First drawn in 1935, Hu Line illustrates persistent demographic split – how Beijing deals with it will determine the country's future.
- In 1935, demographer Hu Huanyong drew a line across a map of China.
- The 'Hu Line' illustrated a remarkable divide in China's population distribution.
- That divide remains relevant, not just for China's present but also for its future.
A bather in Blagoveshchensk, on the Russian bank of the Amur. Across the river: the Chinese city of Heihe.
Credit: Dimitar Dilkoff/AFP via Getty Images
The Hu Line is arguably the most consequential feature of China's geography, with demographic, economic, cultural, and political implications for the country's past, present, and future. Yet you won't find it on any official map of China, nor on the actual terrain of the People's Republic itself.
There are no monuments at its endpoints: not in Heihe in the north, just an icy swim across the Amur from Blagoveshchensk, in Russia's Far East; nor in Tengchong, the subtropical southern city set among the hills rolling into Myanmar. Nor indeed anywhere on the 2,330-mile (3,750-km) diagonal that connects both dots. The Hu Line is as invisible as it is imaginary.
Yet the point that the Hu Line makes is as relevant as when it was first imagined. Back in 1935, a Chinese demographer called Hu Huanyong used a hand-drawn map of the line to illustrate his article on 'The Distribution of China's Population' in the Chinese Journal of Geography.
The point of the article, and of the map: China's population is distributed unevenly, and not just a little, but a lot. Like, a lot.
- The area to the west of the line comprised 64 percent of China's territory but contained only 4 percent of the country's population.
- Inversely, 96 percent of the Chinese lived east of the 'geo-demographic demarcation line', as Hu called it, on just 36 percent of the land.
Much has changed in China in the intervening near-century. The weak post-imperial republic is now a highly centralized world power. Its population has nearly tripled, from around 500 million to almost 1.4 billion. But the fundamentals of the imbalance have remained virtually the same.
Even if China's territory has not: in 1946, China recognized the independence of Mongolia, shrinking the area west of the Hu Line. Still, in 2015, the distribution was as follows:
- West of the line, 6 percent of the population on 57 percent of the territory (average population density: 39.6 inhabitants per square mile (15.3/km2).
- East of the line, 94 percent of the population on 43 percent of the territory (average population density: 815.3 inhabitants per square mile (314.8/km2).
Hu Huanyong's original hand-drawn map of China, showing population density and the now-famous line (enhanced for visibility).
Credit: Chinese Journal of Geography (1935) – public domain.
Why is this demographic dichotomy so persistent? In two words: climate and terrain. East of the line, the land is flatter and wetter, meaning it's easier to farm, hence easier to produce enough food for an ever-larger population. West of the line: deserts, mountains, and plateaus. Much harsher terrain with a drier climate to boot, making it much harder to sustain large amounts of people.
And where the people are, all the rest follows. East of the line is virtually all of China's infrastructure and economy. At night, satellites see the area to the east twinkle with lantern-like strings of light, while the west is a blanket of near total darkness, only occasionally pierced by signs of life. In China's 'Wild West', per-capita GDP is 15 percent lower on average than in the industrious east.
An additional factor typifies China's population divide: while the country overall is ethnically very homogenous – 92 percent are Han Chinese – most of the 8 percent that make up China's ethnic minorities live west of the line. This is notably the case in Tibet and Xinjiang, two nominally autonomous regions with non-Han ethnic majorities.
This combination of economic and ethnic imbalances means the Hu Line is not just a persistent quirk, but a potential problem – at least from Beijing's perspective. Culturally and geographically distant from the country's east, Tibetans and Uyghurs have registered strong opposition to China's centralizing tendencies, often resulting in heavy-handed repression.
Street view in Tengchong, on China's border with Myanmar.
