Why this economic crisis is truly different

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

Beatrice Weder di Mauro, professor of International Economics at the Graduate Institute, has experienced and tried to find solutions to many financial crisis in the last 30 years. In this pocket lecture, she explains how the current crisis is utterly different.

  • This crisis is exogenous from the economic system (like wars).
  • This crisis was a common shock all over the world but was given different political answers.

  • This crisis is government mandated, as it was a response to a medical necessity, putting political leaders in a very different role and responsibility.

  • The world was not ready at all to face such an economic recession.

The interactions between the medical and the economic systems can be graphically explained: when the epidemic curve has to be flattened, it also meant steepening the economic curve.

Lessons can be learned from Asia. First by looking how China’s activity has resumed after the end of the lockdown, which seem to show a “B-shape” recovery, but also by looking at the case of Singapore, which was at first very successful in containing the first wave but had later to implement an asynchronous 8-week lockdown because of a second and third wave.