Along with the prolonged pandemic of the novel coronavirus (COVID-19), the global economy is leaving people in anxiety. Along with the plunging of international oil prices, there is a continuing economic downturn caused by COVID-19 — the weakening of consumer confidence, shutdowns of a plethora of large-scale factories, and the forced temporary leave of laborers. There surely is a need to take a closer look at the current social-economic condition around the world, and devise means by which to stabilize the precarious economy in order to stop the negative ripple effects spreading all over the world.

The world is going through a massive economic recession due to plunging oil prices, as well as the COVID-19 crisis. To cope with the overall depressed social-economic conditions, the seven most powerful economies, including Canada, France, Germany, Italy, Japan, the United Kingdom (UK), and the United States (U.S.), all under the name of Group of Seven (G7), decided to hold a video teleconference. On March 16, the leaders of G7 participated in the teleconference, and discussed the currency, feasible financial actions, and the supporting issues of small businesses and laborers.

Though they held such a conference, some members of the G7 are being harshly criticized for putting their whole country into an enormous economic mess through unsatisfactory and sometimes inadequate reactions to the current COVID-19 crisis. Their inadequacy led to massive infection, and the ruinous infection resulted in a huge withering throughout the economy. The clumsy response to the crisis in the largest economies made it necessary for people to examine and analyze the current economic conditions and policies within and between countries.

Socio-Economic Crisis with the Steep Decline of Oil Prices

One of the causes of the current global economic recession is the plunge in international oil prices. West Texas crude for April delivery closed at 20.37 U.S. dollars — the lowest level in 18 years. This downward trend can produce a variety of results, but before we look at the results, it is necessary to understand the background of what caused oil prices to fall so much.

There are two major grounds for this, and the first one is the decrease in demand for oil. Factories shutting down for a while, and restrictions of movements of consumers caused the tremendous decrease. The fact that China, the second largest consumer of petroleum products, showing a large decrease in their demand for oil was highly influential. Another reason is the failure of negotiation in the discussion on the production cut of oil. On March 6, the Organization of Petroleum Exporting Counties (OPEC) and other oil-producing countries that are not in OPEC gathered in Austria to find a middle ground concerning the decrease of oil production. However, Russia did not agree with the proposal, and accordingly, the oil price has faced a steep decline. Hence, the current drop of oil price is a combination of reduction of demand and increase of supply.

COVID-19 has not only influenced the world economy indirectly through the fall in oil prices, but itself has literally struck a blow to the world’s economy. The main cause behind this economic blow is the drop in demand caused by weak *consumer sentiment*. For instance, movement between regions within Korea has significantly decreased as local consumers have made efforts to prevent COVID-19 infection by refraining from using multiple facilities. According to the Korea Railroad Corporation (KRC), the number of Korea Train Express (KTX) passengers in February decreased by 50 percent compared to the previous month.

In this unprecedented period of economic turmoil caused by an infectious disease, government intervention is needed in various fields. Cooperation with professional organizations such as Korea Institute for International Economic Policy (KIEP) is needed. Also, some experts argue that it is necessary to reinforce the power of small and medium-size enterprises. Key or value-added components of products should be produced and exported by Korean small enterprises at a higher rate than before, to localize the whole process. High dependency on foreign businesses is even poisonous to the domestic economy in an international economic crisis.

An Economic Panic Demolished the Stock Market

In the period of crisis, economically wealthy countries should be trustworthy, supporting other weak countries to overcome the crisis caused by the virus. G7 countries, however, failed to become a focal point for overcoming the crisis of COVID-19. The measures that G7 countries had implemented were truly ineffective since these countries led the world economy to cool down, and eventually crumble.

As the virus infected all continents beyond Asia, the World Health Organization (WHO) officially declared a pandemic, and the U.S. President Donald Trump even implemented the unprecedented counteraction of a 30-day ban on the U.S. travel from Europe. While financial markets around the world are reeling from economic shock, the relations constructed among nations are being destroyed. After President Trump’s announcement, the world stock market fluctuated. On March 13, Nasdaq and Standard & Poor’s 500 (S&P500) lost 9.5 percent and 9.4 percent respectively, and the well-known stock markets started to collapse consecutively. On the same day, Financial Times Stock Exchange 100 (FTSE100) had its worst day since “Black Monday” in October 1987. These situations in the world stock markets made each country establish economic countermeasures. Three of the largest central banks in the West concentrated their finance in response to ease the economic shock caused by COVID-19, but it did not have much effect. The stock market continued to fall.

South Korea also experienced the collapse of its stock market as shown in the numerical value of Korea Stock Market Price Index (KOSPI). The worldwide economic shock swept KOSPI and it plunged to 1457.64 on March 19. This was an unprecedented collapse of KOSPI since it exceeded the value of 1400 on January 4, 2006. This crisis shows that through COVID-19, the economy of South Korea in 2020 returned to the economy of 2006 within two months. In other words, through these worldwide downfalls of stock market price, the economic crisis due to COVID-19 is more severe than the Subprime Mortgage Crisis that happened in 2008.