Credit: China Photos/Getty Images
But repression is not the central government's long-term strategy. Its plan is to pacify by progress. China's 'Manifest Destiny' has a name. In 1999, Jiang Zemin, then Secretary-General of the Chinese Communist Party, launched the 'Develop the West' campaign. The idea behind the slogan retains its political currency. In the last decade, Chinese Premier Li Keqiang has repeatedly urged the country to "break through" the Hu Line, in order to modernize China's western half.
The development strategy has an economic angle – adding industry and infrastructure to raise the region's per-capita GDP to the nation's average. But the locals fear that progress will bring population change: an influx of enough internal migrants from the east to tip the local ethnic balance to their disadvantage.
China's ethnic minorities are officially recognized and enjoy certain rights; however, if they become minorities in their own regions, those will mean little more than the right to perform folklore songs and dances. The Soviets were past masters in this technique.
Will China follow the same path? That question will be answered if and when the Hu Line fades from relevance, by how much of the west's ethnic diversity will have been sacrificed for economic progress.
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A new MIT report proposes how humans should prepare for the age of automation and artificial intelligence.
- A new report by MIT experts proposes what humans should do to prepare for the age of automation.
- The rise of intelligent machines is coming but it's important to resolve human issues first.
- Improving economic inequality, skills training, and investment in innovation are necessary steps.
Does the coming age of intelligent machines mean billions of humans are about to be out of work? Not necessarily, concludes a new report from MIT's Task Force on the Work of the Future. The two-and-a-half year study on technology and jobs concluded that while some jobs will disappear, innovations will also drive the creation of new jobs for the lower and middle class workers.
The report, "The Work of the Future: Building Better Jobs in an Age of Intelligent Machines," also highlighted growing economic inequalities and recommended specific policies governments should embrace to make sure the transition to a future rife with robots doesn't leave large segments of the population behind. Institutional changes must accompany the technological ones.
The Task Force that produced the document was co-chaired by MIT Professors David Autor and David Mindell and executive director Dr. Elisabeth Reynolds, while the expansive group of experts involved more than 20 faculty members from 12 departments, and over 20 graduate students.
One important note the study made is that while many expect automation to take over our lives in the near future, there is still time to prepare and make sure the transition to intelligent machines is in itself intelligent. Ultimately, it's not the machines we need to worry about, but the exacerbation of the existing human-made problems and deficiencies. Specific areas policy makers should focus on include investing into skills development and worker retraining, improving job quality, and expanding and shaping innovation.
Perhaps the central message of the study is that technology both takes away jobs and creates new ones. Around 63 percent of the jobs carried out in 2018 didn't even exist in 1940.
Here are the 10 ways humans should prepare for the rise of the role artificial intelligence will play in our lives:
1. Increase private sector investment in skills and training
The group pinpoints the importance of private sector investment in training employees, especially with the purpose of increasing the upward mobility for lower-wage and less-educated workers. This will particularly affect minority workers, who are overrepresented in this group. The report estimates only about half of employees get training from their employers in any given year.
2. Significantly increase federal funding for training programs
The report advocates getting the government to fund training programs that can help lead to middle-class jobs for workers who don't have a four-year college degree.
3. Support community colleges
The research team thinks community colleges should be supported by the federal government's money and policies to advance programs that connect employers to the education being received by students. The policies should be aimed at raising degree completion rates at community colleges.
4. Invest in innovative training methods
Demonstration and field testing programs that work out new retraining and reemployment ideas should be given particular focus, according to the MIT scientists.
"Innovation improves the quantity, quality, and variety of work that a worker can accomplish in a given time," wrote the report's authors. "This rising productivity, in turn, enables improving living standards and the flourishing of human endeavors. Indeed, in what should be a virtuous cycle, rising productivity provides society with the resources to invest in those whose livelihoods are disrupted by the changing structure of work.
