The coronavirus has dominated all of our lives in recent months. Radical paths were taken by politicians in the form of lockdowns to contain the pandemic. But we should recognize that even if the coronavirus is a (major) challenge for us, we always have to keep a holistic view of world events. Just as there are epidemiological factors to consider in this crisis, there are also economic, social, cultural, political and other health factors at play. It is precisely these other factors that are so often forgotten in the panicky reporting, in the constant, manic tracking of the current infection numbers, that we want to take a look at in our series “The Costs of Coronavirus Lockdowns” in the coming weeks.
Throughout the Coronavirus crisis, governments around the world have been on a massive spending spree to cover costs that closed businesses had to incur. Public spending in general tends to rise during a crisis, but during this one grew to astronomic dimensions. On the one hand, this is understandable: if governments force businesses to close, the thinking goes, they should at least cover the damages or else everyone goes bankrupt. But on the other hand, it will take an even greater strain on the fiscal health of countries that already had problems with their bloated budgets – and needless to say, these stimulus programs can be counted as costs of the lockdown policy as well.
As the European Commission, Statista, and Handelsblatt report, government spending has risen dramatically in 2020. In Austria, the public spending has reached 58.3% of GDP, in Germany 54%, in France 64.3%, and in Italy 58.8%. This means that in 2020 Austrian government has spent 10.1% more of its GDP compared to 2019; Germany’s public spending as part of GDP shot up by 19.5%; France saw an increase of 15.7%, while the Italian government even afforded itself a 21% increase.
Thus, the power and scope of the state has increased dramatically as well. The crisis further blurs the line between the role the private and the public sector play. By spending so much money we don’t have, the public sector is crowding out the private sector – thereby, creating a new economy which has little to do with a free market or a functioning price system.
More Statistics in Our Costs of Coronavirus Lockdowns Series:
Children Hurt Not by Corona – But by Lockdowns: children’s mental-health-related visits to the emergency departments in the U.S. increased by approximately 24% and 31% for children aged 5-11 and 12-17, respectively, compared to the same period in 2019. (CDC)
Record-Breaking Budget Deficit in the U.S.: the U.S. government spent $3.1 trillion more than it collected in 2020. Who is supposed to ever pay back all this money has not been answered yet. (U.S. Department of the Treasury)
Drug Addiction Intensifies: the number of people dying from drug overdose in the U.S.rose by 17% in the last twelve months. This only includes reported cases until May 31, 2020. (CDC)
Governments Grow in Size: in Austria, Germany, France, and Italy government spending has risen dramatically in 2020. (European Commission, Statista, and Handelsblatt)
Stillbirths on the Rise: more than 200.000 additional stillbirths could occur just in the next 12 months, concentrated in low- and middle-income countries. (UNICEF)
The Poor Pay the Higher Lockdowns Price: lockdowns and restrictions have proven to be something that disproportionally affects those already poor, whereas those wealthier are less hurt. (PEW Research Center)
How Women Are More Hurt by Lockdowns Than Men: between the first and second quarter of 2020, on average, women suffered a 6.9 % decline in wages, compared to the 4.7% decline suffered by their male counterparts. (International Labor Organization)
No Work in Europe Thanks to Lockdowns: The sharp decline in labor market participation and the 32 million people under the short-term work schemes hide the real numbers of the unemployed in the European Union, which most likely averaged a two-digit number. (ECB & Eurostat)
Printing Money in Times of Corona: Monetary policy effectiveness has its boundaries. As the Fed has created 39% of all the “dollars” in the economy in 2020, those boundaries might have been reached. (Trading Economics)
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