With emergence of weaker variants, economist suggests governments should consider more adaptive policies
The global pandemic is almost at its second anniversary, and as new variants of COVID-19 continue to emerge, record-high levels of inflation are putting a real strain on the U.S. and other economies around the world. And while some optimistic voices are predicting inflation has to peak in the near term, at least one economist does not expect it will – unless something changes.
“A lot of people have been forecasting that inflation will moderate. Eventually supply chain issues will resolve themselves, and hopefully this pandemic doesn’t continue to be disruptive. And academically I understand why they’re saying this,” said Bryce Gill, economist at First Trust. “But I’m hearing the same things I was a year ago.”
From where he sits, repeated pronouncements that there’s light at the end of the tunnel sound very much like wishful thinking, and he wishes as much as anyone that the data would show the world finally turning a corner. But the latest data out of the U.S. showed inflation reached 7% in December, a near four-decade high, and he doesn’t see it decelerating anytime soon.
“My question is, ‘Can the world get off the COVID roller coaster?’ Because it seems we’re going to get the whole Greek alphabet’s worth of variants with this virus,” Gill says.
While many have hoped for an easing in the supply chain problems plaguing the global economy, he argues that those issues are likely not as transitory as many would want to admit. Suppliers from Asia and Europe are implementing COVID-zero policies every few months, he says, noting that China is shutting down even as it’s set to host the Winter Olympics. The free trade policies and offshoring agenda pursued by the West over the past 70 years, he adds, has left much of the Western world extremely vulnerable to these types of disruptions.
He admits that initially, he was among those who expected that the development of COVID vaccines would herald an economic recovery. But in the face of new variants and breakthrough cases, Gill contends that the only way to resolve the supply shortages in the U.S. and the rest of the Western world is to pivot toward COVID policies that focus more on protecting the most vulnerable and getting back to some form of normalcy.
Preliminary research on the omicron variant indicate that while it’s more transmissible than previous strains of COVID-19, those who catch it are also less likely to get hospitalized. To Gill, that suggests the virus is mutating to become more infectious and less lethal, which lines up with the evolutionary impetus of viruses to spread and perpetuate themselves.
“From my perspective, this could be seen as a good thing. But other governments around the world seem to be committed to this idea that they can protect all their citizens from ever coming into contact with pathogens, and I think it’s just unrealistic,” he says. “I don't think governments have ever had the ability to stop the spread of a virus.”
Of course, only time will tell whether the virus continues on its path toward becoming a more benign sickness that we can live with. But even if it does, Gill argues that the world won’t be able to get away from the current recursive loop of shutdowns and economic disruptions, unless governments are willing to change their response accordingly.
“If we're going to pursue the same exact policies that we took in the fog of war, in March and April of 2020 when we knew nothing about this thing … there's really no end in sight,” he says. “I think there hasn’t been a lot of adaptation from the government policy side of things.”