Editorial

Preparing for an Economic Crisis

Carmel Market, closed to mitigate the spread of the coronavirus, Tel Aviv, March 22, 2020
Moti Milrod

It’s still too early to tell how the health crisis created by the spread of the coronavirus will end, but it’s not too early to prepare for the rehabilitation the economy will need following this sudden, powerful shock.

From every direction, victims of the crisis have been contacting the government to request urgent economic aid – the self-employed, hoteliers, small businesses, the aviation industry, people working in the school system, salaried employees and of course the health system, which needs equipment. The number of people applying for unemployment compensation has jumped from 150,000 to 570,000 over the last month and is expected to continue climbing rapidly. Every day of lockdown and reduced activity seals the fate of more businesses and workers who will not able to return to the status quo.

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An exceptional crisis requires a dynamic government response suited to the accumulating economic challenges. The usual paradigms, which are based solely on minimal government intervention – keeping the budget deficit under control and capitulating to lobby groups – can’t continue in this new situation.

The government bears ultimate responsibility for the health-related decisions that have sent millions of people into lockdown and destroyed hundreds of thousands of jobs. It is also responsible for developing a strategy for recovery from the crisis by making use of powerful tools – but in a gradual manner, so as to retain ammunition for the next stages of the crisis.

The main problem right now is how to spur the economy at a time when the government is suppressing economic activity through its prohibitions on tourism, travel, leisure activities, business activity and the education system. The usual tools employed by central banks and governments in such situations are useless at this stage. But there are issues the state can and should address immediately: supporting the health-care system; helping businesses with their cash flow; paying unemployment to employees, the self-employed and people on unpaid leave; and keeping the financial system functioning properly. There are also issues that need a plan of action for exiting the economic crisis: investment in infrastructure; tax incentives for businesses, including small businesses; a significant reduction of red tape; and making the public sector more efficient.

The most important messages the government must send are that it’s taking responsibility for dealing with the economic crisis and its victims; that it’s concerned for the entire population, and above all for those who have been affected, not just lobby groups; and that it’s willing to use every possible tool to prevent a prolonged economic and social crisis.

The dangers are real, and they will put Israel’s social capital to the test – trust between individuals and communities, and between the government and the citizenry, as well as their ability to cooperate. The last political year has raised very big questions about this ability. But the coronavirus is a large and shocking enough threat to reboot it.

The above article is Haaretz’s lead editorial, as published in the Hebrew and English newspapers in Israel.