5. Restore the real value of the federal minimum wage
The report spotlights the growing economic disparity between low-paid workers and the rest of society. Compared to Canadians, for example, low-paid Americans earn 26 percent less. Government policy should make sure people in traditionally low-paid service jobs like cleaning, groundskeeping, food service, entertainment, recreation, and health assistance get adequate pay and some economic security. To that end, the researchers propose that the minimum wage should be raised to at least 40 percent of the national median wage. This value should also be indexed to inflation.
6. Modernize and extend unemployment insurance (UI) benefits
Several measures are recommended to improve unemployment insurance and extend it to workers that aren't usually covered. The report suggests allowing workers to count their most recent earnings to determine eligibility, determining eligibility based on hours rather than earnings, dropping the requirement that unemployed seek full-time work (because many hold part-time jobs), and reforming partial UI benefits from the states.
7. Strengthen and adapt labor laws
Labor laws need to be both improved and better enforced, states the report. Contraction of private sector labor unions makes it harder for rank-and-file workers to bargain for wage growth that matches the growth of productivity growth. How workers are represented needs to be innovated as much as the technologies. Current U.S. laws "retard the development of alternative approaches," write the researchers. For example, due to racial politics during the New Deal, sectors of the American workforce like domestic workers and agricultural workers are unable to participate in collective bargaining.
8. Increase federal research spending
In a proposal aimed at fostering innovation and making sure its benefits are experienced by workers, the MIT group thinks it's key to increase government spending on research, especially in areas not addressed by the private sector. These tend to involve longer-term research that addresses the social impacts of new technologies, zeroing in on major national problems, climate change, human health and similar larger research topics. Investing into research on human-centered AI, collaborative robotics and the science of education should be a part of this approach.
Small and medium-sized businesses should receive targeted government assistance to allow them to increase productivity via the new tech, advises the MIT team.
9. Expand the geography of innovation in the United States
Innovation is increasingly "concentrated geographically," think the researchers. For a country that has so many universities, entrepreneurs, and workers that are spread throughout, the benefits of innovation should be made available not only to more workers, but also to more of the country's regions. Each state can have its own Silicon Valley.
10. Rebalance taxes on capital and labor
Innovation is necessary in the tax law as well, according to the report. It's important to change the manner in which the current tax code "unduly favors investments in capital" by eliminating accelerated depreciation allowances, applying corporate income tax equally to all corporations, and instituting an employer training tax credit.
The pandemic has given us an early glimpse at how truly disruptive the fourth industrial revolution may be, and the measures we'll need to support human dignity.
- The coronavirus crisis has acted as a catalyst for two powerful transformative forces: automation and universal basic income.
- These two intertwined forces will undoubtedly gain steam, writes Frederick Kuo, and the pandemic will hasten the acceptance of them from a scale of decades to years or mere months.
- This crisis has ushered in a glimpse of what a dystopian future could look like as a rapidly advancing fourth industrial revolution inevitably causes severe disruption in our economy and labor structure.
The coronavirus pandemic has sent the global economy into a tailspin posing a twisted choice to humankind between economic survival or our very health. Markets are crashing, numbers of infected people and deaths soaring by the day and a massive part of the global economy forced into a standstill as people shelter in place. Looking out the window, the world still looks the same. The sun is still shining, the leaves still rustle in the wind and birds still chirp merrily as if nothing was amiss. However there is no mistaking a collective sense of mourning that the world is feeling as normal daily routines and freedoms we took for granted have come to a sudden halt. Amidst the constant barrage of gloomy news however, this crisis shall inevitably pass. But the world post-COVID-19 will not be the same; the crisis has acted as a catalyst for powerful transformative forces such as automation and the need for universal basic income, two intertwined forces that will undoubtedly gain steam.
COVID-19 will expedite automation
As the mobility of human beings grinds to a halt due to public health directives and fears of infection, our need for food, resources and social connection has forced us to increasingly rely on technology to fill urgent gaps. In the United States, Amazon is seizing this opportunity to further entrench its domination, while in China, robots are being deployed to serve those in quarantine. In a world where fear of contact with other humans has become pervasive, businesses that can adapt quickly and significantly automate their supply lines and cut points of human contact stand to thrive in this new market.
