Understanding the Economic Shock of the Covid-19 Crisis

Predicting the path ahead has become nearly impossible, but we can speculate about the size and scale of the economic shock.
Economic contagion is now spreading as fast as Covid-19 itself. Social distancing, intended to physically disrupt the spread, has severed the flow of goods and people, stalled economies, and is in the process of delivering a global recession. Predicting the path ahead has become nearly impossible, as multiple dimensions of the crisis are unprecedented and unknowable. Pressing questions include the path of the shock and recovery, whether economies will be able to return to their pre-shock output levels and growth rates, and whether there will be any structural legacy from the coronavirus crisis. This Explainer explores several scenarios to model the size and scale of the economic shock and the path ahead.
Based on the HBR article by Philipp Carlsson-Szlezak, Martin Reeves and Paul Swartz
---------------------------------------------------------------------
At Harvard Business Review, we believe in management. If the world’s organizations and institutions were run more effectively, if our leaders made better decisions, if people worked more productively, we believe that all of us - employees, bosses, customers, our families, and the people our businesses affect - would be better off. So we try to arm our readers with ideas that help them become smarter, more creative, and more courageous in their work. We enlist the foremost experts in a wide range of topics, including career planning, strategy, leadership, work-life balance, negotiations, innovation, and managing teams. Harvard Business Review empowers professionals around the world to lead themselves and their organizations more effectively and to make a positive impact.
Sign up for Newsletters: hbr.org/email-newsletters
Follow us:
hbr.org/
/ harvard-business-review
/ hbr
/ harvardbiz
/ harvard_business_review

[@ccd119]

The impact of covid 19 is not only a supply side shock, it also includes a substantial demand side shock as well which could have stronger and longer negative effects. Demand shocks may even have a bigger weight compared to supply side shocks in this case. Simply stating that the economic impact of covid 19 is mostly due to a lack of investments is grossly understating the problem. Expectations, risk aversions and decreases in income due to job losses and possible erosion of personal savings and disposable incomes due lack of incomes during shut down all constitute large demand shocks. The closure and bankruptcy of businesses also constitute a demand shock issue as well as their demand for input goods declines. It is therefore inaccurate to say that lack of investments is the underlying problem caused by covid-19 and the resumption of credit would constitute a recovery. That is why governments have been enacting stimulus packages in order to attempt to stem the effects of demand shocks.

[@spinmouth4114]

That flow has been severed for decades as upper managent disportionately benefits from profit. That's why the rich profit from downturns while the W-2 wage slave pays for everything and is the quickly cut from employment and medical care. CEO's get golden parachutes, real estate investors scoop up hard earned equity in favor of a flipping and rental business. Where does all this leave the traditional W-2 wage slave? Subserviamt serfs to an ivy league lead economy. Tell us what to think and do because you own the media, pay off politicians so you can get the bail outs, all the while terrified you'll lose control of the narrative. The banking cartel has been exposed. Education need not be so costly, real estate speculation need not be predatory nor compete with shelter buyers. PAC money need not determine our next presidential candidate.

[@iambarnowl]

ah yes, the old "everyone needs to do everything better" solution very good

[@blacklabelmansociety]

No surprise for HBR

[@isaksmith3712]

Pretty much lol

[@marcossidoruk8033]

A classic.

[@A_A_K_123]

nice production values, though

[@gggromay]

Yeah, just bs. Maybe just stop social distancing, stop hyping deaths and accept life with the coronavirus and everything it brings to the table, like we've done for millions of years in our life on this planet

[@Willys-Wagon]

I am shocked by the rapid recovery on Wall Street while the crisis continues on main Street.

[@Dwightstjohn-fo8ki]

It's either a smokescreen, designed to protect the monies of all who live in/near the Trump Tower, or it's temporary. whadda think??? we're not outta this just yet, so a call is too soon.

[@gjsoriano1]

True. It might lead to a dead cat bounce. Investors are trying to profit from easing of lockdown but I believe when economic and corporate numbers from April and May comes out, a big correction might occur.

[@qigong1001]

Its propped and meaningless. When people stop buying shit, when government prints more money, when crime skyrockets...then watch Wall Street. Banks have to take the hit...```loan forgiveness upto 30% is reasonable. Many will go under, but its better than all go under.

[@RawMaterialENT]

they got some sweet bailout funds

[@WvhKerkhof]

the crisis just started, recovery will take 10 years or more. There is volatility, up and down and up and down, the 10 year trend is down.

[@izdotcarter]

This is some of the most effective communication I’ve ever witnessed.

