Governments typically try to stimulate demand in a downturn but people trapped at home cannot spend freely
months the world economy has been turned upside down. Stockmarkets have collapsed by a third and in many countries factories, airports, offices, schools and shops have been closed to try to contain the virus. Workers are worried about their jobs and investors fear companies will default on their debts. All this points to one of the sharpest economic contractions in modern times. China’sprobably shrank by 10-20% in January and February compared with a year earlier.
What to do? An economic plan needs to target two groups: households and companies. And it needs to be fast, efficient and flexible so that if the virus retreats only to resurge, workers and firms can be confident that governments will dial assistance down and up again as needed. Start with households, where large government spending is needed. One aim is to protect vulnerable people, by subsidising sick pay and ensuring those without insurance have health care.
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