Some primary school children have checked out, due to a lack of structure or connectivity. At a higher level, reports indicate that nearly 17 million U.S. college students stopped their studies last year, at least temporarily. For some, the quality of remote learning did not match the prices being charged for it.
Losing a year of educational progress is not a minor issue. The formation and enhancement of human capital is central to invention and productivity. It is not clear how we can make up for the learning deferred by Covid-19.
The pandemic has also taken a toll on labor forces around the world. About 2.5 million lives were lost during the first year of the pandemic, and an estimated 10% of those who have recovered are still dealing with lingering after-effects. Life expectancy has declined in many countries, and the pandemic has produced a baby bust. Projections of future population growth are being adjusted downward.
Immigration, a source of both labor force renewal and economic innovation, has been severely curtailed. Populist movements in many developed countries had led to diminished immigration prior to Covid-19, but the need to maintain public health during the pandemic made borders even less permeable. Reopening those borders may take a while, as countries seek to put their own citizens back to work and avoid re-importing new strains of the virus.
As Expensive As Pandemic Support Has Been, More May Be Needed To Limit Long-Term Damage
In sum, long-term growth prospects have suffered lasting damage during the pandemic. As a result, standards of living may not improve as expected, and debt may not be as sustainable. Markets that are growing more slowly may not attract the same level of inbound investment, which could further hinder prospects.
Studies of past pandemics routinely show negative effects that can last for decades afterwards. Growth and employment take a long time to recover, even when policy responses are generous. It seems unlikely that we can escape these consequences after Covid-19 is conquered.
The missions to Mars illustrate the apogee of human achievement. But back on Earth, the pandemic threatens to limit the altitude of economic performance. Persistent support from policy makers will be needed to overcome the gravity of the situation.
Grounded
Another more subtle challenge to long-term economic growth is the increased difficulty in making public investments in human and physical capital that may result from two years of massive government deficits. Calls for austerity are already rising in many world capitals, even before the pandemic has been contained. As an example, the infrastructure initiative expected from U.S. President Joe Biden may not get a fair hearing amid the concerns over reflation. Failing to make productive investments will bound an economy’s ability to progress.
As Covid-19 vaccines started rolling out, a profound sense of enthusiasm followed, especially among those of us who love to be on the road for business or leisure. Visits to travel websites increased, and the industry grew hopeful. But that optimism quickly faded: numbers of infections kept growing, new variants of the virus emerged, and immunizations got off to a slow start. Many governments have kept their borders and economies closed.