[@teslasoul]

Economy driven by human sustansibility can be winning option

[@lm_b5080]

South Korea will implement a Green New Deal, go look it up. other countries should follow

[@Willys-Wagon]

Human, sustainable, sensibility don't go in the same sentence.

[@Dwightstjohn-fo8ki]

only if the great unwashed learn to innovate, andn swpell cowwectwy, and odoo sumeting differuntt. den maybee.

[@samantathaver7203]

This is true test of strength of economies, economic planning and forecasting in the developed countries. It seems that these countries have taken their economic strength for granted .

[@Caleta280]

Oh yea, the ol' positive ways to see things. How is that working 2020?

[@malenurse35]

Or we could be all doom and gloom and sarcastic. That would be better right?

[@j.b.9796]

Not so good with a bunch old far out GOP nut jobs who still think its all a HOAX

[@untouchable360x]

How do you know if someone you just met went to Harvard? Answer: He will tell you in the first 5 minutes when he's talking.

[@kellyorator9007]

As seen in Seth Wright

[@matthewledford7209]

Benedict Neo Yao En What he said has nothing to do with what you’re talking about.

[@untouchable360x]

@Benedict Neo Yao En It's a Joke. You're taking my comment too literally.

[@slowerandolder]

Wait...is this not a disinformation technique.....1 - say something that plays to popular stereotypes while it pits Them against Us / 2 - grin / 3 - if a cogent counter-narrative appears, pass the original comment off as a joke / 4 - grin, since an opportunity for effecrive discussion has been hijacked

[@WvhKerkhof]

i went to Harvard Universe, sounds good and is not university, same with the video.

[@robertschlesinger1342]

A worthwhile introduction to the economic effects of the pandemic, but it is more complicated and with many variables. A depression, higher unemployment, and inflation big issues and are likely coming.

[@krissdbpc]

Please also make a video on innovation metrics currently used and their flaws if any.

[@drpamelatomcruise4517]

No one called me about that either ,that's important to me it is keeping up to date on these important matters ,

[@sushantmmehta]

What software do you use to make the presentation

[@haqmalik4238]

i am loving the cynicism in the comments section. Spoken like true economists.

[@qigong1001]

Because we are living it, not studying it in some outdated book.

[@WvhKerkhof]

the comments bring balance, THE truth doesnt excist, the video is an opinion from the one who paid the video, or do you think the video is made to help you, the viewer?

[@prasenjitmishra6130]

What's interesting is we have an explanation for what is not seen or known yet ! :)

[@MinhNguyen-wz2wn]

Now you know

[@prasenjitmishra6130]

@@MinhNguyen-wz2wn I was wondering what's the rocket science here ?! 🤔 I've been clearly noticing the trends in a way different to that of experts from a long time . My observations weren't confirming to tomes written about economy n stuff but it was clearly indicating the mess that was imminent . I was spot on at different things . So , I knew it much prior to ' now I know ' . Anyways , thanks for the answer that didn't quite surprise me or interest me . 🙂

[@kevink6419]

Sounds like an instruction of where the capital should go.

[@flowertowerrr]

Thought you were trying to explain how the apple magic keyboard worked

[@TheZSOTTER]

Apparently the countries that take the pandemic in control first are more likely to recover their economy first, which will draw more foreign capitals into their market as well. It creates a virtuous circle. Now it's clear that the economy of East Asia will recover first. Singapore is also doing a good job but their neighbors are still struggling with COVID19.

[@hardlifemararike50]

Where is East Asia? You mean the Gulf Region ?

[@junyong12]

i dunno what neighbours you're referring to but malaysia and vietnam is doing just fine

[@TheZSOTTER]

@@junyong12 Yes a lot of asian countries have done a good job to flatten the curve, including Malaysia and Vietnam. It's not a coincidence that Asian countries did so good but western countries did so bad, even with much better medical system. Asian's economy as a whole will rise quickly in the next 2-3 years. And you will see western money flocking into Asian countries as well.

[@joshportnoy8102]

Yes but what about all the industries that got wiped out, how will the economy adapt to that? It will be one major shift to the left of the labor demand curve. The supply chains will stabilize but industries will shrink. Add to that the quantitative easing...what do we have?

[@Algeriadjamel]

Nice visuals, does anyone knows which tool is used to do such animation ?

[@ZodiacEntertainment2]

Probably Adobe After Effects

[@allthingsnew6334]

Central banks: “shifting wealth upwards and destroying your buying power one freshly printed dollar at a time since 1971”

[@aquakun3166]

fuck my entire life, i want to die already, ill suicide soon, fuck evwrything and fuck everyone, ill kill myself

[@allthingsnew6334]

@@aquakun3166 dont do that!

