The pandemic was not unexpected. But reality always differs from expectations. This is not just a threat to health. It may also be a bigger economic threat than the financial crisis of 2008-09. Dealing with it will require strong and intelligent leadership. Central banks have made a good start. The onus now falls on governments. No event better demonstrates why a quality administrative state, led by people able to differentiate experts from charlatans, is so vital to the public.
A central question is how deep and long the health emergency will be. One hope is that locking down countries (as in Spain) or parts of countries (as in China) will eliminate the virus. Yet, even if this proved to be true in some places, it will clearly not be true everywhere. An opposite extreme is that up to 80 per cent of the world’s population could be infected. At a possible mortality rate of 1 per cent, that could mean 60m additional deaths, equivalent to the second world war. This calamity would probably also take time: the Spanish flu of 1918 came in three waves, over a year. Yet it is more likely that this ends up in the middle: the death rate will be lower, but the disease will also not disappear.
If so, the world might not return to pre-crisis behaviour until well into 2021. Younger people might behave normally, sooner. But older ones will not. Moreover, even if a few countries do eliminate the disease, quarantines will be maintained against others. In sum, the impact of the coronavirus is likely to be severe and prolonged. At the very least, policymakers must plan on that.