Whereas before this crisis, the need for automation was mainly driven by the desire for increased profits and improved efficiency, the momentous shift in public consciousness today regarding simple human contact may make automation almost a necessity for many businesses to survive. When humans trust a robot to handle or deliver their food or goods more than they trust another human, or when crowded workplaces present public health hazards, jobs for humans will be unceremoniously eliminated. Given existing technologies, experts have estimated 36 million jobs may be vulnerable, ranging from trucking and delivery to food service and repetitive white collar jobs, the labor market may face a significant restructure driven by new technology and a radically altered market for those technologies. In a recent survey conducted by auditing firm Ernst & Young, more than half of company bosses throughout 45 countries had begun implementing existing plans to fast track automation.
This crisis has compacted the timeline of a gradual acceptance of an automated future from years into months.
The crisis of unemployment has become real for tens of millions locked down around the world. Although this phase is likely to be temporary with normality expected to return by the third quarter, the process of entrenching automation in our daily lives will be radically pushed forward. This crisis has compacted the timeline of a gradual acceptance of an automated future from years into months. In Seattle, Amazon has pioneered Amazon Go, a small grocery that relies on cameras and sensors to charge customers for what they buy instead of a checkout line. With Amazon already in control of a major grocery chain, Whole Foods, one could imagine that this little, fully automated store could serve as a template for a nationwide expansion of this technology, thus reducing the once-vital role of the cashier nearly overnight. Similar rollouts of automation models will likely follow in the coming years, affecting warehouse employees, delivery people, food service personnel and more.
Mainstream acceptance of UBI
In early 2019, Andrew Yang began gaining news coverage regarding the central theme of his presidential campaign: $1,000 a month in universal basic income (UBI) dispersed to every American. His primary argument for the necessity of this safety net rested on the belief that the coming age of automation was about to inundate vast scores of our current jobs with a shrinking percentage of elite tech corporations gobbling up more and more of the profit. When Yang first introduced his vision, it seemed to belong to a remote dystopian future with little relevance to the booming economy and low unemployment figures that was the reality until only weeks ago. On the right, he was lambasted as a communist seeking to turn American citizens into dependents to the state. On the left, his ideas were dismissed as other Democratic hopefuls touted the Green New Deal and job programs.
Fast forward to today and Andrew Yang's UBI theory has moved straight into the forefront. Trump, perhaps cognizant that the "Yang Gang" pulled a great deal of support from his own supporters, quickly recognized the popularity of his ideas and the need to provide supplemental income to Americans as shelter-in-place directives began to take hold throughout the country. The massive $2 trillion coronavirus emergency stimulus will provide every American earning $75,000 or less, regardless of current employment, a check of $1,200 per person and $500 per child for the duration of the crisis. There has been little debate over the necessity of this measure because it has proven to be widely popular to the public, regardless of political standing. It lifts some of the immediate and pressing need to work and helps take some of the edge off from isolating at home, thus contributing to a quicker resolution of this health crisis by sending fewer people out into the streets.
Although the pandemic and the stimulus check is temporary, this crisis has ushered in a glimpse of what a dystopian future would look like as a rapidly advancing fourth industrial revolution inevitably causes severe disruption in our economy and labor structure.
Although the stimulus package is a stopgap measure to deal with this crisis, its absolute necessity during this crisis has validated Yang's prophetic vision of a dystopian future where work no longer becomes possible for huge swathes of the American people. The reality is that the after effects of this crisis will be felt for at least months after the pandemic ends. There is little security for either the business owners or employees of food service businesses, bars, hair and nail salons and essentially any business that requires large crowds of people to gather and interact. To the initial detractors of UBI who argued that the program would breed laziness and a welfare state, the reality is that for most workers thrown into the sea of uncertainty, receiving a stimulus check will provide a small lifeline but will ultimately be of little solace to individuals who are accustomed to earning far more and who derive a sense of pride and satisfaction from their jobs. For most of those impacted by loss of employment, supplemental income in the form of a UBI helps take the edge off but it is ultimately no replacement for having a job or business.
