avoid these calamities in the near future, we risk chaos ahead.

Even if we do manage to do so, we will not return to the normality we took for granted until recently. For that, we must at least wait for a cure or vaccine. The economic and social damage will last even longer.

Analysis by the OECD illuminates the economic disruption ahead. This is no ordinary recession or even depression, caused by a collapse in demand. Economic activity is being switched off, partly because people fear contact and partly because governments have told them to stay at home.

The immediate impact of these actions could be a reduction in gross domestic product in the Group of Seven leading high-income countries of between 20 and 30 per cent. Every month that large parts of our economies stay closed, annual growth might fall by 2 percentage points.

Chart of potential impact on actitivyt of shutdowns for g20 countries plus Spain that shows Gross domestic product could fall by huge amounts overnight


Moreover, the costs are unequally shared. Unskilled workers suffer worst from loss of jobs.

People and businesses able to work online, stay working. Those that cannot do so, do not. The costs are not evenly shared globally, either.

Many emerging and developing countries are being hit by collapsing external demand, falling commodity prices and unprecedented capital flight, while also having to manage the pandemic with highly inadequate health systems.

Lockdowns are especially brutal in countries with limited or no welfare states and vast numbers of people who subsist on their daily earnings from a fragile informal economy.

Chart of potential initial impact on activity of shutdowns by sector that shows the closure of services drives the collapse in output


It is right to ask whether such economic carnage can be justified.

Among high-income countries, Sweden has taken the least restrictive approach.

A comparison with Norway makes the trade-off clear: unemployment has risen in Sweden, too, but by far less than in its neighbour; yet the number of deaths is also higher in Sweden.

We should be grateful for the Swedish experiment.

We can learn from it, one way or the other.

My view, however, in line with that of health experts and leading economists, is that the lockdowns are necessary to save health systems from collapse and get the disease under control.

But they have to be brief. It is impossible to keep people locked up indefinitely, without huge personal suffering and social and economic damage.

This is obviously true where governments are unable to offer the costly social protection measures feasible in high-income countries.

Chart of cumulative unemployment benefit claims for Norway and Sweden which shows that Sweden's more relaxed approach means fewer unemployed relative to Norway, where unemployment incrreased rapidly following the national lockdown on March 12


Lockdowns must be a short breathing space before we move to what a group of German experts calls a “risk-adapted strategy”.

During the lockdowns, governments must do whatever is needed to avoid having to employ such heavy-handed interventions again. They do not have much time to do so: a few months, no more. Otherwise, they may have no choice but to imitate Sweden.

Making the lockdowns pay, to allow us to live without them, is the essential first step. The second step is minimising economic damage. Here the focus must be on today, not on the high public debt and other burdens of the future. Sufficient unto the day is the evil thereof.

As in war, one must survive the present if there is to be a future worth having.

Chart of daily deaths with coronavirus (7day rolling average) showing that Sweden's coronavirus toll  is rising much faster than Norway's

In considering what is to be done to manage the devastating economic impact, beyond reopening economies as swiftly as it is reasonably safe to do so, there are three essential considerations.

First, protect the weak, both within countries and among them. A disease threatens all. How one responds is a measure of our ethical standards. It is essential to ensure basic economic security for everybody if they are unable to work.

A temporary universal basic income is one obvious option. Similarly and crucially, ways must be found to support vulnerable economies.

There are many radical possibilities. One is a huge new issuance of the IMF’s Special Drawing Rights, with donation by high-income countries of their share into a trust for the benefit of the most vulnerable developing countries.

Also crucial will be a halt to debt-service payments for the duration of the crisis.

Chart of cumulative change in jobs since Jan 2007 for the US, by skill level, showing that Coronavirus shutdowns hit middle and low skilled jobs hardest in the US. Employment of middle-skills had not yet recovered from the 2008 financial crisis


Second, do no harm. The deepest wound would come from destroying the trading system completely. That would make it vastly more difficult to restore global prosperity after the crisis is over.

Third, abandon outworn shibboleths. Already governments have given up old fiscal rules, and rightly so. Central banks must also do whatever it takes.

This means monetary financing of governments. Central banks pretend that what they are doing is reversible and so is not monetary financing. If that helps them act, that is fine, even if it is probably untrue. In the eurozone, they talk much of eurobonds.

But the support that matters will have to come from the European Central Bank. There is no alternative. Nobody should care. There are ways to manage the consequences.

Even “helicopter money” might well be fully justifiable in such a deep crisis.

