Covid-19: the medical shock and the economic shock

The Graduate Institute Geneva and are co-producing a series of 'pocket lectures' about the current crises: Covid-19, the virus that is changing the world.

Richard Baldwin, Professor of International Economics at the Graduate Institute, Geneva, made the first episode. Part of his “pocket lecture” deals with the medical shock and part on the economic shock. Both are essential for understanding the crisis we are currently in.

He compares China’s epidemiological curve with the curve of the recession, primarily caused by the containment policies that are used to fight the disease. Two takeaways: first, the epidemiological curve is not exponential: it comes sooner or later to a peak. Second: we need international cooperation to ensure that we do not adopt crazy policies, like protectionism or “tit for tat” travel bans that last after the medical crisis is over.

It is important to think carefully and calmly to get the economy back on track. Panic is not the right reaction: we need forceful government policies to contain the disease, to save lives, but forceful economic policies to make sure that the recession does not have to be worse than it needs to be and doesn’t last any longer than the medical shock.