Movement of Investors during COVID-19 Crisis

Market watchers may wonder what about the news regarding COVID-19 is scaring investors — it is the strong countermeasures of the U.S. and European countries against COVID-19. Another factor that affected investors’ movement is a consistent downtrend of major companies’ stock price. As the downturn from COVID-19 continues, more investors are opening new security accounts or activating dormant accounts to seize opportunities for low-cost purchases.

Most of the active investors during the period of crisis are novice investors in their 50s and 60s, who jump into investments through recommendations or online information. According to the Korea Financial Investment Association on Wednesday, the number of stock trading accounts increased from 29,356,620 to 30,046,623 within two months. Furthermore, the number of new accounts at two large security firms increased by more than 320,000 in the first two months of this year. The increase of stock trading accounts means that many investors are currently participating in stock investments, seeking the rebound of stock prices.

Experts showed concern about novice investors who get investment information through internet communications or YouTube videos. Experts advise that people need to take caution with the increasing number of illegal transactions that require money in return for recommending promising items on the internet. John Lee, a Chief Executive Officer (CEO) of Meritz Asset Management, said, “Just because we are losing a lot of indexes, we do not want to make short-term investments in theme stocks.” He added, “We recommend people to find blue-chip companies with better fundamentals than unverified information and invest in long-term basis.

Domestic Employment and Labor Condition

One essential aspect with regard to a country’s economic condition is the issue of employment. Though there are differences for each field of industry, there are worries about the falling employment rate due to enormous shutdowns of factories, large businesses, restaurants, and entertainment districts. Moreover, the delay of open recruitments is putting young applicants into a state of depression. However, these worries seem to be at variance with the statistics on the employment situation in Korea provided by the National Statistical Office (NSO). Based on the statistic presented on March 11, the number of people employed in February increased by 492,000 over that of February 2019. Moreover, there is a continuous increase of about 300,000 for the last seven months.

Nonetheless, whether this statistic reflects the actual condition of the labor market accurately or not, there still exist negative perspectives. The first point is about people on a temporary leave of absence. Working people who cannot work because of various reasons such as disease, accident, or labor disputes are called “people who are temporarily laid off.” Within the statistic of the NSO, these people are classified as *the employed*, which made the employment index look better on the surface. However, technically, people who are temporarily laid off include a lot of people who were forced to be laid off from their job, and among them, there are people who have problems with the instability of their own employment.

The condition is well shown in the allowances for job seekers by the Ministry of Labor (MOL). The number of people who applied for the allowances in March is 156,000. Given that the allowances are given to people who are joining the employment insurance and about half of all the employees are not joining the insurance, it is estimated that many more job seekers would exist than appeared in the statistical data.

Under these circumstances, on March 30, the Ministry of Labor (MOL) officially presented solutions including subsistence support for vulnerable people and the formation of an employment safety net. As for the people who are temporarily laid off, it was announced that more subsidies would be provided to the employers to reinforce the employees’ life support. Also, it is promised that MOL will reinforce support for people in search of jobs and provide direct livelihood support. As for Japan, a special measure was presented on March 13 that the government would aid the business suspension allowance ━ half for large companies and two thirds for small enterprises. There needs to be specific guidelines or figures as well in Korea, to actually support the forced instability of employees’ lives.

Severe Populism vs Inevitable Support

*Basic income* is defined as systematic support that provides a certain amount of money to all people without conditions. The intention of this support contains the idea that the government should guarantee people a life befitting a human being. The arguments regarding *disaster-related basic income* have been aroused with the spread of COVID-19 and the downturn of economic conditions. The aim itself is positive in that it is trying to help people get through such economic hardships, but there are worrying perspectives as well doubting the effectiveness of the system and the affordability of the finances.

One of the hot arguments regarding the *disaster-related basic income* is whether it would work as a real emergency prescription, or if it is a typical example of populism, a political approach appealing to the public who believe that they are relatively alienated in political fields compared to elite groups. People who support the former side make a point that paying people money would increase the withered demand for purchases, which would result in the overall circulation of money. On the other hand, people on the latter side cast doubts precisely on this *circulation* point, and state it is hard to expect people to spend more money if they are paid around 100,000 won because fewer purchases and demands are basically due to the fear of going outside, rather than lack of money.

As for foreign countries, Singapore, Japan, Australia and others are implementing the system. In Singapore, all citizens over the age of 21 get basic incomes in accordance with their incomes or properties. National finance, public’s needs and viewpoints, and efficiency could be all different from country to country. In Korea, after severe arguments, every local government is providing their own system and standard for *disaster-related basic income*, and whether this would actually be helpful is something to continuously look at. Further, considering that the COVID-19 situation may be prolonged for an even longer period of time than expected, there would also be voices for more basic incomes. Thus, there needs to be the recognition that this system is temporary and other various methods and systems should be devised to stabilize the situation.