Chart of real money flows to emerging markets (centred 6-week moving average, $bn) that shows Covid-19 has generated unprecedented EM outflows

More painful choices than these arise. An emergency like this will be used by would-be tyrants to strengthen their grip. At the same time, some freedoms will have to be given up, temporarily.

Managing such painful trade-offs depends on high levels of trust and trustworthiness, hardly salient characteristics of today’s democracies. But the test is now.

Governments that fail to confront these challenges risk collapse. Political systems that produce such governments risk losing their legitimacy.

We have to get these next steps right. Everything depends on our doing so.

Now Comes The Real Crazy



A recurring theme of modern financial crises is the “temporary” nature of the extreme steps governments take to fix the system.

Recall that the massive increase in the Fed’s balance sheet during its Great Recession asset-buying binge (which is another way of saying “currency printing binge”) was going to be reversed out.

But a funny thing happened on the way back to normal: We couldn’t get there from here.

The Fed actually did raise interest rates and shrink its balance sheet a bit in 2018, but towards year-end the financial markets melted down.

Here’s the S&P 500:

S&P 500 2018 real crazy


This flash bear market was enough to send the Fed back to cutting rates and printing money. And just like that, zero-to-negative interest rates and QE to eternity became permanent features of the global economy.

Then came the pandemic that not only ratified QE but expanded it to cover pretty much any financial asset anywhere, while sending government deficits to levels last seen during World War II.

The IMF now projects that by year-end global debt will be $8 trillion higher than it would have been otherwise.

Advanced economy sovereign debt will surge from 105% of GDP to 122% — in one year.

covid-19 deficits real crazy


Now let’s assume the best-case scenario going forward, which is that a cure for covid-19 is developed and the global lockdown ends in a few months. The world goes back to work and growth returns to the previous 2 or so percent.

What happens to all this new debt? Nothing. We’ll simply carry it into the next crisis, amplifying a mess that would have been spectacular in any event.

2018 proved that tightening of any kind is destabilizing for a society this highly leveraged. So currency once created and debt once incurred can never be retired, only rolled over.

And rolling over ever-rising amounts of debt requires ever-easier money, which means the current loan guarantees, direct payments to individuals, industry bailouts and all the rest are just a taste of things to come.

The true crazy begins when one-off relief payments are made permanent (hello, UBI),  when the Fed makes QE equal to the entire federal deficit (come on in, MMT)  and when whole categories of private sector debt are simply forgiven (step out of the bible, Mr. Debt Jubilee).

Oh, and when interest rates go firmly negative in the US (see you in the rear-view mirror, zero bound).

Put another way, the entire socialist/corporatist wish list is about to be enacted in one ear-shattering primal scream of “WE GIVE UP!”

It hardly needs to be said that when faced with this financial murderers’ row, holders of the world’s major currencies will run screaming for the exits.

The obvious response to this would be to load up on precious metals.

But since they’re apparently no longer available,  I don’t know what to tell you, other than “snooze, you lose.”

The Case for Mandatory Face Masks

Now that the US Centers for Disease Control is recommending that the public use face masks to prevent the spread of COVID-19, it is worth examining the main arguments against such self-protection. Upon closer inspection, they all fall short.

Shang-Jin Wei

wei25_David Dee DelgadoGetty Images_uscoronavirusphone


NEW YORK – In some ways, the fight against COVID-19 has brought out the best in American society. More than 70,000 doctors, nurses, and others from around the country have volunteered to help out in New York, which has quickly become the new global epicenter of the pandemic. Demonstrating unrivaled technical capability, the Army Corps of Engineers is rapidly transforming stadiums, hotels, and other buildings into functional hospitals.

The country’s private sector is shifting gears to mass-produce ventilators and other medical necessities (though some are doing so under threat of a government mandate). And nearly all states have issued aggressive yet necessary shelter-in-place orders.

Still, compared to South Korea, Japan, China, Singapore, and other countries that seem to have controlled the spread of the coronavirus, the US response leaves much to be desired. Media images from those other countries show something that we don’t commonly see in the United States: ubiquitous face masks.

Not only are these simple protective items scarce in the US, but those who wear them are sometimes accosted for doing so. And in some US medical settings, health workers have even reportedly been threatened with termination for wearing their own masks.

Now, the US government has finally issued an advisory suggesting that people wear a face mask when going out in public. But, even at the press briefing announcing this advice, the president stressed multiple times that wearing a mask is voluntary and that he himself will not. This is woefully wrong-headed.

We can easily dismiss many bad reasons for not wearing a mask, such as being uncomfortable or unfashionable. But we should think more carefully about three seemingly reasonable arguments against wearing a face mask: that they are ineffective, that they can create a sense of false security, and that use by the general public creates shortages for medical staff. All three claims are problematic.