[@aquakun3166]

@@allthingsnew6334 I need to

[@allthingsnew6334]

@@aquakun3166 why?

[@aquakun3166]

@@allthingsnew6334 if I kill myself the world will be better

[@drpamelatomcruise4517]

I had to run my business an over night being a doctor working in the emergency room ,I do have patients I have seen ,every one is the dare devil ,your favorite doctor on daytime

[@zapatazac22]

This is a great explanation but why does she sound like the announcer in the purge.

[@user-ix5wr5vf1v]

Such an excellent video

[@andreaf8113]

What if innovation could be sustainable development and reduction of severe economic inequality? Too risky?

[@Michael-kb7vh]

Different industries have different impact.

[@falsul96]

True I've worked with business like gardening, home-decoration, parenting ideas etc.. they all agree that the Pandemic has done them good, restaurants and retailers might be the most affected, but as somebody once said if a business goes bankrupt because of a few months of down-profit maybe that business should not exist at all.

[@ethanweeter2732]

@@falsul96 That is why it boggles my mind you could wreck an economy because of COVID. Did those folks ever blame the economy on people like Fauci though?

[@hassanmohamed6488]

Whether advanced or growing economies, it won't be easily recover to a full viable employment level.

[@yousraadly7341]

The economic shock that will lead to the great rescission then athird world wild .what do people expects roses and chocolates coming from sky ?!This world is definitely lives in wonder land .

[@tunggulsujarwob.archmba7751]

Eventhought I dont see any clear solution than theories that we have already knew, hope this video is a warming up. Keep going 👍

[@bhavikvadhia2284]

What software is used here to create this animation?... Well explained

[@harvardbusinessreview]

I think the designer used Adobe After Effects.

[@aiden_le]

oh my externalities

[@thenarfer]

I would love to learn how to make animations like this! Well done! (Other than that also a great video!)

[@kailiang4160]

this is a really good stuff, harvards r smart, but smart people tend to make mistakes because of arrogance, arrogance leads to bloating self esteem and confidence , this crisis nobody knows what will happen next , only what will u do ? to deal with it

[@ahzlaseonnicorn4034]

can i use this for my university task? thanks before

[@MatthewMartinDean]

we will need policies (of any sort), yeah, like that will happen in the next year.

How about taking this chance to transition into a environmental restoration based value system.

[@lufema18]

Harvard is my best dream. Professor Marques.

[@kurosua]

Here’s a health innovation for the US: separate employers from health insurance; i.e., support affordable universal public health insurance.

[@PinePizza]

They didn't want that, remember?

[@champagne7530]

You mean the affordable care act that Trump moved he'll and high water to overturn out of pure spite. (Sips tea in karma)

[@kennethblair9314]

A good bill for Congress is for Uncle Sam to issue $50,000 in a lump sum to all self employed, employees, employers, government employees and military personnel after 60 months of full time work, part time work included in the total, regardless of number of employers worked for. Foreigners here on work visas would receive $20,000 in a lump sum after 60 months of full time work, regardless of number of employers. Also a bill for the President or in Congress to mandate U.S. Banks to pay their depositers at least 90% of all interest collected, since it was the depositers money to begin with that got loaned out. Also the Federal Reserve needs to increase all depositers bank accounts according to the inflation rate put out by the U.S. Department of Labor every quarter and every year. Government and military personnel are exempt from the adjustment because they are already accounted for on their paycheck. The printing and issuance of money is validated by any legitimate labor and production.

[@titonicanorpizarropoblete5029]

ok, now i understand it all

[@drpamelatomcruise4517]

Oh my god hopefully I don't run around in circles

[@jkim1115]

Easier said than done!

[@simonread2411]

None of the prerequisites you mention to avoid an “L” or “U” appear to be present in your great nation, certainly not in your current leadership.

[@joshparrott8841]

Forgot about money velocity, though it was a concept derived by that one philosopher whos name we shant say. Cant print demand!! Won't implement UBI!! Like a cartoon cat running off a cliff, noticing it is suspended in the air, falls precipitously to doom.

[@drpamelatomcruise4517]

They have childproof all my plans It feels like ,after I preplann brought an build all my equipment for these. Special reason applied for department of housing an applied for housing an was approved for them both

[@drpamelatomcruise4517]

I try to keep my seat cushion with me every where I go seem like stolen vehicles are every where ,

[@Adam-sw6nm]

Hopefully the policy enforced is lower than other markets, otherwise thats a major middle finger to Milton Friedman and Libertarians...

