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You're Not Welcome Here: How Social Distancing Can Destroy The Global Economy – NPR

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Paris is under nightly curfew, starting at 9, to curb the spread of rising coronavirus cases.

Kiran Ridley/Getty Images

Kiran Ridley/Getty Images

Stay out.

It’s what people are being asked to tell each other. Less than 10 days ago, London banned people who live in different households from meeting each other indoors, to stop the spread of the coronavirus.

“Nobody wants to see more restrictions, but this is deemed to be necessary in order to protect Londoners’ lives,” London Mayor Sadiq Khan told the London Assembly.

Taking away the welcome mat is key to cutting off the path of the coronavirus. From the beginning of the pandemic, cities, states and countries have banned each other. And now, eight months into lockdowns that have led to immense stress and fatigue among people, some places around the world are introducing even more draconian measures.

The path toward recovery continues to be inherently antisocial and runs counter to how humans interact, live lives and conduct their business. This unwelcome policy — which has already harmed families, societies and economies — has the potential to lead to a tectonic shift in how the world functions in the foreseeable future.

End of globalization?

Some people worry that this moment is strengthening the hand of nationalism that was rising before the pandemic and that it is accelerating the changing relationships between countries.

President Trump’s “America First” strategy of the last four years had increased tensions between the United States and the rest of the world, specifically China. It was already leading to friction in the smooth supply-and-demand economic chain that has been the hallmark of an interdependent global world. But the self-isolation during the pandemic could mean the end of globalization as we know it.

“The coronavirus pandemic could be the straw that breaks the camel’s back of economic globalization,” according to Robin Niblett, director of the think tank Chatham House, in a Foreign Policy article.

Specifically, the global supply chain is very much at risk. Tax deductions in the U.S. designed to bring back jobs in pharmaceuticals, medical supplies, electronics and auto manufacturing have led companies to invest heavily in production in this country in the last few years.

“The needs that surfaced during the pandemic to bolster supply chain resilience may further accelerate such moves,” according to Moody’s Investors Service Senior Vice President Robard Williams.

Social distancing brought mighty economies to their knees

The entire world’s economy has shrunk dramatically. The pandemic delivered the most severe blow to the U.S. economy since the Great Depression as gross domestic product collapsed and millions of jobs were lost.

“This recession was by far the deepest one in postwar history,” Richard Clarida, vice chair of the Federal Reserve, noted in a speech.

A robust economy is dependent upon the movement of goods and people. For instance, restaurants need people to meet, socialize and break bread together. Airlines and hotels need people to travel to conduct business or to see family and friends or new places.

But all that has been vastly reduced. And the effect of that social distancing has been deadly on many businesses. Restaurants have been among the hardest hit. According to Yelp data, more than 60% of restaurants in the U.S. have permanently closed, closely followed by retail stores that sell clothing and home decor (58%) and beauty stores and spas (42%). Airline travel is down around 70%, and hotel occupancy is at record lows.

“Social distancing has stilled our strong economy,” said Eric Rosengren, president and CEO of the Federal Reserve Bank of Boston.

Social distancing is exhausting but works in some places

What’s worse is that despite long and extensive social distancing, there are signs that it has not worked everywhere — especially in freer societies. In fact, more than lockdown orders, it is people’s fears that have a larger impact on their economic behavior, some researchers have found.

The latest signs of increased cases in the U.S. and Europe are even more disheartening for people who feel they have endured a lot.

So, why are governments continuing to rely on lockdowns? That’s because it’s proven that aggressive social distancing does work in countries where the state can enforce strict shutdowns.

In China, where severe lockdowns were enforced in many parts of the country, the coronavirus has been wrestled to the ground. In Wuhan, ground zero of the virus, recent reports cite crowded water parks and night markets. Domino’s Pizza recorded such a huge improvement in sales in the country in recent months that it prompted CEO Richard Allison to call China “a terrific success story in 2020.”

But the Chinese form of enforcement is hard to achieve in democratic societies, most of which are pinning their hopes on a vaccine.

Some of the largest cities in the West are putting in place even more draconian social distancing measures to combat the virus. Paris is under curfew starting at 9 each night. And in London, you can’t even visit or invite a neighbor over for dinner.

But it’s unclear if people in these societies will strictly follow these guidelines or how enforcement will work. It’s already taken a huge toll on the psyche of the populace of many countries. No wonder most people worry that the longer social distancing goes on, a higher price will be paid by households, society and the economy.

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Robust economy ailing after bout with pandemic – Business in Vancouver

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The year 2019 seems like a distant memory in the COVID-19 era, but provincial economic accounts data confirmed that, heading into 2020, B.C.’s economy remained among the strongest in the country.

On an expenditure basis, real gross domestic product (GDP) expanded by 2.7% compared with 1.9% nationally and was on par with 2018’s performance.

