Will millions of businesses fail due to the corona crisis? Are we doomed to years of high unemployment?
Maybe.
But let’s be very clear. A depression is a political choice.
Governments can solve the crisis in the blink of an eye. Transfer money to households and businesses that suddenly lost their income.
Problem solved.
Hoe raken we uit de coronacrisis? Dit zeiden de Vlaamse media-economen in maart:
Geert Noels en Stijn Baert zitten in het economisch relancecomité van de Vlaamse regering.
Wat een bloedarmoede.
De coronacrisis is nog lang niet voorbij. Maar dat houdt professoren en denktanks niet tegen om nu al nieuwe belastingen voor te stellen.
Stop hiermee!
Extra belastingen schaden het economisch herstel. Bovendien zijn ze helemaal niet nodig.
Update 24/05/2020: Een “topeconoom” wil dat ouderen een coronataks betalen.
The corona crisis is a once-in-a-lifetime emergency. You cannot expect firms to anticipate zero revenu for months on end.
Therefore, it’s reasonable to help firms with loans and grants. But not all firms. Let’s reward corporate citizens who follow the law and pay taxes.
There are plenty of financial proposals for dealing with the corona crisis.
More government debt! Eurobonds! Helicopter money! Eliminate sovereign debt held by the ECB! Create a European investment fund!
One thing that greatly annoys me is that people don’t go into the details.
So if you want to convince me of your financial panacea, show me what it means in practice. Who are the winners and losers? What are the consequences of your plan for households, companies, banks, government finances, inflation, employment?
Make me think past the sale, and I might buy your proposal!
Dit is een update van mijn coronaplan. De trage Belgische aanpak heeft het voordeel dat we kunnen leren van buitenlandse voorbeelden.
Deze versie van het plan heeft bovendien aandacht voor lokale besturen en verenigingen. Ook zij zullen immers inkomsten verliezen door de crisis.
De (federale) regering betaalt 90% van de kosten opgelopen tijdens de corona-lockdown, evenredig met het omzetverlies en beperkt tot de belastingen die het bedrijf de voorbije 3 jaar betaalde. Bedrijven die steun krijgen, mogen de komende 3 jaar geen geld uitkeren aan aandeelhouders. Eventueel kunnen ook eisen gesteld worden op het vlak van tewerkstelling. Financiële bedrijven zoals investeringsmaatschappijen en banken worden uitgesloten1.
Kosten omvatten onder andere huur, rente, verzekeringen, afschrijvingen en lokale belastingen. Geen personeelskosten, aangezien die al gedekt worden door het stelsel van tijdelijke werkloosheid.
Voordelen:
Voor bedrijven die minder dan 3 jaar actief zijn, kan gedacht worden aan een belastingkrediet.
De (gemeentelijke opcentiemen op de) verkeersbelasting en onroerende voorheffing zijn weinig conjunctuurgevoelig. De personenbelasting zal echter gevoelig dalen.
Om het tekort op te vangen, kunnen gemeenten personeel ontslaan (zoals in de V.S. gebeurt) of geld lenen. Maar de interest die gemeenten betalen is veel hoger dan die van de federale overheid.
Het lijkt daarom aangewezen dat de bijdrage voor de gemeenten stabiel blijft. Laat de federale overheid een donatie geven die in lijn ligt met het bedrag dat we zouden verwachten zonder corona.
Door de coronacrisis kunnen veel verenigingen niet langer geld ophalen. Jeugdverenigingen kunnen geen fuiven organiseren, benefietetentjes zijn niet mogelijk, enz. De Vlaamse regering en/of de gemeenten moeten een regeling uitwerken voor het verenigingsleven. Voor de meeste verenigingen zal het immers niet lukken om later in 2020 nog iets te organiseren.
Help dit plan op de politieke agenda te zetten! Schrijf lezersbrieven. Spreek je burgemeester of parlementslid aan. Laten we er met zijn allen voor zorgen dat we de financiële schade van deze crisis zo klein mogelijk houden.
The coronavirus has led to a lot of economic pessimism.
I’m more bullish than most commentators. Why?
The future looks bright!*
*Unless premature austerity kills the recovery.
