‘The corona crisis impacts all levels of society’
Bas Jacobs, Professor of Public Economics at Erasmus School of Economics, talks in Studio Erasmus about the economic impact of the corona crisis. The world economy has gotten a blow that we haven't seen since the 1930s. How can we recover from such a crisis? And under what conditions should companies receive economic aid?
The economy looks very bleak. Nobody knows exactly how big the economic impact will be. The estimates from the Netherlands Bureau for Economic Policy Analysis (CPB) and the IMF predict an economic contraction of approximately 8%. If these calculations are true, the economy is shrinking faster than during the Great Depression and the global recession of 2008. But what does this mean for us? According to Jacobs, it means, simply said, that our income will decrease significantly, and that the unemployment rate will rise enormously. ‘In the entire economy you can see that shops are empty. Many establishments in the hospitality sector and companies in the events sector will most likely not make it through summer. We can see the impact of the corona crisis on all levels of society.'
Economists are also working empty-handed at the moment. ‘It's uncertain how the virus will develop. The question is how long the economy will have to remain locked up. This all depends on whether we can get the virus under control. If we can manage this, the economic damage will be limited. If this is not the case and many sectors will have to remain closed, the damage will be much greater. We also don't know what effect the government policies will have. The extent of the economic damage and the effectiveness of the policies remain unknown. Can we compensate the damage with the current policies or not? There is a lot of crucial uncertainty at the moment.'
According to Jacobs, politicians should be more prominent when it comes to important issues relating to the economy and social life. ‘I believe that many politicians hide behind medical doctors and virologists while far-reaching decisions are being made that have to do with the economy and people's freedom. Now we see, for example, that a number of people who are seriously ill are being put on a waiting list to give priority to corona patients. Can that be done just like that? Is that fair? I feel like there are a lot of important issues that are being avoided.’
Who are you saving and why?
Another discussion that is reviving now is about the support packages and who is allowed to receive them. In other words, who are you saving and why? 'I think the government initially did what it had to do and that it had no other choice. All companies could get support to compensate for their wage costs. Now, a new support package has to be put in place for companies that are still unable to generate revenue because their sector has to remain closed. The question is however, are you going to continue paying the wage costs of these companies without imposing conditions? I think it would be a good thing if the government imposes some conditions. For example, the government could provide support in the form of shares for large companies such as KLM. I also believe that companies should first go to their shareholders for support and try to raise as much money as possible from their own capital. Now, the government is opening its wallet a little too easy.’