Could we be returning to the Roaring 20’s; I mean a Roaring 2020’s as the coronavirus pandemic winds down this summer, leading to an explosion of growth after the worst recession since the Great Depression and worst pandemic since the Spanish Flu pandemic of 1918-19?
The International Monetary Fund is hinting at such with its latest forecast. The IMF World Economic Outlook projects global growth at 5.5 percent, which is higher than their previous forecast in October. Global growth will moderate to 4.2 percent growth in 2022, said the IMF in its latest blog post.
“In our latest World Economic Outlook forecast we project global growth for 2021 at 5.5 percent, 0.3 percentage point higher than our October forecast, moderating to 4.2 percent in 2022. The upgrade for 2021 reflects the positive effects of the onset of vaccinations in some countries, additional policy support at the end of 2020 in economies such as the United States and Japan and an expected increase in contact-intensive activities as the health crisis wanes. However, the positive effects are partially offset by a somewhat worse outlook for the very near term as measures to contain the spread of the virus dampen activity.”
The economy grew 42 percent during the 1920s, and the United States produced almost half the world's output because World War I destroyed most of Europe, say the historians. New construction almost doubled, from $6.7 billion to $10.1 billion. Aside from the economic recession of 1920-21, when by some estimates unemployment rose to 11.7 percent (due to the Spanish flu pandemic lockdowns), unemployment in the 1920s never rose above the natural rate of around 4 percent.
We should see a similar rebound from the damage done by COVID-19. The global economy contracted by 3.5 percent in 2020, the worst peacetime contraction since the Great Depression of the 1930s. But it was a short-lived recession, since the economy was at full employment last February at the onset of the pandemic that has killed 2,143,861 worldwide and 421,670 in the U.S., according to the John Hopkins coronavirus tracking center.
“Much now depends on the outcome of this race between a mutating virus and vaccines to end the pandemic, and on the ability of policies to provide effective support until that happens,” said IMF chief economist Gita Gopinath, in a blog post accompanying the updated forecast.
The Biden administration is making a good start with its program to vaccinate 100 million in the first 100 days by opening mass vaccination sites and mandating the increased production of PPE and vaccines with the Defense Production Act.
But the IMF emphasizes this must be a global effort, as poorer countries don’t have as ready access to the PPE supplies and vaccines, which means they will continue to harbor virus outbreaks that could prolong the pandemic.
“The international community must act swiftly to ensure rapid and broad global access to vaccinations and therapeutics,” says the IMF, “to correct the deep inequity in access that currently exists…The health and economic arguments for this are overwhelming. The new virus strains are a reminder that the pandemic is not over until it is over everywhere, and we estimate that faster progress on ending the health crisis will raise global income cumulatively by $9 trillion over 2020–25, with benefits for all countries, including around $4 trillion for advanced economies.”
Need we say more on what is needed to bring us a new 'Roaring Twenties’? Let us hope we can keep the peace as well, since the Great Depression and a second World War followed the original Roaring Twenties.
Harlan Green © 2020
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