The really important issue
is how much of our economy
is destroyed in the process
of managing the disease
and how easily we can
get back to normal.
The optimistic view
would be that we
will bring the explosion that
we have recently seen in cases
and death under control.
We will then have
testing regimes available
that allow us to keep
it under control,
so that within a
relatively short time
the major economies can follow
China and begin to get back
to work by the summer.
But at an extreme opposite
it may be the case we simply
cannot contain the disease.
It might last till
the end of 2021.
If that were to
happen, we'd obviously
have colossal increases in
public debt, maybe 20 or 30
percentage points of GDP.
We would have many companies
that have disappeared.
We would have had many people
who have been unemployed
for a year and a half or more.
We would have profound
social unrest.
I think the trading system
would probably have collapsed.
It could certainly
be immediately,
I think, in the short run,
a bigger decline in output
than in the early 1930s.
The impact on output
gross domestic product
in the developed countries will
vary between minus 15 per cent
and minus 30 per cent.
So every month, as
it were, our GDP
will be smaller by
that amount, below what
it would have been if the
crisis had never happened.
And so over a year, that
will be the shrinkage of GDP?
And that's why you mustn't
have it every year.
What the IMF is telling
us is that we're
going over an economic
cliff right now.
They're expecting that
in advanced countries
GDP will decline
roughly by 12 per cent
between the end of last
year and the second quarter
of this year.
Thereafter, they hope,
there will be a recovery.
It will be a long time to get
back to the starting point,
but there will be
a steady recovery.
Unfortunately, even that could
prove to be too optimistic.
If we look at what sectors
are being hit, well,
obviously it's travel,
it's leisure, it's tourism,
it's restaurants, it's retail.
In the emerging
developing countries
there are no
cushions of the type
we have in the developed
world, so their fate
will be really much more like
what happened in the '30s.
This will be a truly
profound transformation.
Governments would be
colossally indebted.
They would have printed an
enormous amount of money.
I would expect serious inflation
to emerge, one way or another.
If we were to do the very
best one could imagine,
the recession
globally would still
be worse than the Great
Recession, not necessarily
worse in the developed countries
which were most directly hit
by the 2007 or 2008 crisis.
But it's very important
to remember the 2007
and 2008 crisis wasn't
really a global crisis.
While the developed
countries were badly hit
and that affected
the whole world,
China did incredibly well,
came out very, very quickly
with an incredibly
strong growth in 2009.
That supported
commodities, and that
meant a lot of emerging
and developing countries
did pretty well.
Today, this is a global crisis.
It's affecting every
economy in the world,
including China, of course, and
all the emerging and developing
countries, as well as
the developed countries.
If you think we are now
in 1930, as it were,
we're going over a cliff
faster than in 1930.
It's more global than in 1930.
And if it goes like this
for two or three years,
then I think political
consequences which, ultimately,
will feed back into the economy
are just wildly unpredictable
and could be devastating.
Without the Great
Depression, Adolf Hitler
would never have been
elected to power in Germany.
It is possible, if we get
the disease under control,
that the recovery
will be quicker.
We're going to have to
have higher taxation
to strengthen our
health systems,
and I think we'll have to
strengthen our social safety
nets.
And those costs will have to
be borne by the relatively
well-off.
We will have to consider
whether we can continue with gig
working, precarious working.
We will have to
rethink how we relate
the winners to the losers
in our economic system.
Otherwise, I don't believe
our democratic systems
will survive.
