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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.

Photo by Stanley Ndua on Pexels.com

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.

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    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.
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Health Economics and the Coronavirus: How do Pandemics contribute to Innovation?

The Coronavirus has caused the Corona-Pandemic disease COVID-19 ravaging human health around the globe. But are we at the edge? Will health scientists find solutions to this pandemic? How can the Coronavirus Pandemic contribute to innovation? Will medical researchers discover the healing vaccine to combat the coronavirus? Behavioral solutions have already been put in place to curb the spread of the virus. Social distancing is now a global model of behavior that should lead to lower infection rates, while society aims at finding a technological solution soon. The world needs quick-testing kits, vaccines, containment technologies, among other medical solutions to contain the disease. The implications of the pandemic are still salvaging through the economies. How can innovation change the social game?

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Innovation Contest between Germany and The United States of America

This challenge is the global task for medical research centers, the medical technology firms, chemical industry. Other sectors of the economies will have their required measures. Two researchers at the John Hopkin University of Medicine in Baltimore, Maryland (USA) have developed a screening test that would allow the health system to test about 1,000 patients daily by early April 2020. It currently takes up to 24 hours to get the results, but the researchers aim to innovate the test to take a short as 3 hours to get the test outcomes. In Tuebingen, Germany, a firm, CureVac, “…[want to focus] on the development of mRNA-Based Coronavirus vaccine to protect people worldwide”. Media reports that the innovation contest to find medication against the Coronavirus has become a competition between Germany and the United States of America.

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Read more

  • 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.
  • Health Economics and the Coronavirus: How do Pandemics contribute to Innovation?
    The Coronavirus has caused the Corona-Pandemic disease COVID-19 ravaging human health around the globe. But are we at the edge? Will health scientists find solutions to this pandemic? How can the Coronavirus Pandemic contribute to
  • Synergy between Health and Economics: Oil-Price-Crash or Corona-Crash
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  • Corona-Crash 2020 and the impact on the global economy
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Synergy between Health and Economics: Oil-Price-Crash or Corona-Crash

Health shocks can also cause economic shocks (ceteris-paribus). The coronavirus pandemic is one of the health shocks that might unravel another global economic shock. Why is that the case? Fact number one, health is a basic human need. Consequently, the satisfaction the health needs requires human decision-making in all economies. Decision-makers face the challenge of managing the synergies between health and economics amid a health shock. How is the Scenario? Simultaneously, economic shocks unveil themselves amid health shocks as the pattern of decision-making changes with time. The time-lagged impact of change in decision-making is revealed through market reactions and is observable. Markets not only react to consumer choice and entrepreneurial decisions but also react to government decisions.

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Macroeconomic objectives of Economic Policy

All macroeconomic objectives could be affected by health and economic shocks. The potential reactions of markets are; the increase in market price volatility, the demand and supply shocks, among others. Economists of different schools of thought may differ in their economic forecasts, but the assumptions of any approach should be tested and empirically evident. The objective of the scientific approach should be to explain the global economic impact of the coronavirus. In the coming days, we will have the chance to observe; how strong or weak the global impact of the health and economic shocks will be in different economies around the world.

What is Health Economics?

Health Economics is the scientific branch of economics that deals with healthcare provision (supply) and healthcare utilization (demand) and how society makes coordination choices to meet the healthcare needs of its population. Economics as behavioral science influences health economics as a subbranch through the contribution of economic thought to healthcare issues. For example, we may see the solution to the following question: what are the most important behavioral choices of society that would help find the first-best allocation of healthcare goods and services in a world of scarce resources. The Coronavirus-Pandemic is the current health issue that is stress-testing our healthcare systems on a global scale. How we will deal with the pandemic depends on the behavioral incentives and contingencies to be resolved. In summary, health economics is the branch of economics that deals with the decision-making of how to allocate resources to health provision in economies. European countries have compulsory social welfare systems that coordinate health risks, while some economies have a voluntary system of insurance or no backup system in place.

How did the world economies react to the coronavirus pandemic outbreak?

It all started with the coronavirus pandemic outbreak somedays before 31.12.2019 in the Wuhan province in China. The first cases of the COVID-19 were reported to the World Health Organization by the Chinese government officials. Days after the World Health Organization reported the decease outbreak to the public on 05.01.2020. Globally, the reactions remained moderate and optimistic towards the ability to resolve the emerging disease. As reality became more prevalent and the cases wouldn’t be contained in China but spread around the world, the world Governments reactions as decision-makers were divergent and showed less global coordination. China put a whole province under quarantine, while most countries continued with life, as usual, giving out mild health alerts to the public.

Belated reaction of Governments

Maybe, the governments wanted to buy time to set up contingency plans, consult with experts on how to manage the unavoidable risks. The belated plan of actions by governments might have accelerated the spread of the coronavirus.

