The Economy May Never Be the Same

double by the end of the year. The researchers predicted that the death toll would reach four hundred and ten thousand by January one one, but they said that number could be cut dramatically with certain precautions. If almost everyone wears masks and governments with high death rates put social distancing measures in place, more than one hundred thousand deaths could be prevented in the US and seven hundred and

seventy thousand lives could be saved worldwide. Danish drug maker Novo Nordisk is exploring whether a new class of medicines that helps people lose weight and control diabetes also has potential in fighting COVID nineteen. Research shows people afflicted by obesity and diabetes often fare worse with the disease. Now, new data shows g LP one, drugs, which help patients keep blood sugar levels in check, could be a meaningful

therapy in helping people with diabetes battle COVID nineteen. According to NOVO chief scientific officer Mad's Krogskard Thompson, he pointed to it in the virus attacks cells that produced the hormone insulin. Finally, the first peer reviewed data on Russia's proposed COVID nineteen vaccine show it has promise. In early trials, the drug induced an antibody response in all participants and

found no serious adverse effects. According to the first vetted data on the controversial project, preliminary results from phase one and two trials that were published Friday in the Lancet Medical Journal showed the vaccine also produced a response in T cells, a type of white blood cell that helps the immune system destroy infection. Russian officials had previously made broadly similar statements about the shot, but there had been

no review by outside experts. And now, for today's main story, the global economy could lose up to twenty two trillion dollars in twenty twenty alone due to COVID nineteen. That's according to Australian economist Warwick McGibbon. He predicts that successive waves of coronavirus infections will mean the world will continue to count the cost of the pandemic for years. Bloomberg Senior editor Jason Gale spoke with Professor McGibbon about his

dire forecasts. He explains that the pandemic will result in lasting changes to the way we work, live and interact. Warick McGibbon is a professor of public policy and the director of the Center for Applied macro Economic Analysis at the Australian National University in Canberra. It was to Warwick who the World Health Organization turned to quantify the economic cost of Sazzle Severe Acute Respiratory Center and when it

spread across the globe almost twenty years ago. Back then, sickness and death were thought to be the biggest contributors to a contagions economic cost because of their effect on labor productivity. But Warrick and his colleagues found that the behavior of people and businesses in response to pandemics are bigger drivers. We found The conventional cost of STARS, which was just how many people died and what was their

fort on income, was really quite small. But when you took into account the change in people spending behavior and the way capital was relocated around the world, we can't be an estimate of about forty billion US dollars, which is the official WHO estimate for the Stars outbreak. According to Warwick's modeling, the COVID nineteen pandemic may cost more

than forty billion dollars a day. We estimate this outbreak is going to cost tens of trillions to the world economy, and it's actually not over even once his pandemic is through. Work began looking at the coronavirus outbreak and what it might cost back in January when it was just beginning to spread into aw We wanted policy makers to understand that if they didn't react to very quickly, that this was going to be a very very dangerous and expensive disease. Potentially.

Ricks analysis has been updated to take into consideration the actual spread since then. One of his models, the most pessimistic, sees the accumulative cost of COVID nineteen topping thirty five trillion dollars. I asked him what the biggest costs will be with COVID nineteen number one. His international trade has collapsed, and the movement of goods around the world has has collapsed.

The movement of people has collapsed. Very there's a lot of human capital that's generated then distributed around the world with people moving across different countries for different types of jobs and that that's that's a big problem. For example, in India, internally, we have a lot of people that were working in the city's have lost their jobs, so they've had to migrate back to the countryside and take the disease with them. So this mobility of people and

goods is the biggest impact, he says. The second biggest factor is the impact on confidence. People argue you shouldn't have shutdowns because if you had no shutdowns, there's been no economic loss. Well that's just not true. In our study that we did, we looked at what happened to

electricity use in Australia. We had very fine data from one of the electricity companies and we knew which which groups of companies had been closed by mandate and which were still operating, but their demand had shifted because of people's own preferences, and overwhelmingly the change in economic outcomes is caused by individuals changing their behavior, not because the

