The RF guide to learning about, and living through, the coronavirus crisis

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Afternoon all,

I’m going to be honest, this hasn’t been a great week for getting reading done. It’s been more about exiting RF towers, and then the team working through the nights on what can be done to respond to what is now clearly a truly awful economic crisis. I couldn’t be prouder of the hard yards they’ve put in as they, like many of you, settle into the long haul of very different lives over the coming weeks and months.

But obviously we know we have responsibilities to TOTC readers too. So below are our selection of coronavirus-related reads to both practically help you through what is to come, and to understand some of the many mad phenomena that we’re seeing in economies around the world this week.

And however bad things feel cling on to what good news you can – at least you’re not currently in quarantine with your Hinge date, or a child that’s just started learning the euphonium.

Have a good weekend and stay safe,

Chief Executive
Resolution Foundation

The idiot guides to… Lots of us are going to be living very different lives in the months ahead. Those lucky enough to be able to will be working from home, while those lucky/unlucky enough to have school age kids are going to be full on educating/entertaining them. So TOTC thought some practical guides to life in coronavirus Britain might be of help. Here are some useful ones – from mental health support, to how to talk about the pandemic with children, to remote story-time and home schooling. I definitely don’t have all the answers to how on earth to do all these things remotely well, so it’s reassuring to know someone else does. If you read anything else advice-wise in the coming days that you think we simply must share with TOTC readers then please do get in touch.

Sterling collapses. Financial markets are all over the place this week – volatility is up, and sterling is down. A lot. We’re approaching parity with the dollar and quite a few people have asked me why this is happening given that this crisis is hitting almost the entire world. Ian King from Sky News has offered an explainer of why there’s a flight towards the dollar. Clearly a lot of this is about people wanting to hold dollars – another reason why the strengthening of ‘swap lines’ between central banks is particularly welcome (Ricardo Reis of LSE has a great tweet thread explainer of how these market operations work to ensure dollars are available not just in the US but elsewhere). But more broadly this is also about the UK being a very open economy, relying on capital inflows to fund our current account deficit. In a crisis like this cash heads home, and sterling falls as a result.

Playing god government. if you want to put yourself in the shoes of the government wrestling with this crisis, take a look at the just released set of research/advice that they are drawing on. It covers everything from the disease itself to the impact of mass gatherings and self-isolation on its spread.

School’s out for summer coronavirus. Schools closing is simply huge news – and marks a significant stepping up of the economic damage that our necessary measures to contain the virus requires. One in three workers have a child under the age of 16. It obviously affects different people very differently. Crucially, it poses particular challenges for workers at the bottom of the income distribution who are far less likely to be able to work from home while also caring from their children. However, also important is the impact closures will have on education, particularly for the around 245,000 UK students now no longer sitting their A-levels in May and June. The Economist this week looks at the effects of the pandemic on schools and education globally, and particularly the strengths and weaknesses of online teaching which will be put to the test at incredibly short notice in the weeks and months ahead.

Eurocrisis returns. While we’ve largely been concentrating on the impact of coronavirus on the UK’s economy, there’s serious cause to be concerned about the next few months for the euro-area. In particular, Italy being hit hardest so far by this crisis is combining with its long-standing economic challenges. Specifically, the relative cost of Italian government borrowing is rising. This has been exacerbated by Christine Lagarde initially implying it wasn’t the ECB’s job to worry about such things (basically the opposite of Mario Draghi’s promise to do “whatever it takes”). But what is the answer? European think-tank Bruegel looks at the options for avoiding a second eurozone crisis. Their answers are technical but basically there are direct or indirect ways for the ECB to buy government-issued bonds for states in distress – be that via huge quantitative easing or other approaches. The ECB has now stepped up its bond buying, and this is of course exactly what the Bank of England did yesterday to calm nerves about UK borrowing costs creeping up and becoming volatile. But it is much more politically contentious in the Eurozone. This crisis will require more unity within the Eurozone in one form or another – as noted by Olivier Blanchard and in this piece by economists from the Bank of Italy.

Learning from the past. It might feel like an entirely different world from even a few weeks ago, and is the first major pandemic most of us will have experienced in our life-time. But this piece from Brookings suggests we can learn from history. It turns out that there’s a lot in this pandemic that isn’t particularly new, in terms of global connectedness, scapegoating and ‘flattening the curve’. Previous pandemics also spread through trade routes and international travellers, and previous societies also dealt with social distancing measures. A particularly pertinent example is the comparison of Philadelphia and St. Louis during the influenza outbreaks of 1918 – Philadelphia threw a parade to celebrate armistice; St. Louis imposed social distancing measures. Predictably, St. Louis avoided the worst of the sharp spike in mortality experienced in Philadelphia. What’s also not new, according to the article, are frankly pathetic attempts, both abroad and closer to home, to scapegoat, rename and blame previous pandemics on other nations. We’ve got a lot to learn from in the history of pandemics – and clearly a lot more to improve on.


Chart of the Week

We are living through a profound economic shock. And now is the time for big, bold support for firms and workers. To understand why this sudden stop to economic activity is so big, Chart of the Week shows quite how far past just worrying about sick or self-isolating workers we are. Over six million people work in sectors directly affected by the government’s necessary social distancing measures – think of staff in hotels and restaurants, non-food retail, and the travel, arts and leisure industries. Add to that over four million workers with children who aren’t on the government’s key worker exemption list (which means their children can continue to go school). They will be home-schooling for the foreseeable future. Around 1.5 million workers fall into both categories, meaning that we estimate that nine million workers are already being profoundly affected by the public health response to coronavirus – well over a quarter of the workforce. That is why this economic shock is so big and so sudden. And that’s why all our eyes and ears are on what support for firms and workers the Chancellor will announce this afternoon…