COVID-19 Social and Economic Impact

How will the coronavirus crisis affect our societies? What are the social and economic consequences of the pandemic? The first session of the cycle of virtual debates on Covid-19, promoted by the Centre for Contemporary Studies in collaboration with CADS and the Ministry of the Vice Presidency, Economy and Finance, analysed the social and economic impact of the coronavirus through experts insights from the economic domain. The speakers highlighted the need to strengthen the public sector to mitigate the economic inequality caused by the crisis, the importance of articulating good economic policy and the fact that this pandemic could be an opportunity to change the technological, energy and social model.

The Minister for Foreign Affairs, Institutional Relations and Transparency, Bernat Solé, opened the session. In his words, he highlighted the need to reflect on the possible paths that could help in the long term to overcome with resilience a crisis that is multidimensional. “We want to lead the reflection on the post-Covid world, with a long and inclusive view”, he said. Solé also stressed the commitment of the Catalan government to tackle the situation from an inclusive perspective, focusing on vulnerability, and from networking, which will allow us to avoid the mistakes that were made in the management of the 2008 crisis.

Pere Almeda, Director of the Centre for Contemporary Studies and IDEES magazine, presented the following sessions in the cycle, which will deal with the impact of the pandemic on the area of planetary health, future scenarios and economic and social responses, democracy, citizens’ rights, the climate crisis and the geopolitical context. “It is important that we ask the right questions and listen to the plurality of responses in an increasingly complex world,” said Almeda. For her part, Marta Curto, Director General of Economic Analysis, moderated the conversation and referred to the need to adapt to the situation of uncertainty and begin to think about a recovery that avoids returning to the unsustainable economic and social model that existed before the crisis.

Uncertainty: the central element

During the debate, Oriol Aspachs, director of studies at Caixa Bank, stressed the great uncertainty of the current moment, which has become a fundamental element in economic analysis, and spoke of the difficulty in assessing the exact economic impact of the health crisis, although he pointed out that it will undoubtedly be a historical one. Even so, he wanted to provide a note of optimism by stressing that “since the harshness of lockdown measures began to be relaxed, a notable change in spending trend can be observed”.

Albert Carreras, professor of Economic History at the Pompeu Fabra University, said that we must bear in mind that this crisis is not born from the dynamics of the economic system itself, but from a health emergency. “This crisis has been decided by the public authorities as a matter of public health; it has nothing to do with the functioning of the economy. This also forces us to think of different responses,” he explained. Carreras defended the debt capacity of the states to mitigate the economic and social impact of the pandemic, and stressed the need for virtuous behaviour on the part of citizens, both individually and collectively, as a key element in returning to normal and mitigating the damage until the vaccine arrives.

The director of the Foundation ISEAK, Sara de la Rica, focused her intervention on the labour market and welcomed the fact that it has been possible to temporarily suspend employment thanks to the ERTE (temporary lay-offs), as well as it has been possible to implement teleworking. She highlighted the importance of respecting the physical distance between people in order to progressively reactivate the economy and, based on what most sources say, predicted that by the end of the year “there will be a public debt of 120% of the GDP and an unemployment rate of 20%”. In spite of the figures, Sara de la Rica argued that the current situation is an opportunity to undertake two transitions: the energy transition, on the one hand, and the technological transition, on the other, focused on R+D+A, where the letter A refers to the adequacy of workers. “We are living in an unsustainable way with the planet and we have to rethink it. This crisis is a kind of accelerator that, at the same time, opens up possibilities”.

Asked if the ERTE could bring about a change in corporate culture that would lead to less temporariness, Sara de la Rica commented that these mechanisms have contributed to increase internal flexibility within companies, but criticized that the current regulations make people with temporary contracts unable to benefit. The expert highlighted the importance of preventing ERTE from becoming EROS (redundancy schemes) and companies from going bankrupt, and therefore advocated greater flexibility and adaptability of this type of measures to be able to apply it to people with temporary contracts. However, she was also very critical of the generalisation of temporary contracts and called for the need to limit them both politically and through a change in business culture.

Finally, Judit Vall, professor in Economics at the University of Barcelona, focused her intervention on the effects of the pandemic on the mental health of the population, caused in large part by lockdown measures, and cited previous studies on the impact of Ebola and SARS. Vall stressed that health-care providers and families with children are the most vulnerable groups, which can suffer long-term psychological consequences, both in the short term and in the long term. The economist spoke of a study that has investigated the impact of Covid-19 on a sample of the Spanish population, and which concludes that the current situation is having very negative short-term effects on mental health, above all on people in unstable economic situations, which could last if there is no forceful political intervention and if the public health system is not strengthened. “Without political will and public policies aimed at restoring the mental health of the population, it will not return to pre-Covid levels on its own,” she said.

The session continued with exchanges of views among the speakers on different issues. For example, on whether the economic crisis could lead to a financial crisis. Aspachs sent a message of calm and commented that the current situation at the banking level has nothing to do with the crisis of 2008. However, he said the situation is serious and there is a need for a very strong solution in the area of economic policy. The expert warned that “we are once again making the mistake, at the European level, of entrusting the entire response to the crisis to the European Central Bank”, and that a fiscal restructuring plan is needed l to solve the problems of the EU’s institutional architecture.

Lessons from previous crises

To analyse what lessons we can learn from previous crises, Albert Carreras explained the similarities and differences of the current crisis with other episodes, among which the Black Death. In this sense, confinement as a solution is the same reaction that could have been had in medieval times, when there was no biological knowledge about the infection. Regarding the Spanish flu of 1918, Carreras stated that it is a precedent in which no public health measures were taken due to the lack of information and the lack of contact between continents. He also made a comparison between the pandemic and wars, in which the demobilization of productive capacity occurs, as has happened today. The Professor of Economic History highlighted the uniqueness of all these events, which generate fears that change behaviour and social organisation on a permanent basis. “Lockdown is an extreme event. Anyone who has experienced it will remember it. There are many things that will change and that do not derive from the will to create a new world after Covid-19, but from the projection of the fears we have now”.

The essential role of the health system was also discussed, and how this situation has made the population much more aware of the importance of the public health system. Judit Valle stated that it is necessary to provide it with greater resources so that it is more prepared for future crises such as the current one, and referred to a research in which she took part, according to which “58% of those surveyed believe that health is the most important public policy, and would be willing to pay more taxes”. In this sense, Sara de la Rica claimed the role of care and the task of all medical and health care staff. “We applaud them every day at 8 pm. From a working point of view, we must treat better those who have proven to be so important,” she said. In the final part of the conversation, she also warned that women may be the most disadvantaged in the growing inequalities of the new post-Covid world due to the greater burden they bear in the area of care.

Increased taxation and reinforcement of the public sector

All the speakers agreed that public policies aiming to a good response to the crisis will be those that strengthen the public sector, especially the health and education systems. This is the only way to mitigate the social inequalities that will worsen over the coming months, and which the market alone will not correct. “Clearly, there have been winners from this crisis, such as the big technology companies,” Carreras said. All the speakers agreed that increased taxation will be inevitable and will need to be articulated at European level.

In the final part of the session, the experts answered questions from the audience, which had come in via the Youtube live chat and also via Twitter, with the #IdeesCovid19 hashtag. In their answers, the speakers assured that the present moment could be an opportunity to redefine many structural elements of the system and to undertake common projects in the Spanish, European and global sphere. The capacity of small companies to invest in technology, the main failures of the Catalan and Spanish public sectors, the sustainability of public finances in countries such as Spain, Italy or Portugal, the idea of degrowth and the transition towards a more sustainable economy were also discussed.

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