Even before the COVID-19 pandemic there was frequent discussion of “economic resilience.” In particular I saw constant efforts to define the term. Now I am not trying to quibble around the edges here but I am not sure “economic” is needed as a modifier for the term resilience really but we will move on to other issues.
At its heart we are talking about an issue of capacity or ability. To do what? Recover from an adverse event. The frequency of adverse events, or at least the apparent frequency of them, increased in recent years (though that is a separate post at another time). We need to be careful talking about adverse economic circumstances in large part because activities in the economy are inherently risky. That is, not all negative outcomes rise to the level of adversity where we want to discuss resilience at the macroeconomic level.
Three events of the last twenty years likely rise to that level in most people’s opinion: the terrorist attacks on September 11, 2001, the Financial Crisis and the ensuing Great Recession, and the Covid-19 Pandemic. It is regularly, and naturally, the case that those impacted by events in any negative way will look for it to be expanded or felt to rise to the level of larger emergency.
Given that I think we are at the level of crisis where a discussion of resilience is in order let’s tackle that. What would it take for the economy to get back into shape or recover. The scale of what we are dealing with is quite intense and widespread. There are consumer issues and business issues and how to get the economy back is a matter of some debate right now.
To do this we need to confront some basic realities. There are many people unemployed right now and there are far fewer jobs available than unemployed people. This creates a certain measure of fear on the consumer sector, both for those with and those without jobs. There are changes in behavior happening as a response to the pandemic and the economic circumstances surrounding it.
Businesses are dealing with issues too. Paramount among them is sales, especially in some of the more consumer facing service industries. There are also issues about employment but this is nuanced as they face a chicken-egg problem. At reduced levels of sales businesses do not need staffing at the same levels as before (at least in many cases). This contributes to unemployment and fear that can create an increased sales issue. However, they do need employees and they do need to be open in order to create sales and economic output. There really is not an ability, at an economy-wide level, to fine tune this with policy.
That might actually be the best thing, to get out of the way of businesses. To do that though, you need to create a bridge for the unemployed. The notion that the extra money going to unemployed is deterring return to work is one we can entertain, despite the lack of widespread evidence at this time. The simple solution to this is to take it out of the realm of impacting decisions.
If the payment is not tied to status as unemployed it no longer impacts the decision to return to a job. We see this happen in the United States in Alaska and the work of Ioana Marinescu at University of Pennsylvania makes it clear that such a plan does not impact the decisions of people to work(here is is a link to a podcast at UPenn where she talks about her research). This situation would allow both businesses and consumers at least a partial financial bridge and time to work out the issues about how to move forward.
These are only part of the issue though. There is the question of safety for people in the workplace, as they are shopping in stores, and businesses need to answer these questions as well. The extra time from financial support can be very important for those factors too.
The time to worry about resilience is prior to an event occurring. However I doubt most people can envision circumstances unfolding the way COVID-19 did, nor the broader economic implications. Now the question is this: can our economy recover? The answer is yes, but it is not an easy road or an easy fix. Recover is going to take time and effort and we may not get back to things looking like they did before. Maybe that should not even be the goal. Maybe we need to envision recovery as improving upon things that were wrong but that we could not see how to fix from where we stood at the time. That’s resilience right there.