government mandated the shutdown. So the shutdowns are there because there are a number of individuals that won't respond appropriately to make the choice between do nothing and say the

economy is a false, false choice. Why it says the loss of confidence is having impacts everywhere except in stock markets, which in itself is an interesting problem, and that's I think largely caused by central banks just flooding the world with liquidity, and people are putting that liquidity into buying equities. Plus some companies have done very well out of this. In the meantime, he sees the current pandemic leading to significant change. I think the shift to working from home

and the uptate of technology is the ever last. There's going to be long lasting. There's going to be a lot of industries that are going to be restructuring that some industries that may cease to exist, especially if we never get an effective vaccine. But the other structural shift I think is they're just in time technology. They's just in time processing that we developed with all of these chains for production. That's going to change and I think you're going to shift from just in time to just

in case. Unemployment has surged across the globe as nation shutted large parts of their economies. Work estimates the world economy has slump. Why tend to this is the biggest shock since certainly bigger than the Great Depression for some countries. With the structural shifts in the economy remain, a lot of people aren't going to be able to use their existing skills. You're gonna have to retrain a lot of

people to take up these new jobs. And we've had a lot of automation, so even a lot of jobs that were substituted away for either new techniques or machines um and so those jobs won't come back. So you could have a regular recovery, but it's probably not going

to have a job recovery. At the same time, says that during the global financial crisis, the Group of Twenty mobilized a very large fiscal response at the global level, saving a lot of economic loss, but the Forum has been much less active in responding to the current crisis. There is no G twenty response at this point. The leadership coming that came from the UK and came from the US and came from Australia. It's just not there.

Suppose you actually coordinated a response so that countries like Brazil, Argentina, Indonesia who need fiscal stimulus but can't because the financial markets won't allow it. What if you had got them the resources to do that and the whole world is much better off? Wreck says a vaccine won't turn the economic outlook around any time. Seen. I don't think you can physically have a vaccine that's going to be adopted or by six billion people over the next two years.

It's just practically impossible. So who's going to get it? Where the elites will get it? Who's going to get it? Well, the rich countries will get it. Um. So okay, if there's a vaccine tomorrow and you can give it to the wealthiest people in the country, why does that change the economic outcomes? It doesn't. You've got to get it into the into the population. You've got to get people out there interacting again. You've got to get businesses moving again.

So you have to get a fair bit of quite a lot of the population vaccinated before the economic costs start to come down. You'll get you'll get a surge in markets because people will say, oh, there's a vaccine, and confidence will be restored. But it's hard to imagine that the Dow can go much higher once a vaccine. If a vaccine is forthcoming, it's already pumped up by cheap money. As much as I enjoyed my chat with Warrick,

it didn't fill me with optimism. As Warrick says, we're operating in a great deal of uncertainty, and that's why the policy framework is extremely important. And that's why communication is extremely important, because you can't predict anything to do with this disease except that it's going to be unpredictable, which is very helpful. Ah. No, we're all desperate to know when we can safely return to our workplaces, when our kids can return to the classroom, when we can

travel again. The reality is, for most of us, nothing is certain, and if the pandemic is teaching us anything, it's to embrace uncertainty or at least acknowledge it. That was Jason Gale, and that's it for our show today. For coverage of the outbreak from one bureaus around the world, visit Bloomberg dot com. Slash coronavirus and if you like the show, please leave us a review and a reading on Apple Podcasts or Spotify. It's the best way to

help more listeners find our global reporting. The Prognosis Daily edition is produced by Top for Foreheads Jordan Gaspoure, Magnus Hendrickson, and me Laura Carlson. Today's main story was reported by Jason Gale. Original music by Leo Sidrin. Our editors are Rick Shine and Francesca Levi. Francesca Levi is Bloomberg's head of podcasts. Thanks for listening.