Economic Situation in Foreign Countries

The economic situation abroad is much more serious than the situation in South Korea, mainly because other countries shut down their borders and regulate their people from moving around. The domestic market in South Korea did not collapse because the government did not consider blockading the country. In addition, the delivery business managed to sustain the economy in South Korea. Compared to South Korea, delivery service in foreign countries is not well-developed. People in foreign countries usually visit stores to buy food or groceries rather than ordering those goods through delivery. However, as COVID-19 spread all over the world, people controlled themselves from going outside, which led people to use social infrastructure less.

According to the Washington Post (WP), small business owners are suffering from the cancellation of cultural and sports events in the U.S. and the vacancy of office buildings due to the COVID-19 infection. The sales of small businesses like coffee shops and restaurants in Washington DC decreased by 40 percent as office workers stay at home due to the crisis. The same crisis is happening in Europe. With many small businesses now closed in Germany, the government is concerned about self-employed businesses that will face a number of layoffs and bankruptcies since store owners cannot pay rent without income.

Developing countries, such as India, are undergoing the hardest situation because the social infrastructures that they had established are meager compared to other wealthy countries. Economic experts view the situation in India with concern. As COVID-19 is unwieldable in India, Narendra Damodardas Modi, the prime minister of India, announced a state blockade, which included the regulation of factories. This was viewed as a mistake by many. India is a country where many international companies constructed their factories. However, as all factories are closed, workers in those factories temporarily lost their job without getting paid. Making things worse, millions of day laborers lost the chance to work in construction sites or factories. As such, the unemployment rate rapidly increased.

On the other hand, unemployment rates can recover after countries overcome the crisis. What is more critical during the COVID-19 crisis is the serious malaise among people around the world due to tensed economy. People’s distrust their governments can stimulate the economic situation, even after the crisis gets relieved. It is important for each country’s government to develop the temporary policy or regulation that can satisfy the people’s expectation, so that people can come together to overcome the crisis.

Situation during the Great Repression, Similar but Different

A similar economic situation happened during the Great Recession of 2008. The Great Recession is also called the Subprime Mortgage Crisis, which means that the crisis was due to the collapse of real estate prices. Enormous financial companies like Bear Stearns, American International Group (AIG), and Lehman Brothers Holdings collapsed as people, who borrowed money to buy real estate, could not repay the debt to these companies. Some experts worry that the Great Recession was still ongoing even after 2015, because the economic prosperity was reduced compared to the economy before the crisis in 2008. In order to prevent another possible mortgage crisis in the future, the U.S. government passed the *Dodd-Frank Financial Reform Act* on July 21, 2010. According to Professor Aum Sangmin (Economics, Myongji University), the goal of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was to increase financial stability to ensure that no more “bank run” would repeat in the future.

The economic crisis due to COVID-19 is similar to the crisis of 2008 in the aspect of the collapse of the stock market. However, the current crisis seems much more serious. The 2008 financial crisis was often called an “unknown” crisis, which means even experts could not realize the risk of cutting-edge derivative financial products. It was very similar to the current situation wherein the virus, which has no exact characteristics and path of infection, is rapidly spreading. The difference is that the current crisis is “untouchable” in addition to “unknown.” If *Dodd-Frank Financial Reform Act* was to stabilize the financial market in a hurry so that the crisis could not shift to the real sector, the first priority in the present is by far dealing with the infection. In a cool-headed perspective, the response of economic policy makers, including the government and the central bank, is nothing but a supplementary act, without directly handing the crisis.

Prospects for South Korea’s Economy During and After the Crisis

Due to the current crisis, South Korea’s economy will face a complex situation. If President Moon Jae-in’s government pursues a prompt response, it will not only lead to confusion over its previous policy stance, but also lead to confusion among people in the country. The interest rate is a typical example. Since the government was launched in 2017, it has repeatedly expressed its willingness to stabilize the real estate market by pouring out the real estate measures through 19 consecutive and different policies. With instability in all areas of the economy, including the financial market, exports, and domestic demand, the government and the central bank should agonize between the primary or innovative measure.

Professor Aum added that the measure that the government should take immediately is to support businesses so that they do not go bankrupt due to decreased demand, and to maintain a contractual relationship with employees. In addition, various financial policies such as expanding loan guarantees to self-employed businesses, should also be considered. The most important thing here is the content rather than its size. The policy of easing inequality and inclusive growth of all people in society is also the way to success in responding to the imminent crisis.

In this intense period of socio-economic crisis, everything seems to be in chaos and the flatline situation makes people feel more and more depressed. As trite a remark as it may sound, it is always the efforts with hopes of every party including the government, organizations, and the public that will end the crisis and depression in the end. As covered above, there exist a lot of controversies on various issues now, but it is always true that a decision cannot fully satisfy everyone’s needs. With a careful look at each matter from various angles, rational and plausible supports should be given by the government. Then, through close observations of the results and people’s reactions, complements should be made to build up better systems and supports.