Economic slowdown, hoard purchases and travel bans

Simultaneously, the staggering impact of economic activities due to production stops in China channeled a global slowdown on the delivery of goods, services and the global supply (value) chain. The imposed travel bans and quarantines could heavily hurt the mobility of the people, the global flow of migration and tourism around some hotspots. Public life (e.g. traveling, local transport, retailing, etc.) in affected regions had been slowed down due to quarantines imposed by Governments, leading to hoarding behavior, the closing of industries and production, travel bans and other limitations to public life.

Global oil crash or Corona-Crash in Financial Markets

As expected, the impact was still to become visible in public life. The economic pressure has slowly become visible through reactions in financial markets. Financial markets are volatile markets, which adjust their valuation of assets in very short periods.

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The oil-price-crash on 09.03.2020 agitated the global financial markets three months down the path. The reason for the price downfall was caused by the OPEC negotiations, which ended without a compromise. The over-production of oil, coupled with low demand for oil, led to the downfall of the oil price in the stock exchanges around the world.

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Corona-Crash 2020 and the impact on the global economy

Monday 09.03.2020, will historically be remembered as the Global Corona Crash, a global health shock, that hit almost all economies worldwide. What will be the global macroeconomic and microeconomic impact of the Corona Pandemic?

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Financial Markets adjust to Corona-Crisis

The corona health crisis continued to have an impact on the global financial markets, with global indices like DAX30 falling from above 13500 points in mid-February 2020 to below 11000 Points on Monday, 09.03.2020, a loss of more than 21%. Similar negative trends of indices were observed in other financial markets.

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  • 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.
  • Health Economics and the Coronavirus: How do Pandemics contribute to Innovation?
    The Coronavirus has caused the Corona-Pandemic disease COVID-19 ravaging human health around the globe. But are we at the edge? Will health scientists find solutions to this pandemic? How can the Coronavirus Pandemic contribute
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The Magic Square and Hexagon of Macroeconomic Policy Objectives

What should you understand by Magic Square and Hexagon, economic policy goals, and measures in macroeconomics? The explanation begins like this: Every economy, according to its economic order, pursues a number of quantitative and qualitative economic policy goals. Each relevant goal of the national economy requires a series of economic policy measures. The resulting economic policy measures are aimed at maximizing the common social welfare and economic welfare of an economy. The qualitative and quantitative target categories together form a hierarchy of objectives: the magic square and the magic hexagon.

The quantitative economic policy goals are grouped under the magic square, while the qualitative goals extend the magic square by two additional goals to form a magic hexagon.

“What is magic about this from the perspective of economists? It is probably the resulting goal harmonies and goal conflicts between the individual macroeconomic economic policy goals of the magic square and hexagon”.

Hypothesis to Review

The Magic Square – 4 Macroeconomic Policy Objectives

The magic square consists of four macroeconomic economic policy goals: steady economic growth $g_t$, a high level of employment $u_t$, a stable level of price $P_t$, and a steady foreign trade equilibrium $NX_t$.

Objective 1: Steady economic growth

Steady economic growth means that an economy should always have a stable and positive real growth rate of the gross domestic product (GDP). Assume that $Y_t$ is the real GDP-Level of your Country at Time $t$. The real GDP-growth rate for Period $t$ can be defined as follows:

g_t=\frac{(Y_t -Y_{t-1})}{Y_{t-1}}

Objective 2: High employment level and low unemployment rate

A high level of employment also promotes low unemployment rates. To quantify the rate of unemployment $u_t$, three variables are needed; Number of persons capable of working $L_t$, the number of employed $N_t$, and the number of unemployed $U_t$.

u_t=\frac{U_t}{L_t}=\frac{(L_t-N_t)}{L_t}=1-\frac{N_t}{L_t}

Objective 3: Stable price level and low inflation

A stable price level ($P_t$) also requires a low rate of inflation $\pi_t$ or price stability. Ensuring price stability in the European Union (EU) is the task of monetary policy. This is controlled by the European Central Bank (with the Deutsche Bundesbank as a member) in Frankfurt am Main in the Eurozone (Monetary Union). Before the foundation of the Monetary Union, each country controlled its own monetary policy. In the monetary union, monetary policy is coordinated collectively. The inflation rate can be calculated as follows:

\pi_{t}=\frac{P_t-P_{t-1}}{P_{t-1}}

Objective 4: Steady foreign trade balance and a current account surplus

Steady foreign trade equilibrium ideally results from the fact that the current account shows neither a surplus nor a deficit.

The Magic Hexagon – 6 Macroeconomic Policy Objectives

The magic hexagon is created by adding two qualitative macroeconomic economic policy goals to the magic square: the fair distribution of wealth, income, assets and resources and the sustainable use of environmental resources.