For starters, the latest data indicate that 25-30% of COVID-19 cases are asymptomatic but still contagious, and that the remaining 70-75% show no symptoms in the first few days of infection.

These figures imply that potentially half of those who can infect others may not know it, because they have no symptoms. And yet, even the most stringent stay-home orders in the US still permit people to go out and exercise or shop for food and other “essentials,” provided that they stay six feet (nearly two meters) away from others.

The problem is that during these stints out of the house, people inevitably will pass within a few feet of one another, and at least some will be unknown virus carriers. Worse, research by Lydia Bourouiba of MIT suggests that droplets from coughing and sneezing can travel much farther than six feet, while also lingering in the air for some time after an infected person has left the area. Wearing a mask in public is therefore a social good with positive externalities: it benefits everyone else.

As for a false sense of security, forceful advice from public health authorities is still needed. This is no different from saying that even with frequent and thorough handwashing, we still need to keep social distancing and avoid touching things in public unnecessarily. Moreover, a mask makes it much more difficult for someone accidentally to touch their mouth and nostrils, and thus supports another piece of standard advice for preventing transmission of the virus.1



While face masks are not a silver bullet, they are clearly a critical supplement to existing social-distancing protocols. Consider two anecdotes from the American experience with the pandemic so far.

First, recent photographs of the arrival in New York City of the USNS Comfort, a Naval hospital ship sent to New York to assist in the emergency response, show that many people congregating on the Manhattan waterfront to welcome the ship were not wearing masks and were well within six feet of one another.

Wouldn’t it be ironic if the arrival of a hospital ship became a major accelerant of the outbreak in the city?

Second, on March 6, a local choir group met at the Mount Vernon Presbyterian Church north of Seattle, even after everyone was aware of the coronavirus threat. Hand sanitizer reportedly was provided at the door, and choir members avoided hugging and handshakes.

“We were making music and trying to keep a certain distance between each other,” one member recalled. No one showed any signs of sickness, and after two and half hours, everyone went home. Three weeks later, 45 people from that gathering had been diagnosed with COVID-19, and two have died.

The final argument for not wearing a mask is that the public should not be competing with doctors and nurses for a limited supply of a critical good. Such fears were justified between late January to mid-March, when there was a shortage of masks, especially the high-filtration N95 variety.

But masks are low-tech products. Many US factories can easily be refitted to boost the overall supply, and many more global suppliers can provide a similar-quality product at even lower cost than US producers can. There are now planeloads of masks and other protective gear arriving in New York and other US cities on a daily basis.

The shortage is fast disappearing, especially for non-N95 masks of the kind the general public should wear. Moreover, home-made masks can do the job.

The CDC could endorse one or two YouTube tutorials on how to make a simple and effective mask at home. Importantly, if everyone wears a mask in public, the resulting decrease in infection rates would reduce the need for more masks in health-care facilities.

Research suggests, however, that the risk of future tariff increases acts as a big disincentive for global producers to make masks and other essential medical supplies. If the US abandons its trade war and grants permanent exemptions for these products from any future tariff increases, it can alleviate those fears and boost the global supply and availability of masks very quickly.

The extent to which near-ubiquitous face masks have played a role in South Korea, Japan, China, and other countries’ COVID-19 response can be studied more rigorously in the future.

For now, though, it is better to be safe than sorry.


Shang-Jin Wei, a former chief economist at the Asian Development Bank, is Professor of Finance and Economics at Columbia Business School and Columbia University’s School of International and Public Affairs.

Mapping the COVID-19 Recession

Until there is a better sense of when and how the COVID-19 public-health crisis will be resolved, economists cannot even begin to predict the end of the recession that is now underway. Still, there is every reason to anticipate that this downturn will be far deeper and longer than that of 2008.

Kenneth Rogoff

rogoff192_Vectorios2016Getty Images_coronaviruseconomyrecession


CAMBRIDGE – With each passing day, the 2008 global financial crisis increasingly looks like a mere dry run for today’s economic catastrophe. The short-term collapse in global output now underway already seems likely to rival or exceed that of any recession in the last 150 years.

Even with all-out efforts by central banks and fiscal authorities to soften the blow, asset markets in advanced economies have cratered, and capital has been pouring out of emerging markets at a breathtaking pace. A deep economic slump and financial crisis are unavoidable.

The key questions now are how bad the recession will be and how long it will last.

Until we know how quickly and thoroughly the public-health challenge will be met, it is virtually impossible for economists to predict the endgame of this crisis. At least as great as the scientific uncertainty about the coronavirus is the socioeconomic uncertainty about how people and policymakers will behave in the coming weeks and months.

