US economy

What Was the Last Time an Economy Froze Like This?


There are many differences between the Soviet Union’s dissolution and our own coronavirus-induced freeze. But there are obvious similarities, too. Trade links have been torn apart by the economic downturn. Transport has been obstructed by the cancellation of flights and shipping. Companies such as Apple, which has been a leader in establishing cross-border supply chains, are rethinking reliance on manufacturing in China.

If companies don’t change their globalized way of doing business, governments may force them to. Many countries are limiting exports of masks and other medical supplies. Sometime in the next year or so, the world will likely acquire its first vaccine against the virus. It is easy to imagine whatever country that creates the vaccine prohibiting exports until its citizens have been vaccinated first.

Indeed, President Trump is not the only person questioning the wisdom of international trade. Ideas about national self-sufficiency championed by his advisers, like the trade skeptic Peter Navarro, are beginning to look more mainstream. The European Union has seen debates about whether medical goods can be exported beyond the bloc — or even to other countries within it. China hypes its supplying of medical equipment to countries in need, but it kicked off the trend of hoarding masks. Almost everywhere that the coronavirus has spread, it has brought not only lockdowns, but trade restrictions, too.

When the Soviet Union’s economy splintered, catastrophe resulted. As businesses closed and workers lost jobs, the Russian economy shrank by 14 percent in 1992 — a staggering decline that the United States and Europe may well replicate this year. (By comparison, in 2008, in the depths of the financial crisis, America’s G.D.P. declined by only 3 percent.) For Soviet citizens, the human costs of the crash were severe, with life expectancy falling so fast that it appeared that a new disease was ravaging the population.

Today, we have no alternative to lockdowns if we want to survive. Still, countries like Russia that experienced double-digit declines in G.D.P. have found that the results weren’t healthy. Terrible recessions come with human costs. In the United States, 6.6 million people filed for unemployment claims in just one week. Throwing up barriers to trade and to business is tough medicine — not a cure all.

Chris Miller (@crmiller1) is an assistant professor at the Fletcher School of Law and Diplomacy at Tufts University and the author of “Putinomics: Power and Money in Resurgent Russia.”

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