An image of a green fedora hat, which serves as the logo for this site.Gordy's Discourse

Can an entire planet's economy collapse?

Gordon Ansell Opinion, Coronavirus, Society 479 words.

How does an entire planet's economy collapse?

Obviously I can see how an entire planet can suffer physically from something like CV-19 but I don't understand how a global economy can collapse.

Money and wealth are human constructs we use as a handy way to measure one country's worth against another country's worth. It's a relative thing we tend to put a value on, maybe in US dollars or whatever.

Let us assume there are only two countries on our planet — country A and country B — and they both have £100 to begin with, so we're dealing with a global pot of money worth £200. Over the next year country A trades with country B at a £10 profit, which means country A has £110 and country B has £90. One country gains and one country loses in terms of the relative counting method we've chosen for our world economy. At this point the world pot is still worth £200.

Now we'll inflict a virus on countries A and B. Country B does a good job and handles the virus for £20, so it now has £70. Country A struggles and it uses up £50 handling the virus, so it now has £60.

The world pot has gone down to £130, so who has the lost £70? Did the Vogons take it to build a hyperspace bypass?

Economists would say the planet has suffered an economic collapse, but I'd say they're talking out of their bottoms because it's all relative. The abstract figures we've chosen to represent economies are just imaginary things and all the matters is the relative worth. There isn't really a missing £70, it's just that, abstractly, we're now dealing with a global pot of £130, which is just a number and not a real thing.

Nothing has 'collapsed' as such. Yes, we've all had a tough time and the relative finances of each country have changed depending upon how well they've handled the crisis, but all we've done is set a new baseline of £130 instead of £200. I stress again those are just arbitrary numbers and because this affected the whole world we can call it £200 again if we like. In fact, let's call it £400 for a feel-good factor. We can get away with that because all that matters is the relative comparison.

An entire global economy can't collapse unless we start trading with other planets. If that were the case then the missing £70 would be in the hands of the Vogons (or whatever) and we would be talking about a relative scale that extends to other worlds.

Economists are needlessly gloomy people in my opinion.

So, that's that sorted out. My talents aren't just limited to sorting out global economies and next I'll be pondering why my microwave oven has a button marked Chaos and what the implications of pressing that button might be for the world.