The unprecedented contraction of the global economy due to the coronavirus lockdowns has led to comparisons between today and the crisis seen in the 1930s.
Abdul Basit lives in a congested neighbourhood on the fringes of a vast industrial estate in Karachi, where the pungent smell of chemicals hangs in the air all year round.
For six years, he has worked as a sewing machine operator at one of Pakistan’s largest garment manufacturers that makes t-shirts for H&M and jeans for Levi’s.
On April 5, he, along with thousands of other workers was laid off - put on unpaid leave that the company said was the result of cancellations of international orders in the wake of the coronavirus lockdowns.
“I make around Rs25,000 ($154) a month and seven people in my home depend on it. Right now, I have no idea how I will survive,” Basit told TRT World. “Just the rent of my house is Rs12,000.”
Basit’s employer has told him that workers might be called back to work in the next six months. In the meanwhile, he and many others have to fend for themselves amid the deadly pandemic.
While Pakistan’s federal and state governments have given assurances of cash handouts to those in need, Basit remains sceptical. He could be depending on charity in the coming months in a country where social security is near non-existent.
The transnational impact of the lockdowns enforced in dozens of countries hints at the ferocity of the recession that the International Monetary Fund (IMF) says is something that has not been seen since the 1930s.
As shopping malls are shut in the wealthy United States and European Union member states, the shipments of goods from developing countries have been put on hold. Across Bangladesh, more than a million workers in apparel factories could lose jobs.
Measuring the impact of a depression can be tricky. Generally, experts say a depression is a prolonged period of economic decline in one or more countries.
The destruction that a depression leaves behind can be seen clearly, only in retrospect. If the past is any guide, then the global economy is heading for trouble, economists say.
On social media and in articles, people are already drawing parallels between the current situation and what happened in the 1930s - the era known as the Great Depression.
How bad does it get?
Almost every recession - a time when businesses shut doors and people lose jobs - has followed a cycle that starts with greed and ends at fear, leaving destitution in its wake.
But when businesses are done laying off workers, once savings have evaporated and people have lost their homes, comes the stage of pinning the blame. And that’s where the present situation poses another problem: who do we blame for this crisis, which is the result of a zoonotic disease?
The Great Depression of the 1930s was an outcome of many factors. Cheap money after World War I flooded the US stock market, currencies were pegged rigidly to gold so governments didn’t have the leverage to pump in money when needed, and war reparations had put a stranglehold on industrialised countries such as Germany.
The US stock market crashed in 1929, shattering confidence all around. More than a third of US banks went bankrupt, and international trade ceased.
Between 1929 and 1933, the US unemployment rate rose from 3.2 percent to 24.9 percent, and the number of jobless people surged from 1.6 million to 12.8 million. Jobless men roamed the streets and cities turned into shantytowns.
The crisis in the world's largest economy soon led to banking failures in Europe, freezing credit for trade and stranding passengers who could not cash their cheques.
Wheat prices in India crashed, hurting poor farmers. By May 1931, Creditanstalt, Austria’s largest bank owned by the Rothschilds, collapsed.
According to some estimates, world trade plunged by more than half.
The crisis at hand right now as a result of forced shutdowns could unfold in a similar fashion. In a matter of four weeks, more than 25 million Americans or 13 percent of the workforce have filed for unemployment claims. It took three years for unemployment to reach 25 percent in the 1930s.
“This is a crisis like no other, and there is substantial uncertainty about its impact on people’s lives and livelihoods,” said Gita Gopinath, the IMF’s chief economist.
To put it in perspective consider this: the loss to the economic output in 2020 and 2021 from the pandemic could be around $9 trillion, greater than the economies of Japan and Germany, combined, she said.
The world economy will shrink by 3 percent this year, according to the IMF.
Although the numbers are frightening, there’s some consolation this time around as KPMG’s chief economist, Constance Hunter, told Yahoo Finance that there are more social safety nets in place than there were 80 years ago.
In some US states, people are entitled to $600 a week in unemployment benefits. The government has put in place a $2.2 trillion stimulus package. Around $350 billion are earmarked for small businesses to help them with payroll has already been used up and now US lawmakers are in talks to top it up. Some 150 million US residents are also entitled to stimulus payment of $1,200 each.
While the world economy started to recover from the Great Depression after 1933, the US had to wait many more years to regain the economic output it had in 1929.
There’s an additional fear that this economic contraction will make countries look inwards as they investigate the causes of dramatic shortages in items such as ventilators - much like what happened in the 1930s.
Covid-19, has in a way, exposed the fragility of the global supply chains, which have in the past two decades helped large corporations grow as they relied on the cheapest supplier they could find anywhere in the world.
“The coronavirus crisis has been a powerful reminder that the basic political and economic unit is still the nation-state,” wrote Joseph E. Stiglitz in Foreign Policy.
But that is no good news for Basit, the garment factory in Karachi who lost his job. If international trade takes a significant hit then his company is sure to extend the shutdown.
“You know what the irony is? Because of the restrictions on assembly of people, we can’t even protest,” he said.