[@haqmalik4238]

if only innovation were so easy

[@infavorofdemocracy5770]

So well made but so little watched

[@sakshichoudhary7039]

Economic concerns is the major concern than health, this lockdown is worsening situation. I don't know what lockdown even exists.

[@billmoss2877]

The shark has lost oxygenated water flowing past its gills and is sinking fast.

[@donkeyxote7729]

0:07 the map! the map!

[@drpamelatomcruise4517]

Staying on the scene

[@lgsunnyvale]

Looks great! With what software can you create those animations?

[@ZodiacEntertainment2]

Probably Adobe After Effects.

[@AshGreen359]

Sweden's economy has actually grown

[@ManuraNanayakkara]

Yeh, getting bailout money. That's the economic benefit.

[@Dwightstjohn-fo8ki]

at least compared to the last idiocy ten years ago, this time the great unwashed is actually being somewhat included. YEH!!!! OR, yeh..yeh.....ye...y

[@drpamelatomcruise4517]

You don't let them take you off the scene especially if your paid your college tuition off what kind of stuff is that ,I had bought four mobile RV home from Tennessee as the professor told the class that's where they had to go an buy it we had to have it with us every day an night

[@TravisFebruary]

That L-shape graph reminds me of a similar graph I saw a long time ago; I forget the details of it but it was basically a before/after Reganomics graph. 🤔

[@GraceCole-qy6ul]

It aint just about fancy lines on a graph, you also need to look at wealth concentration and that was exasperated further and may be the dreaded L shape for everyone but the rich (in aggregate and the rich may be top 5%, 1%, 10%, etc, but whatever it is, it is smaller than before).

[@itscarolina837]

It doesn’t take a genius to know it’s going downhill

[@drpamelatomcruise4517]

It's not me I realize that but I'm feeling all there sicken grief inna bad way

[@Xez1919]

Step 1: Create Asset Bubble by increasing Money Supply Step 2: Burst Asset Bubble Step 3: Offer help by printing more money and demand structural and political reforms to increase your power Step 4: Buy assets at low prices, force conditions on parties which face problems Step 5: Repeat. For detailed instructions see: kzbin.info/www/bejne/a16si42ursdkfas

[@Philoreason]

Add widespread social unrest, that will be the end of the world

[@webburns69]

I understand what is being talked about in this video? You have not talked about BAILOUTS costs to the economy, including other economic around the world? With dependencies on other countries needed in manufacturing US products? Soon the major sectors of citizens at the bottom will no longer be able to purchase food, having a rippling lack of purchasing power causing failures within the overall economy? Businesses now successfully working at home will have a major impact on the restaurants and stores around the empty buildings, like a Wall Street? Along with these issues, automakers, oil companies, trucking, etc will show up in the data; how long can the oil fracking companies last; automobile sales will not recover if the population is worrisome; real estate? I have so many question around simplify of your video? everyone is saying this downturn has never happened in the history of the a United States, time to place that book on economics on the self and start writing the updated 2020 version? Please let’s see some “Game Theory Models.” With bitcoin and countries stockpiling gold, how long will the US dollar be the world currency?

[@balajisumathi3131]

Good thought... I'm also thinking like this.. other countries economies beating up US economy now... China overtakes US........bla bla....

[@SuzanaMantovaniCerqueira]

How they know this 4 years ago ….? 🤔

[@nashwagemakers]

the fact social consequences have been ignored so far are funny

[@victimoffame2389]

" L " shape is what I like

[@donikajorgo5612]

Very sorry for what I sow in this video. Bad calculations. I see Harvard isn't not good enough in economic statistical. 🤔

[@mukundanalexander9065]

DONIKA JORGO* There weren’t any calculations in it! It was an explainer video.

[@YashSharma-wu7kr]

How to make videos and animation like this?

[@balajisumathi3131]

Using Adobe after effects and other motion graphics softwares..

[@YashSharma-wu7kr]

@@balajisumathi3131 So for making something like this , do i need powerful device or an average computer can do the job?

[@balajisumathi3131]

take this video...for this video, all you need is basic configuration system, which is suitable for adobe after effects requirements.. then you can choose per your choice.

[@YashSharma-wu7kr]

@@balajisumathi3131 thank you Balaji Sunati ji

[@lukman4366]

Harvard !

[@drpamelatomcruise4517]

I feel like I got lead poisoning

[@drpamelatomcruise4517]

The very people I believe I saw that was suppose to deliver me a car was driving it

[@rudeainews]

I have explained the COVID economy

[@robp.8807]

We are on the 7th up day in the SPY since this was published. market is going up, dont buy into the fear.

