Published in El Pais, 29 de Septiembre 2020.
The world is moving towards a terrible economic crisis. It is estimated that the world GDP will fall with approximately 4.9%. This may vary by country, but the fact is that the world will be in crisis and there are few individuals in the world who will not feel it one way or another. Many companies are going bankrupt or will end the year with losses and some people will lose or already lost their job. The cause of all is the COVID-19 quarantine. Many actions to protect the population have caused people not to spend their money on restaurants, vacations, events, public transport, etc. People who worked in these industries were the first to be affected by the crisis. Obviously, this group stopped spending money immediately after losing their job and this has affected other parts of the economy as well causing a snowball effect. Others affected have been the homeowners, the schools that by not receiving the monthly payments have been affected tremendously, and these people have also begun to spend only on the most basic things. People who did not lose their jobs also stopped spending due to quarantine as staying at home has limited spending money. The latter have increased their savings, but they will not spend it either because with a crisis approaching, most will prefer to keep it as a reserve cushion. This will make the crisis worse because people will spend less.
Personally, I think that a crisis from time to time helps us to put us with our feet back on the ground. People and companies will become more creative and competitive to gain back a place in the market. Also, people will once again value the most important things in life. But in the end, the crisis is a crisis and it will have to be resolved.
What can governments do? The first thing is to try to make people trust that the economic situation will be resolved soon. This will help people to spend again and invest in companies that in turn can sell their products. However, something is needed to start the economy, and this is a government job. I believe in a hybrid policy where governments invest money in research, public works, health, education, etc., it can generate jobs. If they do so ensuring quality and efficient management, not just a simple expense in whatever personnel, it can contribute to innovation. In turn, entrepreneurs will be able to invest in new businesses. To succeed everybody will have to get out of their comfort zone to improve the economy, making it eventually more robust.
The role of government is critical to solving an economic crisis. There is no room for corruption and waste of time in silly political games. The plan must be clear, credible, and feasible. The latter is something to consider in the upcoming elections for Bolivia. Which party really has a plan that works and that the entire population understands and supports?
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