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Opinion | Just How Bad Could a Coronavirus Recession Get?

There is much that should be done immediately. Banks, supported by governments, should provide discounted loans and increase their tolerance of late repayments by businesses that risk bankruptcy because of the absence of supplies or customers, or because of late payments by creditors. Gig-economy and hourly contractors, estimated to include 57 million people in the United States, require particular help, and government should help employers to guarantee a basic income and to ensure that workers who are not currently entitled to sick pay — a quarter of the U.S. work force — are covered for the period in which they are unable to work.

These and other wide-ranging targeted interventions, including tax cuts for the lowest-income earners, would restore confidence and help working people and the businesses that could be devastated. The Government Accountability Office estimates that the 2008 crisis cost the U.S. economy over $22 trillion, including a $750 billion bailout for banks. This time, governments should use targeted interventions of a different kind to prevent the fears of a total economic collapse from turning into a prophecy. In Britain, this week’s budget commitment to mitigate the impact of the coronavirus provides a powerful demonstration of what can be done, even though the $38 billion allocated is too small compared with the $650 billion bailout given to British banks after 2008.

However, national policies alone, adopted government by government, will not be enough to forestall a global catastrophe. For that, countries around the world must work together. When the markets crashed in September 2008, President George W. Bush called the leaders of China, Germany, France and Britain, securing a collective response and participation in a crisis summit. Actions agreed to by 20 heads of state, including an unprecedented spending boost by China, helped avert an even greater disaster. The concerted collective response calmed markets. The contrast with today could not be greater.

President Trump has responded belatedly and erratically to the pressing domestic needs. Internationally, he has isolated the United States and, by turning his back on the world, has stymied an international response. And he is just the most prominent symptom of a wider problem: Since the 2008 crisis, governments around the world have become more nationalist and have adopted a zero-sum approach to international politics and economics. Yet today’s crisis shows isolationism escalates, rather than reduces, foreign threats.

The collapse of American leadership could not come at a worse time. After 2008, Britain led the European response to the crisis, but now Brexit has ended Britain’s ability to lead Europe, and squabbling among key countries means that the European Commission cannot speak for its 27 members. China has been turned from an ally of the United States in dealing with common threats like finance and climate change into a perceived enemy. The trade war and the United States’ withdrawal from the Paris climate agreement are the most visible expressions of wider tensions that have been eroding not only global growth but also the potential for cooperation.

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