The amount of household income spent on food varies greatly by country. In countries like the U.S., Singapore and Australia, less than 10% of consumers’ income goes to food. Households spend more than 40% of their income on food in countries like Nigeria, Kazakhstan and Algeria.
Of course, these are average numbers. Even in rich countries, the poorest households spend a much larger percentage of their income on food than the wealthiest.
How does the coronavirus affect food affordability? Affordability is a function of incomes and food prices.
White collar workers can work from home during lockdowns. In countries with a strong social safety net, the government pays unemployment benefits to people who lose their jobs. The income loss of households due to lockdowns is modest.
On the other hand, lockdowns are devastating if they stop the informal economy and the state doesn’t support people’s incomes. Families who depend on remittances are in trouble if their relatives can’t earn and send money.
The corona crisis has hit certain sectors especially hard. Nations that depend on tourism or on the export of oil or garments face a severe dollar income shock.
The coronavirus has raised retail food prices in multiple ways.
Several countries have limited or banned food exports. Travel restrictions prevent migrant farm workers from harvesting crops. Milk and vegetables go to waste at farms because of supply chain disruptions. Farmers are denied access to markets in cities. Lockdowns make food exports difficult.
Food prices are skyrocketing from West Africa to the Middle East.
WEIRD economists should take into account inequality before advocating lockdowns.
If you want to learn more about the impact of Covid-19 on food security, you should follow the Food Pandemic Twitter account of R. Zurayk, N. Amhaz, A.Yehya. They share a lot of news from Africa and the Arab World.
Most economists argue that there is no ‘health versus economics’ dichotomy. A widely shared article by Sergio Correia, Stephan Luck, and Emil Verner on the 1918 Spanish flu “suggest[s] that pandemics can have substantial economic costs, and NPIs [non-pharmaceutical interventions] can lead to both better economic outcomes and lower mortality rates”. Sam Bowman and Martin Eichenbaum, Sergio Rebelo and Mathias Trabandt believe that shutdowns are worth the lives saved, despite the costs.
On the other hand, Michael Burry and Toby Young think that governments are overreacting. Lockdowns cause disproportionate damage to people’s lives.
All of these commentators base their recommendations on the U.S. or Western Europe. But the best response to Covid-19 might be very different in the rest of the world. Not just food affordability, but also demographics and the effectiveness of measures to contain the virus differ greatly between countries. Economists are WEIRD.
Who should pay for the corona crisis in the EU?
Philipp Heimberger discusses the possibility of a European recovery fund, funded by a common debt instrument.
On the Macro Musings podcast, Ashoka Mody says3 countries like Italy need fiscal transfers from other member states.
But fiscal burden sharing is a toxic idea, as Dutch finance minister Wopke Hoekstra demonstrated.
Italy is 135% of GDP. Spain and France are 100% of GDP, so three of the big Eurozone countries are not going to be able to do fiscal stimulus of 5, 7, 10% of GDP, which is basically what is going to be needed for this crisis. We’re going to need enormous amount of fiscal stimulus. Maybe Germany will do that. In the US, with this two trillion, they’re already at about 9% of GDP, and I expect that it will go up even more, for a number of reasons, but Italy cannot do anything close to that, or Spain cannot do anything close to that.
Ashoka Mody
Clearly, the problem is not the level of debt. The U.S. has a higher debt to GDP ratio than France and Spain.
The problem is the refusal of the ECB to close the sovereign spreads. As I write this, the German 10 year bond yield is -0.461. The Italian 10 year bond yield is 2.182.
Every country should do whatever it takes to save its economy. Bail out businesses, pay unemployment benefits.
The expenditures can be funded by bonds. The ECB should keep the spreads low. That means buying whatever it takes.
Secondly, the ECB is once again neglecting its primary objective. Oil prices and unemployment point to low nominal aggregate demand. Without income support to households, it’s unclear how the ECB can achieve its inflation target.
So the ECB needs to do helicopter money drops, as suggested by Eric Lonergan, Frances Coppola, Positive Money Europe, and me.
But what does the ECB do? The Governing Council has never even discussed helicopter money, let alone planned to implement it!
This is not just incompetence, this is financial terrorism.