As fears of coronavirus, or COVID-19, spread throughout the world, economic panic is setting in. The Dow Jones Industrial Average plummeted 2,000 points on Monday, marking the single-largest one-day drop in its history. The drop was propelled by collapsing oil prices, another reason stocks dropped so quickly after the opening bell on Monday morning (and one that links back to the virus too). The New York Stock Exchange had to briefly halt trading. It’s the first time that has happened since 1997.
The market chaos has led to confusion and uncertainty about what might happen to the broader economy from here on out. To better understand how a pandemic like coronavirus in particular could affect Americans who aren’t loaded up with index funds, VICE spoke to Janet Currie, a professor of economics and public affairs at Princeton and the president of the American Society of Health Economics. She spoke about how the U.S. might not be able to handle such a crisis, what that all means for the global economy, and how this chaos might lead to the first recession in more than a decade.
This interview has been slightly edited for length and clarity.
VICE: In the most basic terms, how does a pandemic of this sort slow down the economy?
Janet Currie: Normally, the economy works by buying and selling lots of things, lots of services. If people aren’t going to work, then those services simply aren’t available to be offered. And the same with goods. The economy can weather a very short-term shutdown without too much of a problem. Take something like Hurricane Sandy, which was pretty localized, and it shuts down everything for a little while, there are some direct costs associated with that, but it didn’t really cause large ripple effects to the rest of the economy. But this outbreak is much bigger, in the sense of the number of people affected and the number of areas affected. The uncertainty about how long it’s going to last doesn’t help either, and it seems as if the cancellations and closures are just starting, and there will be many more of them. Things that would have otherwise been created and available for purchase won’t be.
When are nosediving stocks a concern for people who don’t have a lot of stock, or don’t have stocks at all? Are we at that point already?
I do think that many people have stocks, especially if they have some kind of retirement plan—which are generally invested in the stock market. So whether the person personally has stocks or not, they’re still going to be losing value on their retirement portfolios. Now, if they’re retiring in ten years, that probably doesn’t really matter. But if they’re retiring next month, it could be a severe enough correction to cause some people to really have to think again or wait.
I wouldn’t want to try to make a forecast, but if we look at 2008, which is the last time that the stock market really tanked, there were people who really suffered as a result of that. And it was typically people, for example, who had already retired and lost a lot of their savings. Or they were people who were about to retire and lost a lot of their savings. People a decade or so out, though, it didn’t really affect them long term, and we have seen the stock market recover.
This has all the elements of a recession, then?
A lot of people are worried about that, I think. We do have recessions every now and again, but it’s been a long time since we’ve had one—but that last one, in 2008, was so bad that people do remember it pretty well. So in some ways, it might seem as if we’re overdue for one. Having everybody lose confidence in the economy at the same time is a recipe for a recession.
How much of a problem is the potential lack of paid time off for sick workers?
Actually, I think there are two huge problems. One of them is sick leave, and the other one is health insurance. I was reading recently about how one person who had been quarantined and was sent by ambulance to a hospital to be checked and then received a huge bill. He wasn’t anticipating that; the U.S. government had essentially ordered him to be treated like that. I think it’s going to be a significant problem in terms of limiting the scope of the outbreak. There are many people who don’t really have a choice: If they don’t go to work, they don’t have any money. They don’t have savings. They may not have health insurance. Or if they do have health insurance, they do have co-pays that they have to pay. How are those people going to listen to all this advice to just stay at home indefinitely? How are they going to eat? How are they going to pay the bills? How will they pay medical bills, if they have them?
This seems like a pretty potent example of how our healthcare system is ill-prepared for a situation like this.
I do think that’s true, on many levels. One thing is that some people don’t have health insurance, so maybe they won’t go to the hospital and get properly tested, for potentially thousands of dollars. And nobody really talks about that.
Another thing, though, is that our healthcare system is very decentralized. We don’t really have very many mechanisms for getting providers to all do the same things. We’re not getting very clear messaging from public-health officials. If you thought that you might have coronavirus, what should you do about it? If you go to an emergency room, you’re going to expose everyone else in the ER. Maybe that ER will then need to be closed and decontaminated, and all the medical staff in there have to be quarantined for 14 days, and they’re not available to treat other people. That doesn’t sound like a good idea. We’re not getting any guidance. The system just isn’t very coordinated. I think everyone’s waiting for that guidance, which so far hasn’t been all that forthcoming.
Is there an expectation for private companies, and how they can—or should—act? How will they grapple with this?
I actually think another issue, which might be particularly American, is that a lot of companies might be worried about their liability. So that also can be coloring some of this. We may all end up staying home a little longer than we actually need to because executives are skittish about being sued.
Is America’s response pretty American then, by nature?
One report that I saw on the situation in Italy was kind of implying that Italians are used to not really obeying the rules. I don’t know that in the U.S. we’re a whole lot better about that sort of thing. If people are ordered to keep quarantined, will they do that? Will it cause a lot of people to go underground if they have symptoms? Will we have the equivalent to people giving their babies Aspirin or Tylenol and sending them off to the daycare, so they don’t have to keep them at home? If having a fever means you can’t do this or that, will we just take medication to simply tone down the fever?
It’ll be good if people can come together, but I don’t have a lot of confidence that’ll necessarily be the case.
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