Recession lessons: reasons not to be cheerful
EDITOR’S COMMENT If you’re struggling a little bit with lockdown today, I’d advise you to stop reading this right now. Because what I write next is not going to be pretty.
The world is no longer normal and, try as we might, the end of this phase of gruesome hardship, of sadness and pain, is starting to feel further and further away.
Ordinarily I try hard to look for a positive, to find something to take away from a situation to make it better. And I hope that by the end of these few words I get to write every week, I will have found that positive. But for now, let me wallow for a little while.
EDITOR’S COMMENT If you’re struggling a little bit with lockdown today, I’d advise you to stop reading this right now. Because what I write next is not going to be pretty.
The world is no longer normal and, try as we might, the end of this phase of gruesome hardship, of sadness and pain, is starting to feel further and further away.
Ordinarily I try hard to look for a positive, to find something to take away from a situation to make it better. And I hope that by the end of these few words I get to write every week, I will have found that positive. But for now, let me wallow for a little while.
When both the IMF and the OBR paint a pretty horrific picture of our economic future, you have to sit up and take notice. This pandemic is set to cause a depth of recession not seen since the Great Depression of the 1930s. Granted, says the IMF, it won’t (we hope), be as bad as that, but it is going to be bad, dwarfing the impact of the global financial crisis some 12 years ago.
The IMF is predicting a cumulative loss to global GDP over 2020 and 2021 because of the pandemic of $9tn – that’s more than the economies of Germany and Japan combined.
“This is a deep recession,” says the IMF’s Gita Gopinath. “It is a recession that involves solvency issues. And these tend to leave scars.”
Scars mean no quick recovery. The effects of this pandemic will take time to fade. The eternally optimistic short-sharp-shock and quick recovery theories feel a little bit hard to swallow right now. This isn’t Brexit or the General Election. This is a truly global crisis in which no country, no business and no individual will be spared from at least a touch of its impact.
As Prestbury’s “naturally positive” Nick Leslau says, to put faith in a V-shaped recovery ignores the reality that post Covid-19 “we will all feel battle-scarred, anxious, poorer, perhaps unemployed and certainly without the bonuses we relied upon, and our desire and ability to spend our way out of this will be significantly diminished”.
Like Leslau, I hate to succumb to the negative – but sometimes reality forces me to. I said it off the back of Rishi Sunak’s original Budget statement. This magic money tree of his that is enabling all these truly wonderful relief funds to be set up can’t grow forever. This crisis will mean that we have more public debt this year than we have had in any single year since the Second World War.
And there we were, just a few months ago, ready to really and truly call the end of austerity.
But, and here is my attempt at some sort of happy ending, unlike the Great Depression of the 1930s and even the GFC of just over a decade ago, we now have more data, more history, more memories, more lessons to take on board to make sure that the actions we are taking now minimise as much as possible the lasting impact of the scars that Covid-19 will leave behind.
And we’ll do better at that the more we share those lessons, the more we speak, honestly and openly with each other. Even if it is painful.
A scar, after all, is a just a mark of survival.
To send feedback, e-mail samantha.mcclary@egi.co.uk or tweet @samanthamcclary or @estatesgazette
