74 Time August 17/August 24, 2020
The world is confused and frighT-
ened. COVID-19 infections are on the rise
across the U.S. and around the world, even
in countries that once thought they had
contained the virus. The outlook for the
next year is at best uncertain; countries
are rushing to produce and distribute vac-
cines at breakneck speeds, some opting to
bypass critical phase trials. Meanwhile,
unemployment numbers remain dizzy-
ingly high, even as the U.S. stock market
continues to defy gravity. We’re headed
into a global depression—a period of eco-
nomic misery that few living people have
experienced.
We’re not talking about Hoovervilles.
Today the U.S. and most of the world
have a sturdy middle class. We have so-
cial safety nets that didn’t exist nine de-
cades ago. Fortunately, that’s true even for
developing countries. Most governments
today accept a deep economic inter-
dependence among nations created by
decades of trade and investment global-
ization. But those expecting a so-called V-
shaped economic recovery, a scenario in
which vaccine makers conquer COVID-19
and everybody goes straight back to work,
or even a smooth and steady longer-term
bounce-back like the one that followed
the global financial crisis a decade ago, are
going to be disappointed.
Let’s start with the word depression.
There is no commonly accepted defini-
tion of the term. That’s not surprising,
given how rarely we experience catas-
trophes of this magnitude. But there are
three factors that separate a true eco-
nomic depression from a mere recession.
First, the impact is global. Second, it cuts
deeper into livelihoods than any recession
we’ve faced in our lifetimes. Third, its bad
effects will linger longer.
A depression is not a period of un-
interrupted economic contraction.
There can be periods of temporary prog-
ress within it that create the appearance
of recovery. The Great Depression of the
1930s began with the stock-market crash
of October 1929 and continued into the
early 1940s, when World War II created
the basis for new growth. That period in-
cluded two separate economic drops: first
from 1929 to 1933, and then again from
May 1937 into 1938. As in the 1930s, we’re
likely to see moments of expansion in this
period of depression.
Depressions don’t just generate ugly
stats and send buyers and sellers into
hibernation. They change the way we
live. The Great Recession created very
little lasting change. Some elected lead-
ers around the world now speak more
often about wealth inequality, but few
have done much to address it. Large seg-
ments of society, particularly people
who weren’t already on the verge of re-
tirement, were able to hunker down and
later return to the same approach to sav-
ing and investing they practiced before
the crisis. They were rewarded with a
period of solid, long- lasting recovery.
That’s very different from the current
crisis. COVID-19 fears will bring lasting
changes to public attitudes toward all ac-
tivities that involve crowds of people and
how we work on a daily basis; it will also
permanently change America’s competi-
tive position in the world and raise pro-
found uncertainty about U.S.-China rela-
tions going forward.
In addition, political dysfunction—in
the U.S. and around the world—is more
severe than in 2008–2009. As the finan-
cial crisis took hold, there was no debate
among Democrats and Republicans about
whether the emergency was real. In 2020,
there is little consensus on what to do and
how to do it.
Return to our definition of an eco-
nomic depression. First, the current
slowdown is without doubt global. Most
postwar U.S. recessions have limited
their worst effects to the domestic econ-
omy. But most were the result of domes-
tic inflation or a tightening of national
credit markets. That is not the case with
COVID-19 and the current global slow-
down. This is a synchronized crisis, andjust as the relentless rise of China over the
past four decades has lifted many boats
in richer and poorer countries alike, so
slowdowns in China, the U.S. and Europe
will have global impact on our globalized
world. This coronavirus has ravaged every
major economy in the world. Its impact is
felt everywhere.
Social safety nets are now being
tested as never before. Some will break.
Health care systems, particularly in poorer
countries, are already buckling under the
strain. As they struggle to cope with the
human toll of this slowdown, governments
will default on debt. For all these reasons,
middle- income and developing countries
are especially vulnerable, but the debt bur-
dens and likelihood of defaults will pres-
sure the entire global financial system.
The second defining characteristic
of a depression: the economic impact of
COVID-19 will cut deeper than any re-
cession in living memory. The monetary-
policy report submitted to Congress in
June by the Federal Reserve noted that the
“severity, scope, and speed of the ensuing
downturn in economic activity have been
significantly worse than any recession
since World War II.” Payroll employment
fell an unprecedented 22 million in March
and April before adding back 7.5 million
jobs in May and June. The unemployment
rate jumped to 14.7% in April, the highest
level since the Great Depression, before
recovering to 11.1% in June.Now for the bad News. First, that
data reflects conditions from mid-June—
before the most recent spike in COVID-19
cases across the American South and West
that has caused at least a temporary stall
in the recovery. Signs of corporate eco-
nomic distress are mounting. And second
and third waves of coronavirus infections
could throw many more people out of
work. In short, there will be no sustain-
able recovery until the virus is fully con-
tained. That probably means a vaccine.
Even when there is a vaccine, it won’t flip a
switch bringing the world back to normal.
Some will have the vaccine before others
do. Some who are offered it won’t take it.
Recovery will come by fits and starts.
Leaving aside the unique problem of
measuring the unemployment rate dur-
ing a once-in-a- century pandemic, there
is a more important warning sign here.
The Bureau of Labor Statistics report alsoThe economicimpact of COVID-19will cut deeper thanany recession inliving memoryWorld