After the 2008 financial crisis cut stock market valuations in half and destroyed 9 million American jobs, economists identified a culprit: interconnectedness. It wasn’t so much that any individual bank was “too big to fail,” in the popular phrase; it was that each failing bank might bring the others down with it, all at once. The real world quickly reflected the panic in the financial world, as financial firms cut off the credit that supports jobs in construction, manufacturing, and consumer services such as travel and restaurants. Twelve years later, as coronavirus spreads around the world, we’re seeing an inverse of that earlier crisis of interconnectedness. The coronavirus is abruptly ripping apart the intricate physical entanglements that exist not among banks, but among people and goods. This human interconnectedness is the real-world global economy. This time around, financial markets aren’t creating the acute disruption. They are simply reflecting it. This crisis is easier to understand—but it may be harder to fix.
In late January, the United States, along with other Western governments, essentially quarantined Chinese nationals in their country, forbidding almost all tourist and work entries to the U.S. and Europe. Now, with Italy under lockdown, people from other European and Asian countries under various quarantine decrees or simply too scared to fly, and the Trump administration’s suspension of all travel from Europe for 30 days about to take effect, it’s impossible not to notice that streets are emptier. Global and domestic airlines are slashing schedules by double-digit percentages. Layoffs in this industry, which employs nearly 700,000 people, are already happening. The hotel industry, which employs 2 million, is also immediately vulnerable.
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