After all, the world is experiencing something akin to an alien invasion. We know that human determination and creativity will prevail. But at what cost? As of this writing, markets seem to be cautiously hopeful that a recovery will be fast, perhaps starting in the fourth quarter of this year. Many commentators point to China’s experience as an encouraging harbinger of what awaits the rest of the world.

But is that perspective really justified?

Employment in China has rebounded somewhat, but it is far from clear when it will return to anything close to pre-COVID-19 levels. And even if Chinese manufacturing does rebound fully, who is going to buy those goods when the rest of the global economy is sinking? As for the United States, returning to 70% or 80% of capacity seems like a distant dream.

Now that the US has failed miserably to contain the outbreak despite having the world’s most advanced health system, Americans will find it exceedingly difficult to return to economic normalcy until a vaccine becomes widely available, which could be a year or more away. There is even uncertainty about how the US will pull off its November 2020 presidential election.

For now, markets seem to be comforted by massive US stimulus programs, which have been absolutely necessary to protect ordinary workers and prevent a market meltdown. Yet it is already clear that much more will need to be done.

If this were just a garden-variety financial panic, a massive injection of government demand stimulus would absolve a lot of sins. But the world is experiencing the most serious pandemic since the 1918-20 influenza outbreak. If another 2% of the global population were to die this time, the death toll would come to roughly 150 million people.

Fortunately, the outcome probably will not be that extreme, given the radical lockdowns and social-distancing measures that are being adopted worldwide. But until the health crisis is resolved, the economic situation will look exceedingly grim.

And even after an economic restart, the damage to businesses and debt markets will have lingering effects, especially considering that global debt was already at record-breaking levels before the crisis began.

To be sure, governments and central banks have moved to backstop broad swaths of the financial sector in a fashion that seems almost Chinese in its thoroughness; and they have the firepower to do a lot more if necessary.

The problem, however, is that we are experiencing not just a demand shock but also a massive supply shock. Propping up demand may contribute to flattening the contagion curve by helping people stay locked down, but there is a limit to how much it can help the economy if, say, 20-30% of the workforce is in self-isolation for much of the next two years.

I have not even touched on the profound political uncertainty that a global depression can spark. Given that the 2008 financial crisis produced deep political paralysis and nurtured a crop of anti-technocratic populist leaders, we can expect the COVID-19 crisis to lead to even more extreme disruptions.

The US public-health response has been catastrophic, owing to a combination of incompetence and neglect at many levels of governance, including the highest. If things continue the way they are, the death toll in the New York City area alone could rival that of Northern Italy.

Of course, one can imagine more optimistic scenarios. With extensive testing, we could determine who is sick, who is healthy, and who is already immune and thus able to return to work. Such knowledge would be invaluable. But, again, owing to several layers of mismanagement and misplaced priorities stretching back many years, the US is woefully short of adequate testing capacity.

Even without a vaccine, the economy could return to normal relatively quickly if effective treatments can be swiftly implemented. But, absent widespread testing and a clear sense of what will constitute “normal” in a couple of years, it will be difficult to persuade businesses to invest and hire, especially when they are anticipating higher tax bills when it’s all over.

And it is possible that stock-market losses so far have been less than those of 2008 only because everyone remembers how values shot back up during the recovery. But if that crisis does turn out to have been a mere dry run for this one, investors shouldn’t expect a quick rebound.

Scientists will know a lot more about our microscopic invader in a few months. With the virus now racing across the US, American researchers will have direct access to data and patients, rather than having to rely only on Chinese data from Hubei province. Only after the invasion is beaten back will it be possible to put a price tag on the economic cataclysm it left in its wake.


Kenneth Rogoff, Professor of Economics and Public Policy at Harvard University and recipient of the 2011 Deutsche Bank Prize in Financial Economics, was the chief economist of the International Monetary Fund from 2001 to 2003. He is co-author of This Time is Different: Eight Centuries of Financial Folly and author of The Curse of Cash.

The New and Improved Propaganda

by Jeff Thomas





Adolf Hitler and his Minister of Propaganda, Joseph Goebbels, took great pride in their campaign to instill fear in the German people between 1933 and 1945.

They understood that the strongest and most renewable emotion in mankind is fear, and that, once a people have been won over by fear, there’s very little that you can’t get them to do.

To provide a focus for fear, a demon is necessary. Ideally, the people already fear a demon of some sort. If so, this demon should be co-opted and the fear magnified.

However, if no demon is already perceived by the people, one must be created.

