Now we are deliberately shutting down the world’s major economies for at least several months. The global manufacturing industry was already shaky in 2019. It is too early to confidently predict the course of the economic downturn facing us due to the coronavirus. Unemployment peaked at 10 percent in October 2009. After a contraction of 4.2 percent in gross domestic product, a recovery began in the second half of 2009. Thanks to massive intervention of both monetary and fiscal policy, it did not become a deep and prolonged recession. For the global economy, it unleashed the largest contraction in international trade ever seen. Major industrial companies like GM and Chrysler stumbled toward bankruptcy. In the worst of times, over the winter of 2008-2009, more than 750,000 job losses were recorded every month-a total of 8.7 million over the course of the recession. It was this massive financial shock, piled on top of the losses to households from a downturn in the real estate sector, that caused economic activity to contract. In 2008, we saw how the financial uncertainty spreading from the downturn in real estate-by way of subprime to funding markets and from there to the balance sheets of major banks-could threaten an economic heart attack. Of course, we’ve spoken of “contagion” in financial crises, but we’ve meant it metaphorically-not literally. Among the tail risks widely discussed in economic policy circles, a deliberate shutdown of national economies on the grounds of a public health emergency has never been seriously considered.
If this is true for the NSC, it is even more so for those charged with economic policymaking. They sit awkwardly within the conventional silos of modern government and models of risk assessment.
Global economic meltdown 2008 how to#
The fact is that bureaucracies have never known how to treat low-probability, high-stakes biomedical risks like pandemics. Bush and then Barack Obama would shut it down, only to reestablish it shortly afterward. The National Security Council’s (NSC) global health security unit was set up under Bill Clinton in 1998. But he was not the first president to do so. Of course, it seems ill-judged in retrospect. In May 2018, President Donald Trump restructured and downsized the pandemic preparedness unit.
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