Although the pandemic and the stimulus check is temporary, this crisis has ushered in a glimpse of what a dystopian future would look like as a rapidly advancing fourth industrial revolution inevitably causes severe disruption in our economy and labor structure. Automation and artificial intelligence are coming and will significantly alter the way we work, shop, eat and socialize. As society experiences the disruptive force of technology and draws on our collective experiences fighting the COVID-19 pandemic, UBI may become a permanent fixture of our political economy as well.
A bipartisan group of economists, technology and public health experts, and ethicists developed a three-part plan to swiftly and safely reopen the American economy. Could it work?
- The three key parts of the plan are testing, contact tracing, and supported isolation.
- The report calls for significantly increased COVID-19 testing, as well as the creation of a centralized Pandemic Testing Board with "strong but narrow powers."
- The plan would play out over four phases, the first of which involves stabilizing the essential workforce and prioritizing testing for these individuals.
The U.S. can reopen its economy by August 2020 — if it makes a massive investment in public health infrastructure and follows a three-part plan designed to put all Americans safely back to work.
That's the projection outlined in a new report titled "Roadmap to Pandemic Resilience," authored by a bipartisan group of economists, technology and public health experts, and ethicists at Harvard University's Edmond J. Safra Center on Ethics. The report describes COVID-19 as a "profound threat" to American democracy, comparable to "the Great Depression and World War II."
"What we need to do is much bigger than most people realize," the report states. "We need to massively scale-up testing, contact tracing, isolation, and quarantine—together with providing the resources to make these possible for all individuals."
The report estimates this plan will cost $50 to $300 billion over two years. This amount, the authors write, is "dwarfed by the economic cost of continued collective quarantine of $100 to 350 billion a month." What's more, the economic costs of reopening the economy too early or in an unsafe way are similarly massive, and doing so could mean having to keep the economy closed for even longer.
So, to reopen as safely and swiftly as possible, the report proposes three strategies: testing, tracing, and supported isolation — or TTSI.
Testing is the first and arguably most important step. Without it, we can't trace the movements of infected people to determine whom they've contacted, and we can't tell who needs to be isolated in self-quarantine.
"We need to deliver 5 million tests per day by early June to deliver a safe social reopening. This number will need to increase over time (ideally by late July) to 20 million a day to fully remobilize the economy."
As of April 22, about 151,000 Americans are being tested for COVID-19 per day. States are working to increase testing, but the process would be faster with more centralized coordination, Danielle Allen, director of the Edmond J. Safra Center on Ethics, told MSNBC.
@dutchpc99 The most helpful current video that I've seen – which is less about exponential/logarithmic (or: logisti… https://t.co/DilQmuImNA— Benjamin Dickman (@Benjamin Dickman)1587576369.0
That's why the report calls on the federal government to create a Pandemic Testing Board "with strong but narrow powers that has the job of securing the testing supply and the infrastructure necessary for deployment of testing."
With widespread testing, health officials would be better able to trace the spread of the virus. One way to trace the virus is to manually contact those who might have been exposed. Another method is to create an opt-in, GPS-based smartphone app that alerts people if they recently came close to someone who tested positive for COVID-19, similar to the system that South Korea has used to corral the virus. (Understandably, this strategy comes with no shortage of privacy concerns.)
Of course, people who test positive still need to isolate themselves. To succeed on a large scale, the report calls for self-isolation to be supported "with job protections, resource support, and health care."
The report says these three strategies — TTSI — would help the U.S. reopen its economy over four phases:
- Stabilize essential sectors (prioritize testing for them)
- Expand essential workforce (retrain nonessential workers to supplement essential workers)
- End economic misery from collective stay-at-home orders
- Reopen most activity and stay open.