The Nazis chose existing demons. Many Germans had an existing fear and hatred for Jews, non-whites and homosexuals, so the Nazis did all they could to demonise them and to present themselves as the crusaders against these demons.

Once this relationship has been created – that the only way to be saved from the demons is for the government to defeat them – the rest is actually quite simple. The creation of a police state, the banning of publicly held weapons, the pogroms, the waging of war, all of it can be accomplished by describing them as necessary in the defeat of the demons.

Hitler realised early on that the fear need not be rational. Once he understood that principle, he recognised that he could exaggerate the perceived danger of the demons, and as long as he maintained the rhetoric, the fear would increase considerably.

As he himself stated,

"Make the lie big, make it simple, keep saying it and eventually, they will believe it."

His speeches went a long way to increasing the fear, but Joseph Goebbels expanded the fear even more. He understood that if the Nazis took control of the media, they could implement the indoctrination far more thoroughly. Through the media, his goal was to degrade the thought processes of the German people to the point that they behaved as they were programmed to.

As he pointed out,

"Let me control the media and I will turn any nation into a herd of pigs."

Over time, he became extremely adept at controlling the media, and eventually, he only needed to focus on new rhetoric, as the media had become co-conspirators by repeating previously established rhetoric.

His overview was,

"Think of the press as a great keyboard on which the government can play."

The German people were whipped into a lather in their hatred of the demons that had been promoted.

When warfare was begun, they went along enthusiastically.

It was only when the casualties began to mount and German cities began to be bombed that they began to falter.

At that point, Messrs. Hitler and Goebbels increasingly relied on a more sophisticated demon: terrorism.

As Hitler said at that time,

"Terrorism is the best political weapon, for nothing drives people harder than a fear of sudden death."

But just what is it about the terrorism threat that’s so effective in scaring the populace?

Well, if Jews, non-whites and homosexuals are a perceived danger, they can be loaded onto trains and taken away, never to be seen again. And if even one such demon slips through the cracks and remains in your neighbourhood, he is, at least, a known quantity. It’s clear to all as to how to address the problem: Report his presence and have the authorities drag him off. Problem solved.

But terrorism is not a person; it’s an abstract.

That may seem like a small distinction, but it’s not. It’s of major importance in terms of its effectiveness in creating fear.

Terrorism is faceless and bodiless. It has no numerical limitation. It can be anyone: the man down the street or the neighbour across the hall. But best of all, an abstract can never truly be defeated. Its threat can be presented as being endless.

And if only the government can save you from the abstract demon, it stands to reason that, whatever rights must be given up, whatever losses must be suffered, this must be accepted. Submission to the demands of the leaders is essential.

Further, once fear has replaced reason, a people no longer ask why submission will bring about results; they simply submit and trust in the State.

As clever as the leaders of the Third Reich were, they only discovered the ultimate demon late in the game… But modern governments took it a step further.

Around the turn of the millennium, the nations of the former Free World began a campaign to create a fear of terrorism. They used the traditional principles: Create a demon out of existing concerns, expand upon the actual, then, through the use of repeated rhetoric, replace reason with fear.

Today, we’re so well-conditioned that, if we were in a queue at the airport and someone held up a sign that said, "terrorist," we’d all want the authorities to come ASAP and drag him off.

We’d have no concern whatever as to what his fate might be. Our only concern would be that he was now gone.

Like the Germans, we’ve been successfully programmed to overreact with fear… to a mere word on a sign.

But the New Propaganda predates the "war on terrorism." It began when another demon, Global Cooling, was created. It then became Global Warming, then Climate Change. In spite of the overwhelming scientific evidence to the contrary, the Climate Change demon thrives, due to unrelenting rhetoric.

Hitler was correct.

Once again,

"Make the lie big, make it simple, keep saying it and eventually, they will believe it."

But a third demon has recently been born in the form of the coronavirus. Was this a virus that began in the markets of Wuhan?

Was it created in a lab by the Chinese? Was it created by the West and planted in China?

In fact, the true cause matters little.

It will be used to full effect as a demon to terrify the masses. It will be blown out of all proportion to justify the further implementation of a police state, the refusal of the right to cross borders and, ultimately, the shutting-down of the economy.

The government will not be blamed, as the virus is an invisible enemy that only governments can save us from. When told to be obedient and to sacrifice beyond all reason, we shall do so.

Terrorism, Climate Change and the coronavirus are the New Propaganda: a triumvirate of demons that are impossible to pin down. They are abstracts that we have been assured will destroy us.

The message is clear: Our only hope in surviving them is submission to those in charge.