{"id":111312,"date":"2020-03-20T17:21:07","date_gmt":"2020-03-20T16:21:07","guid":{"rendered":"https:\/\/www.erasmusmagazine.nl\/en\/?p=111312"},"modified":"2025-12-19T11:24:51","modified_gmt":"2025-12-19T10:24:51","slug":"the-coronavirus-outbreak-is-forcing-us-to-embrace-a-new-economic-system","status":"publish","type":"post","link":"https:\/\/www.erasmusmagazine.nl\/en\/2020\/03\/20\/the-coronavirus-outbreak-is-forcing-us-to-embrace-a-new-economic-system\/","title":{"rendered":"\u2018The coronavirus outbreak is forcing us to embrace a new economic system\u2019"},"content":{"rendered":"

What happens to the economy when public life grinds to a complete halt? Will the Netherlands experience a terrible recession due to the COVID-19 outbreak? Frank van Oort, a Full Professor of Urban and Regional Economics: \u201cI\u2019m shocked at how vulnerable we are.\u201d<\/p>\n

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Frank van Oort<\/span><\/p>

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Stock markets have crashed, many countries are on lockdown, and large chunks of the economy have come to a standstill. This week, the Dutch Prime Minister, Mark Rutte, addressed the nation in a live broadcast, something that hadn\u2019t happened since the 1973 oil crisis. As an economist, what do you make of the current situation?<\/strong><\/p>\n

\u201cNothing remotely like this has happened in my lifetime. I was born in 1970. This could be the start to a shock to the system. We are living in an extremely globalised world. There are many upsides to this, particularly in the availability and low prices of many products. But it also means that a crisis like this immediately turns into a global crisis, and not just because people are travelling more and therefore are more likely to infect each other. From an economic point of view, what is interesting here is seeing the downside of the long and extremely interwoven value chains that have been created in the last few decades. Due to low labour and transportation costs, it has become much cheaper since the 1980s to have products, or components thereof, manufactured in, say, China or the Philippines, only to have them assembled and sold in another country. For their part, Western nations have come to specialise in services and research & development.\u201d<\/p>\n

How is the Dutch economy affected by the fact that, now that the current measures are in place, public life has largely shut down until the 6th of April at the earliest?<\/strong><\/p>\n

\u201cThe closing of caf\u00e9s and restaurants, schools and child care centres has resulted in both production and consumption being decreased significantly, both directly and indirectly. It\u2019s a huge blow to the tourist industry and the arts and culture sector, where people are currently at home wondering what to do in the next few months. The Dutch economy is largely service-based. And yes, some of these services may be able to be provided from people\u2019s own homes, but that is considerably tougher if you have a child sitting in your lap, or worse, more than one. Moreover, many of these services depend on other sectors, such as the manufacturing industry. If fewer cars are sold or manufactured, fewer drivers take out insurance. And if fewer chemicals are produced in the Port of Rotterdam, fewer financial services will be required in the city centre.\u201d<\/p>\n\n\t

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