Only the US can extricate the global economy from its predicament. It is the only country that can supply effective vaccines against COVID-19 all around the world. The Federal Reserve and the US’s fiscal authorities are capable of swift action. Its consumption market, the biggest in the world, remains vibrant. In June, the US’s economic recovery will begin to drive a global economic recovery. This global economic recession we are witnessing right now is obviously different from other post-pandemic ones in history. In the past, pandemics resulted in the narrowing of the rich-poor divide, but the COVID-19 is widening it. The responses of the governments used to be relatively slow, but now the fiscal and financial authorities have acted relatively quickly. Drug companies, especially those in the US, have also been relatively quick to launch effective vaccines in this pandemic.

First, American vaccines are the ultimate cure for economic problems. The US’s science and technology, including medical technology, is the most advanced in the world. After the pandemic began last year, I was among the many people who pinned their hopes on American science and technology rather than the inept WHO. Last month the Centers for Disease Control and Prevention stated that half of the adults in the US have been fully vaccinated against COVID-19, and 61.6% of adults have received at least one dose. These vaccines are also effective against COVID-19 variants. The US will soon achieve herd immunity, after which its major drug companies will export huge quantities of effective vaccines to other nations. The pandemic was the most fundamental cause of this round of global economic recession. With the widespread use of vaccines, production will gradually resume around the world, and international trade and travel will gradually return to normal.

Second, the Fed and the US administration have acted steadily, accurately and resolutely, and have managed to stave off a hard landing. In March last year, the Fed cut interest rates by more than 100 basis points to bring the benchmark interest rate close to zero, and the Trump administration launched tax breaks and issued cash handouts to the public. By making these moves, the Fed and the government set an example for other central banks and financial authorities in the world, effectively preventing a greater recession. The US was facing an economic crisis far more serious than the subprime mortgage crisis in 2008. Had the US government procrastinated like George W. Bush’s administration, the global economy would be in an unimaginable state.

Third, in the second quarter of 2021, the US’s economy will grow at the highest year-on-year rate in history. This will give a powerful impetus to the US and the world when they seek to shake off the economic recession. In 2020, a full-scale outbreak of the pandemic in the US-led to the suspension of work and production, which seriously affected economic development. In the second quarter of last year, the US’s GDP fell by an annual rate of 31.7%. However, since the third quarter of last year, when the US GDP grew by an annual rate of 33.1%, the US economy has undergone a large-scale recovery. The contrast between the figures for the second quarter of this year and those for the second quarter of last year will be striking. However, it will be a joke to cite this as proof of Joe Biden’s success in boosting the economy.

Fourth, the US’s strong economic recovery has inspired a global economic rebound. The recovery began in the three quarters before the US general election last year. Back then, Donald Trump’s demand for the resumption of work and school in all states was completely resisted in the blue states governed by Democrats. Still, the economy continued to recover across the board. As the world’s largest consumer market, the US plays an irreplaceable role in promoting the global economic rebound. In the first four months of this year, the volume of trade between China and the US reached a new high. China’s trade surplus from the US, which has reached US$100 billion, is just one example.

Fifth, if Biden resists the temptation of issuing cash handouts, the US and global economies will perform even better. To solve economic problems, different policies should be employed in different stages of the economy. Policies should not stay the same all the time. At the beginning of the year, Biden scaled up Trump’s US$900 billion relief package to US$1.9 trillion. He also plans to launch a US$2.3 trillion infrastructural plan, an environmental protection plan worth hundreds of billions of US dollars, and a socialist housing plan for the so-called people in poverty.

Consumption accounts for 70% of the US’s entire economy. At the beginning of the pandemic, there was no special medicine or vaccine to deal with it, so it was necessary and reasonable to offer money to people for them to spend from humanitarian and economic points of view. However, issuing massive cash handouts when vaccines are widely available and the pandemic has been brought under control will only worsen inflation. The unemployment rate will fall only if the government stops offering hefty subsidies to people who are able to work but are not working, and only then can monetary and fiscal policies be brought to an end.

(He Jiangbing is a Chinese financial commentator.)

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