linnugripiblog

link tekstile

.. The global economy would be badly affected by a pandemic. “A pandemic, even one meaningfully less virulent than the 1918 influenza, would have hugely disruptive effects,” says Sherry Cooper of BMO Nesbitt Burns. “Depending on its length and severity, its economic impact could be comparable, at least for a short time, to the Great Depression of the 1930s. The disruption in trade could be analogous to the Smoot-Hawley Tariff of 1930, but even worse given that the free flow of people across borders would be curtailed.

.. A flu pandemic would hit hardest trade, travel, shopping, education and any activity involving face-to-face communications. Industries with a greater exposure to open economies, that rely on trade or on global just-in-time supply networks would suffer badly. “The resulting collapse of the airline and land and water transportation industries, tourism and hospitality sectors, much of retail and wholesale trade along with essential imports and exports would be devastating, at least for some period,”?Cooper adds. “This would trigger foreclosures and bankruptcies, credit restrictions and financial panic.”

.. Large numbers of people would be unable to work because of illness, having to look after the ill or quarantine. Schools and old people’s homes would close as young children and the elderly would be especially vulnerable. Millions would try to work from home.

.. The world’s financial markets would be plunged into chaos. Canny investors preparing for a pandemic would be likely to sell shares in retailers, casinos, transport companies, airlines, insurers, industries with large numbers of staff and large exposures to volatile emerging markets, according to Citigroup. They would invest invest instead in local telecom companies, dot.coms, home entertainment, utilities, private postal services and less volatile developed markets and healthcare businesses. Reduced growth would lead to a decline in commodity prices, oil and energy.

As John Edwards, an Australia-based economist at HSBC, points out, news of a flu epidemic would also trigger a rapid global sell-off of bonds and equities and a flight into cash. The result would be a massive spike in long-term interest rates and the cost of borrowing. “Because low cash rates and increasing global confidence have driven up asset prices and encouraged more business and household leverage in recent years, the financial impact of a flight into cash could be catastrophic,” he argues. The price of gold and safe assets would go through the roof. Eventually, long-term interest rates would fall back but not before the damage has been done.

.. Surging death rates would lead to house price collapses worldwide and a fall in rents, pushing millions into negative equity and default on their mortgages. Financial institutions may start to collapse, wiping out more assets. All of this would lead to further declines in consumer spending, exacerbating the impact of higher bond yields and imposing severe deflationary pressures on the economy. A reduced supply of labour could lead to higher wages, as was the case after the Bubonic Plague.

.. In the long-term, the cost of a pandemic could be even greater by unfairly discrediting capitalism and the international liberal economic order. While temporary restrictions on trade and travel would be required to contain the pandemic, it would be imperative to ensure they are lifted as soon as possible after it subsides to allow the global economy to bounce back when the crisis is over. But today’s low public levels of support for free trade – despite the fact that liberalisation has been an astonishing motor of increased prosperity – suggests the system may not be able to handle such a shock and the World Trade Organisation and free-trade zones may all collapse.

.. Like after the Great Depression, many may turn their backs on capitalism even though the market economy would bear no responsibility for a bird flu-induced economic crisis. Voters may also reject intellectual property rights, blaming Big Pharma for failing to invent the right drugs, dealing a blow to technological innovation. A collapse in trade, research and development would be near-fatal, triggering a slump in productivity and living standards and a new era of decline, conflicts and geopolitical instability.