"Throughout all four phases, research and development of both therapeutics and vaccines should proceed aggressively with the goal of accelerating the transition to phase 4 and hopscotching over the intermediate phases," the report states.
If the report's projections are accurate, the U.S. economy could be fully and safely reopened by August. But even if the plan succeeds, it's unlikely that life will return to business as usual by that point — Americans would still probably be advised to wear masks in public spaces and avoid large gatherings.
The biggest roadblock for a plan like this, of course, is getting Congress or the Trump administration to support it. After all, doing things like ramping up COVID-19 testing will likely require the president to use the Defense Production Act of 1950, which authorizes a president to force private companies to accept and prioritize contracts for materials deemed necessary for national defense.
Allen likened these government-mobilization efforts to past U.S. economic recovery programs.
"You can think of it as a Marshall Plan. You can also think of it as Eisenhower's highway infrastructure, building all those great roads across the country," Allen told ABC News. "What we really need is for the federal government to set up a pandemic testing supply board that will coordinate the supply chain and achieve that massive ramp up as quickly as possible."
Central banks face a Herculean task to keep economies right-side up.
- In the shadow of COVID-19, we're rapidly approaching the point where there's nothing to buy, and no one has any money to buy it with.
- Central bankers have responded to the coronavirus's economic fallout by tinkering with interest rates and instituting quantitative easing (QE) plans.
- Artificially lowering interest rates essentially incentivizes debt and discourages fiscal responsibility, whereas other measures, such as subsidized furloughs, may be more effective and better suited to the current situation.
The coronavirus outbreak is bringing fears for the world's economic health – not just its physical health. The global economy was in difficult shape to begin with, due to international trade wars and rising global debt, but now, to a great degree, economic activity has come to a full stop.
Spending has plummeted, and businesses have closed, with the knock-on effect of pushing unemployment through the roof. Factories are shuttered, so production has fallen along with demand. The world's financial markets are spiraling downwards: The S&P has fallen 20 percent since the beginning of the quarter; the Dow Jones is down more than 23 percent; the NASDAQ lost over 1,300 points in three months.
We're rapidly approaching the point where there's nothing to buy, and no one has any money to buy it with.
Central bankers like Jerome Powell, head of the Federal Reserve; Andrew Bailey, head of the Bank of England, central bank of the UK; and Christine Lagarde, head of the EU's European Central Bank (ECB), face a Herculean task to keep their economies right-side up.
They need to deal with the short-term economic spiral as markets, cities, and entire sectors shut down. And on another level, they also need to prevent long-term economic decline that can result from fears of volatile markets, the destruction of numerous SMEs and even larger corporations, and unemployment stretching into a long-term problem as businesses fail to get back on their feet.
We're seeing central bankers primarily respond by tinkering with interest rates and quantitative easing (QE) plans:
- The Federal Reserve led the way, cutting interest rates to almost 0 percent, promising to buy unlimited amounts of treasury bonds and mortgage-backed securities as needed, and agreeing to buy some corporate and municipal debt.
- The Bank of England suddenly cut interest rates to 0.25 percent, then cut them again to 0.1 percent, alongside a promise to buy £200 billion in government bonds.
- The ECB didn't cut interest rates, presumably because they are already at -0.5 percent. This initially provoked a volatile few days for the euro, but it stabilized, and the eurozone has rallied, thanks to the ECB's announcement of a €750 billion QE stimulus package.
The danger is that rate cuts and QE plans may be entirely the wrong approach. Here's why.
Adjusting interest rates could be actively damaging
Interest rates cuts have long been the tool of choice for central banks, but that doesn't mean they're the right tool.
Artificially lowering interest rates essentially incentivizes debt and discourages fiscal responsibility at times when businesses and individuals need to focus on being frugal and sustainable. As a generation saw huge amounts wiped off their pensions, they learned to stop saving and embrace the debt. Businesses and whole governments took the same approach, borrowing more and more in order to invest in their own expansion.