[@kenm3ng121]

Helicopter cash ready!

[@halaelmaghrabi4117]

that will just cause inflation which will get worse and worse they should just make people work from home or different workers on different days and that way productivity will still be stabilized and no inflation

[@carpediemarts705]

... Two weeks ago...

[@chrisodonnell1269]

(Π£> MS = Π£v < α) where (α) = the value of money before quantitative easing & (Π£) = quantity of substance in pounds is greater than the value of market or market size the value of money goes down, making everyone poorer.

[@n.d8001]

Poverty not wars will reduce the global population

[@knowledgefactory-leansixsi2123]

Watch this video How Singapore,USA,Italy and Malaysia battle against Covid 19... @

[@drpamelatomcruise4517]

Well that's a impact ,please lord please don't let that be on me

[@danielshaikhali5108]

Stonks are going up 😤

[@ZodiacEntertainment2]

stonks only go up

[@drpamelatomcruise4517]

Oh my god I never go on that trip with her again what the heck it came out the water fast

[@davidshelby78]

I write from Russia and the state here does not invest money in the economy at all. If we do not fall apart, I will write later)

[@sauraav4039]

Thats right

[@mariakorman2665]

That’s not good... I have relatives in Russia and this is the first time I’m hearing about this.

[@juanjose3906]

the world needs answers to the pandemic

[@thedailydetails]

Great Content !

[@drpamelatomcruise4517]

I say what's going on I'm not getting my iv meds I believe I was told dry rot inside problems an issue

[@francismausley7239]

Truly stunning shocks... "Decree for me, by Thy bounty, O Lord, that which shall prosper me in this world and hereafter and shall draw me nigh unto Thee, O Thou Who art the Lord of all men. There is none other God but Thee, the One, the Mighty, the Glorified." ~ Bahá’u’lláh, Baha'i Faith

[@drpamelatomcruise4517]

Although the world become infected by all these benefits rules an regulation and routes that a person have to take ,who applied for what ,I am an individual with dependents

[@rmondave]

Net, life losing measures, not saving!

[@fach4422]

Yep, gas got more expensive already.

[@krissdbpc]

Wow !.. wow !.. wow !.. lovely !.. I'm working on a project on exactly this topic for grad school. Lovely !.. Please make more videos on the impact of innovations on the covid crisis.

[@drpamelatomcruise4517]

They stole all my jeeps ,my sports cars my cruise ships an yachts how on earth did my yacht get in that country ,th y broke into my houses I'm sitting here looking like a fool I been threaten ,I guess it's economic as they said 👀💥

[@asailor4636]

How to make this kind of video

[@vivekchandrasekaran]

A vaccine or a therapeutic solution is the only way we could bring the real economy back to life. Zero interest loans and moratorium are only support measures which could help us stay afloat in the short run but much required especially for the middle and poor income class.

[@kaustubhvaishnaw1537]

This is a natural economic

[@stevechance150]

This video was weak. Corporations have realized that their employees CAN actually be productive working at home. Management has finally abandoned their 1970's mentality that says "if I can't watch my grunts do their job, then they won't work". Remote meetings over the Internet is the new normal. Business air travel, and associated hotel and car rental expense is gone and will not come back to the prior levels. You're video is fixated on "credit", and ignores the new reality. Millions of us can work from home. I don't need to buy a new car, I hardly drive anymore. I don't go out for lunch. Rethink the "new" economic reality.

[@chandy3859]

My question would be, what is the ratio between the number of job that can be done at home and the one that can't be done at home. Secondly, what about those that lose their job? Not to mention there's a new disasters for the US at least.

[@messiukesi3638]

The production of tangible products will never be possible to be done from home, I hope that eases your math regarding the number of people who can do their job from home vs who cannot... Not all the production is yet robotical and mechanical, thus physical production is something each of us depend on.. cuz a fat asshole who orders something online and waits till it arrives so he can move his butt to the front door just to pick it up, needs to understand that someone has to physically produce it first.

[@stevechance150]

@@messiukesi3638 You said, "not all the production is yet robotical and mechanical". You should watch this video kzbin.info/www/bejne/bYHUXoZrapyLh7c

[@zhangyi4647]

Reviews only, things that we all know.

[@moriplease]

macroeconomics class anyone?

[@kainewilson6837]

💪

[@andrewa9700]

Here after Wells Fargo stopped taking auto loans from independent dealers. 🤦‍♂️