(Note: Due to the timeliness of this story, some information may change faster than we can update it. All figures were accurate at time of writing.)
Just over a week ago I celebrated my 22nd birthday and, if you do the maths, this means I was 10 when the Great Recession of 2008 started to truly hit home. That crisis was one of the first bits of global news I was truly aware of and its continued drag, taking the form of austerity, political chaos, poverty and underemployment, have defined the world I grew up in. I was always keenly aware that it had happened and of the disaster it meant for workers, consumers, ordinary people. It took a long time, however, before I understood what caused it. Sub-Prime Mortgages don’t mean much to most people, nevermind a ten year old and, as a child, I could never wrap my head around the logic that banks loaning people too much money could result in the entire global economy falling apart. It was, as David Mitchel remarked on Mock the Week, “Just some numbers on a computer, disappearing and reappearing. […] There’s no actual stuff, nothing’s caught fire, or sunk or anything. […] No bad thing has happened.”
Now, in 2020, a different crisis is starting to take hold. Gripped by a global pandemic of Coronavirus, dubbed COVID-19, the world economy has taken a plunge. If stock markets are a good indicator of economic trends (which, of course, isn’t always the case) then the world is braced for an economic crisis as – or more – severe than the great recession. On Monday the 9th, dubbed “Black Monday” by the press, the world economy took a serious hit which left many scrambling. This was only the beginning however as today/yesterday, the crisis began in earnest. In the United Kingdom, the FTSE Index Fell by more than 10%, outstripping not only “Black Monday’s” 7% but also the Great Recession’s 8% drop, bringing the total losses this week to nearly 20% of the Index’s entire value. Meanwhile in the US, the Dow Jones Index plummeted by more than 9%, even worse than the 7.1% fall it experienced on monday. With that, most stock indexes have entered a “Bear Market”, meaning they’ve lost 25% of their recent value and, if the US stock market continues to tumble in the coming days, it is likely that all the touted growth made since Donald Trump’s Inauguration in January 2017 will have been wiped away, perhaps forever. Thursday’s fall on top of monday’s means that “Black Monday” just doesn’t cut it as a descriptor. As the crisis drags on, we’re in a Black Week. The rally experienced on Friday was enough to reassure many in the US but the markedly smaller recovery seen by European markets, the rapid rise in American cases, continued intransigence of the Trump administration and continued public panic show that the economic crisis is just beginning, not coming to an end.
The banning of personal transit occuring in various forms from Slovakia closing their borders to Hong Kong restricting travel from Mainland China reflects something notable. The ongoing economic disaster is entirely or almost entirely the fault of the COVID-19 Pandemic. This isn’t another Great Depression, caused by over speculation and inflated stock prices, or another Great Recession, caused by mismanagement of mortgages and loans. The causes of the Black Week are real, tangible. The incapacitation of workers both happening and predicted, the breakdown of exports and production lines, the utter obliteration of travel and tourism, the huge healthcare costs; these are all real, serious issues. People are dying, others are suffering and everyone looped into the global economy is feeling the knock on of a physically debilitating illness. This cannot be resolved by moving around numbers.
To pin this all on the illness, however, would be a disservice. The sluggish, borderline-arrogant response of some Western nations has allowed the pandemic to spread as far and as fast as it has. Few are more to blame of course than POTUS: Trump’s initial skepticism and insistence that the “hysterical” response to the virus was a “Democrat plot” meant the federal government did next to nothing for weeks; his refusal to step up the medical response means barely a few thousand Americans have been tested. Other countries have failed too: the British, Italian, French, German, Japanese and Iranian governments all bear some blame for early mismanagement and indecision. None, however, are as complicit in the present disaster as Donald Trump.
Undoubtedly, Trump is almost directly responsible for Thursday’s tumble. Having indicated for days that relief was coming for businesses and workers, President Trump gave a live address which, while touting a few economic relief policies to come in the future, was marked out by a confused and inaccurate ramble focused on an immediate ban on all European Goods and travellers coming to the US, with the exception of the UK. Since then, the US Government has backtracked: goods won’t be affected, and only individuals who have been within the Schengen Area within the past 2 weeks will be subject to the ban however even this was walked back as on Saturday Britain and Ireland were added to the long list of banned countries. This is too little too late, however, and a combination of confusion, fear, and the ban on transatlantic travel itself have all shaken the stock market to its core.
The policy seems poorly thought through. Why announce this in such a confused and dramatic manner? Why not consult with European governments first? With cases in the US already high – and rising – will this make much of a difference? Why do flights to South Korea remain unaffected when they have suffered many more cases than much of Europe? The American policy rings of an earlier, similar mistake. In 1930, Congress passed the “Smoot-Hawley Act”, increasing 900 tariffs by an average of 40% and clamping down on foreign imports. The policy – a populist, protectionist measure – was intended to halt the American decline. If that meant damaging European markets, so be it. It had the opposite effect and most historians now judge that it severely worsened the Great Depression and its effects on the American worker. Trump’s European travel ban is similar, and whilst he is moving against people and not imports, the logic and perhaps the impact of the move will be much the same.
A real economic crisis is coming. For now, it is hurting stocks and stockholders, an issue which in relative isolation pales in comparison to the human suffering that the virus is inflicting. However, within our current globalised markets, falling stocks do not exist in isolation. Companies are alreading folding. Workers are being forced onto sick pay, where they can get it. Jobs will vanish or shrink, industries will tank, and the millions trapped in the gig economy will suffer worst of all. In the end, though COVID-19 itself will cause misery and indeed death for thousands, even millions, its impact on our fragile and inhumane economic system seems likely to inflict just as much suffering on mankind, if not more. A real crisis, caused by real events, not just ones and zeros, is a rarity. We are not subject to the whims of traders or to the mistakes of banks. Rather than a mistake made by capitalists, this crisis exposes the fundamental weakness of neoliberal capitalism itself. In this way and in the great tragedies it has set in motion, the Black Week is a turning point in our lives.