While this creates an image of a healthy economy, it's just a dangerous mirage. Much of the developed world now inhabits an unsteady bubble of personal debt, corporate debt, and government debt, encouraged by the consistently low interest rates, leaving no one able to bear a recession when interest rates have nowhere to go but up.
As Peter Schiff, CEO of Euro Pacific Capital, puts it, the current crisis isn't caused by COVID-19, but by the unsustainable bubble of debt. "Too many analysts are focusing on the pin that burst the bubble, but the problem is really the bubble not the pin," he notes. Indeed, many pundits had long predicted a recession in early 2020 – it's easy to argue that if it hadn't been sparked by coronavirus, it would have been sparked by something else.
In this context, cutting interest rates is simply not helpful and is actively damaging. These steps only increase the amount of debt borne by central banks, inflate the bubble further, and make the situation worse. The recent Federal Reserve interest rate cut didn't help stabilize the markets much, showing that investors no longer have much faith in rate cuts.
What are we seeking to incentivize, anyway? Does society really benefit by people having the discretionary income to spend more time in stores and restaurants? The nature of the current situation calls for a specific type of austerity.
On the other hand, it's true that raising interest rates now would be similarly catastrophic. What businesses need right now is enough cash to stay afloat until after the initial crisis has passed.
Central banks can be more creative when pressed
Alongside the interest rate cuts and QE measures, we are seeing some more creative moves. The Federal Reserve agreed to buy some corporate and municipal debt, which is, admittedly, another QE measure but also a way of promising cash to large corporations. However, they are only offering this to corporations above a certain scale, which could be problematic because there are so many companies that don't pass the bar.
The Federal Reserve also moved to make it easier for banks to give loans to small businesses, expanding SBA loans and opening a lending facility that will allow it to buy securities backed by student, auto, credit card, and SBA business loans. But this might not be enough to keep small businesses afloat, and the plan to support SMBs is vague and has no start date. Plus, as mentioned above, such measures only encourage the debt bubble to increase.
We are seeing more creative measures from other central bankers.
In the UK, a £350 billion stimulus package includes a government guarantee to pay workers' wages at 80 percent of their pre-corona amount, as well as a £9 billion package to support the self-employed. While the package also involves quantitative easing and the offer of government-backed loans to small businesses, which perpetuates the debt cycle, these steps should help ensure that businesses still exist post-corona and people still have jobs, so the economy can pick up again in a more natural way.
Denmark's ambitious 90-day Temporary Compensation Scheme, moreover, is particularly compelling. Essentially a variant of unemployment insurance, this is "a temporary program of public furlough assistance that allows firms to place workers on paid leaves of absence," as MIT Assistant Professor of Finance Daniel Greenwald describes it.
Greenwald sees this as a great option for the U.S., since "The businesses would be required to maintain each worker's health coverage during the furlough, and return them to employment afterwards." Plus, no incentivized debt and no unnecessary spreading of COVID-19 infection.As a whole, though, the EU has its hands full. The ECB's €750 billion emergency fund focused on QE measures, promising to buy government bonds to shore up the sovereign and corporate debt that threatens to cripple some economies. The ECB is also offering €3 trillion of liquidity through refinancing operations at -0.75 percent. These steps will probably have disastrous long-term effects on eurozone inflation, but it's difficult to see what else the ECB could have done when Italy and Spain are on their economic knees.
A cure that’s worse than the malady
While the recession we're entering was precipitated by the coronavirus, it was probably inevitable even without the health scare and its domino effect. Interest rate cuts and QE measures are the first weapon of choice for central banks, but they are arguably the true cause of any ongoing economic woes.
Central banks that focus on measures to keep workers in jobs and businesses solvent are taking the right steps to deal with the short-term trauma of corona-induced slowdown, but they may not be able to prevent the long-term fallout of years of a fiscal policy that kept rates low, debt high, and savings non-existent.