Economic Policy Adjustments in Germany and in the USA amid Coronavirus-Pandemic and Corona-Crisis

How are Governments courageously dealing with the Coronavirus-Pandemic and the Corona-Crisis? Worldwide politicians are reacting very differently. Reactions to the pandemic have now become a war between optimism and pessimism. While some politicians realize how serious the current health crisis will be, others are busy procrastinating about an optimistic future. Early birds catch the worm and can navigate through the health crisis, taking leadership on flattening the pandemic spread of the Coronavirus. Optimists want to end the economic shutdown and go back to business as usual. Despite the facts: which responsibilities and consequences will a misinterpretation of the health crisis have on the economies? Healthy cows give more milk than sick cows.

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Which solutions to current health and future economic shocks are being proposed by politicians? 

Globally, economies have embarked on unprecedented economic policy adjustments. The Federal Republic of Germany and The United States of America (USA) have passed their economic stimulus packages. Any huge economic policy adjustments seek to alleviate or eliminate the impact of the Coronavirus-Pandemics and the subsequent potential economic risks of the Corona-Crisis in Germany and the USA, although this crisis has a global scope.

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Noting the sequence as well as the simultaneousness of events is the first important issue. The global health shock such as the Coronavirus-Pandemic should first be contained using adequate health measures. Therefore, the total shutdown of the social and economic interactions is unavoidable to contain the spread of the COVID-19 disease. After health recovery has reached the necessary threshold, the politicians should start focusing on the economic shock or what we now call the Corona-Crisis. Pessimists of the economic shutdown are full of the optimism of opening the economy to economic and social activities, but they playing with pandemic fire. No genuine tradeoff between health risk and economic risk would maximize the welfare of the society while facing current facts.

Global policy versus national policy

The Coronavirus remains a global pandemic that demands a globally coordinated response of all economies. A pandemic never abides by the politicians’ timeline of decision-making. Neither does the Health crisis wait for dispute resolution about the superiority of global health policy and national health policies of nations. Instead, the pandemic would continue to ravage the world population, if poorly managed.

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The exponential rise of the Coronavirus infections around the globe has revealed how vulnerable the health systems, even in most developed G7 countries, have become. The competition of systems has begun. Each nation evaluating the effectiveness of the political response of other nations. Does it help when the USA compares itself with China, Germany, Spain, and Italien? China’s health system is not the same as in the USA. The non-ignorable reality is that a nation cannot entirely combat global Coronavirus-Pandemic only with its national policies. Economies need to cooperate with the global community to find a common goal. Surely, globalization is an opportunity and a threat. Globalization requires a diversity of strategies to utilize the benefits and to curb the losses.

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Federalism, Devolution of Power and Competition of Economic Systems

The high competition between different levels of government could interrupt the management of both the economic and health crisis. At the lower levels of governments, local authorities, starting with the mayors in cities in lower levels of local governments and governors in federal states are overpressured to find quick solutions to a quick-spreading pandemics. Higher levels of government, heads of states and government (presidents, prime ministers, monarchs) and the like, are overwhelmed by the events caused by the Corona-Pandemic due to belated attention to facts.

Who is responsible for implementing the policies? Facing the challenge to come up with solutions to the pandemic, the world leaders in all levels of government have been engaging in a war of blame and facts. Blaming each other of responsibility and communication problems reveal the unpreparedness.

Who should and must do what? Federal governments blaming state governments and vise versa. Healthy conflict is allowed to gauge ideas. All levels of government should harmoniously work together. Judicial functions, as well as legislative functions of government, should also be protected. By doing diligent deeds and public service, the pandemic should not harm the representation of the people.

Market Economy System Versus Social Market System

No doubt, the political leadership globally is at the crossroad between the tradeoff between health and economics. Both nations, Germany and The USA, have federal government systems with elected state governments in a power-sharing system. On the one side, the German economic system applies the social market order, which combines the allocative market system with a redistributive social system. Contrary to that, the market economy system is the American way of life. To capture the difference, answer the following questions. What happened to ObamaCare in the USA? What could have happened to ObamaCare in Europe? The differences in political and economic systems may explain the difference in the enacted economic policy adjustments.

Published by James E Njoroge, M. Sc. Economics - CEO & Founder

M. Sc. Economics - Economic Consultant, Business Coach and private Lecturer in Freiburg im Breisgau. CEO and Founder of Evansonslabs Consulting and Coaching. Finance consultant, insurance agency at ERGO Hauptagentur James Njoroge in Freiburg im Breisgau

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