B.C.’s solid gain last year was achieved despite weakness in most key segments. Household consumption growth decelerated sharply to 1.7% in 2019, down from 2.8% in 2018. This was the slowest expansion since a 0.3% gain in 2009.

Slower consumption growth was driven by fewer vehicle sales, weaker ancillary spending related to housing, and flat non-durable goods purchases.

Household consumption makes up about 60% of GDP. Overall consumption expenditures growth of 2.1% was propped up by stronger government spending, which rose 3.1%.

Housing was a drag on the economy. Investment in residential structures shrank by 1.5% during the year, following a 2.5% contraction in 2018.

Trade was also dismal. Real export growth slowed to 0.9% from 3.5% in 2018. This was partly offset by slowing imports, which decelerated to a gain of 2.7%, from 3.3% in 2018. 

Weaker growth across key segments was offset by a huge increase in investment spending. Private-sector investment jumped 22% from 2018 on a 35% increase in structure investment. Machinery and equipment was flat. Private investment contributed about 74% of headline growth. This surge reflected build-out of liquefied natural gas projects. Government investment, which gained 8.8%, also outperformed, reflecting investment in schools, hospitals and other infrastructure.

Nominal GDP came in at 4.3%, compared with 4.9% growth in 2018. Economic growth largely accrued to employees during the year. Aggregate wages and salaries were up 5.7%, as net operating surplus or profits fell 7%.

With mixed gains in 2019, headline growth marked a modest handoff to 2020 – but a short-lived one, as COVID-19 ravaged the economy this year. Economic output is forecast to contract by nearly 6% in 2020 due to the pandemic-driven shuttering of parts of the economy earlier in the year and the continuing effects of health measures. Rising COVID-19 cases in the fall and winter will pause the recovery phase observed since May, but growth is forecast to reach about 4% in 2021. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.

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Bank of Canada: Vaccine Could Trigger Swift Economic Rebound – Voice of America

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OTTAWA, ONTARIO – Canada’s economy could rebound faster than expected if consumer spending jumps in the wake of a successful coronavirus vaccination effort, Bank of Canada Governor Tiff Macklem said Thursday.

On the other hand, if the economy weakens amid a second wave of infections, Macklem indicated the central bank could, if necessary, cut already record-low interest rates.

In late October, the bank said it assumed a vaccine would not be widely available until mid-2022. Since then, several manufacturers have announced potential vaccines that could be distributed starting early next year.

“It is possible, especially when there is a vaccine, that households will decide to spend more than we have forecast, and if that happens the economy will rebound more quickly,” Macklem said in response to questions from the House of Commons finance committee. He described the news about vaccines as promising.

In late October, the bank forecast the economy would not fully recover until sometime in 2023, a forecast Macklem repeated in his opening remarks.

The path to recovery still faces risks, he said. Earlier this year, the bank slashed its key interest rate to 0.25%.

“We could potentially lower the effective lower bound, even without going negative. It’s at 25 basis points. It could be a little bit lower,” Macklem said, repeating that negative interest rates would not be helpful.

The U.S. Federal Reserve has a target for its key rate of 0 to 0.25%. The Reserve Bank of Australia this month cut its policy rate to 0.1%.

Some other central banks also have benchmark rates that are less than 0.25%, such as the European Central Bank and the Bank of England.

“We want to be very clear – Canadians can be confident that borrowing costs are going to remain very low for a long time,” Macklem said.

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Coronavirus vaccine could help economy recover faster than expected

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Canada’s economy could rebound faster than expected if consumer spending jumps in the wake of a successful coronavirus vaccination effort, Bank of Canada Governor Tiff Macklem said on Thursday.

On the other hand, if the economy weakens amid a second wave of infections, Macklem indicated the central bank could if necessary cut already record low interest rates.

In late October, the bank said it assumed a vaccine would not be widely available until mid-2022. Since then, several manufacturers have announced potential vaccines that could be distributed starting early next year.

“It is possible, especially when there is a vaccine, that households will decide to spend more than we have forecast and if that happens the economy will rebound more quickly,” Macklem said in response to questions from the House of Commons finance committee. He described the news about vaccines as promising.

In late October, the bank forecast the economy would not fully recover until some time in 2023, a forecast Macklem repeated in his opening remarks.

The path to recovery still faced risks, he said. Earlier this year the bank slashed its key interest rate to 0.25 per cent.

“We could potentially lower the effective lower bound, even without going negative. It’s at 25 basis points, it could be a little bit lower,” Macklem said, repeating that negative interest rates would not be helpful.

The U.S. Federal Reserve has a target for its key rate of 0 to 0.25 per cent. The Reserve Bank of Australia this month cut its policy rate to 0.1 per cent.

Some other central banks also have benchmark rate that are less than 0.25 per cent, such as the European Central Bank and the Bank of England.

“We want to be very clear – Canadians can be confident that borrowing costs are going to remain very low for a long time,” Macklem said.

 

Source: – Global News

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