NX_t=X_t-\frac{IM_t}{\varepsilon}=0

Objective 5: Principle of equity in the distribution of wealth

The equitable distribution of wealth, income, assets and resources requires the correction of quantitative targets by means of the principle of justice in order to guarantee equal opportunities for all generations.

Objective 6: Principle of sustainability and environmental protection

The sustainable use of both natural and non-natural resources requires the correction of quantitative targets by means of the sustainability principle in order to guarantee the necessary environmental protection for all generations.

    Future of Sustainable Cooling Systems

    Our focal point in the area of cooling technology is the topic “The future of sustainable cooling systems”. In practically every technical system in the most diverse areas of application, e.g. terminals at the port, in data centers, in building services engineering etc., an air conditioning unit is at least integrated or installed. Air conditioning systems are responsible for a significant part of the worldwide Carbon dioxide (CO2) emissions and energy consumption.

    Which contribution can intelligent air conditioning systems make to the reduction of CO2 emissions and energy consumption? What are the advantages of investing in sustainable air conditioning systems? My name is James E. Njoroge, M. Sc. I graduated from the Albert-Ludwigs-University of Freiburg im Breisgau with a Master’s and Bachelor’s degree in Economics in 2015. In 2012, I started working on a new port project APMT MV II Rotterdam through ABB Crane Systems (Västeras) at Elektrotechnik Janssen GmbH, where I have been dealing with the implementation of an ABB patented sustainable cooling system we name “Heat Exchanger System (HES)“.

    Basic Principle of a Sustainable Cooling System

    Today, I am working on the topic “The future of sustainable cooling systems” in the terminal area of ports as well as other areas of application, e.g. in the cooling of data centers. My personal inspiration for natural sciences (mathematics, physics, and chemistry) goes back to my school days in Kenya.

    ABB has the patent (No. PCT/EP2013/064008) with the topic “Discharge of heat from the electrical switch house on the crane“. The inventors are Bo Edmundsson & Horst Schneider. In the electrical switch house (E-House) there are heat-generating as well as sensitive components. In order to guarantee operational safety, the heat generated must be efficiently extracted from the electrical building.

    “The basic principle of the “Heat Exchanger System” (HES) is: “Warm air rises to the top and cold air falls to the bottom” and this principle is implemented in the “Heat Exchanger Unit” (HEU as a subcomponent of the HES).”

    Mr. Horst Schneider

    Sustainability in cooling systems could make a huge contribution to the reduction of CO2 emissions, increasing efficiency, and operational safety in all areas of application.

    From a technical, ecological, and economic point of view, what problems should a cooling system in an electrical switch-gear building resolve?

    The general conditions inside and outside of the electrical switch-gear building (e.g. weather, movement by crane, etc.) influence the cooling capacity required for heat discharge (output) and the energy required for heat removal (input). From a technical point of view, the heat extraction should guarantee the highest possible operational safety. This should be done in such a way that, from an ecological and economic point of view, the lowest possible costs for the extraction of heat are incurred. Operational safety at the terminal means that the crane is always ready for operation and can carry out its activities without disturbance. The costs of heat removal are subject to the opportunity principle when selecting alternative heat removal options.

    Which goal do terminal operators pursue when optimizing cooling systems on water-side cranes and automated stacking cranes?

    Terminal operators as end-users of the Heat Exchanger System achieve higher operational safety and at the same time optimize the energy consumption for heat dissipation from summer to winter, day and night in the electrical switch house for the automated cranes. Teamwork between the various stakeholders make a major contribution to achieving the terminal operator’s goals. The various stakeholders in the implementation of the HES in the Port of Hamburg (CTB) are HHLA Hamburg and HCCR Hamburg, ABB Cranes System Västerås, Sweden, Elektrotechnik Janssen GmbH, Nordenham, KÜNZ GmbH Hard, Austria, Kampmann Gruppe/NOVA Donaueschingen, Reiss Kälte und Klima Freiburg im Breisgau.

    How important are sustainability and climate neutrality for terminals?

    HHLA’s goal: a climate-neutral company by 2040” is the corporate strategy of Hamburger Hafen und Logistik (HHLA) AG on the subject of sustainability. HHLA’s sustainability strategy is managed under the “Balanced Logistics” brand, says Chief Executive Officer Ms Titzrath. Another example of how climate neutrality and sustainability are important for terminals worldwide is shown by AMPT’s Maasvlakte II terminal in Rotterdam, Netherlands, where the Heat-Exchanger-System (HES) is integrated in all fully automated stacking cranes and rail loading cranes. HHLA justifies its sustainability orientation by the fact that it wants to be both economically successful in its business fields and to assume its social and ecological responsibility in society. This also means that HHLA wants to create a balance between economic and ecological efficiency.

    Learn more about Heat Exchanger System

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