Thousands of small businesses went under, wealth gaps widened, and instability became the status quo in everything from housing to food and education. The financial market sustained expected but unpredictable macroeconomic turbulence, and regulatory institutions, commercial banks, and non-bank entities desperately tried to stimulate consumption trends. The United States was in the spotlight, but global ripple effects can’t be understated.
However, stories of hope and reassurance also emerged during the crisis. Families found assistance and support at many levels, getting the help they needed to cover vital expenses and stay afloat amid deep uncertainty. This extended to global governmental and NGO-driven financial services designed to alleviate the ongoing shockwaves of global poverty.
Let’s explore just how these safety systems helped those left behind by COVID-19 and the policies that brought on a new set of financial challenges.
The United States has led the way in many safety net services throughout the past century, starting with the Social Security Act, unemployment insurance, food stamp programs, and Medicare. These programs continue to develop and expand, even as they face opposition.
While these programs have become burdened over time, they still offer billions in benefits each year and played a key role during challenging periods of the pandemic.
Think back to how small communities would handle times of crisis, whether it’s food insecurity or supply shortages. Neighbors would step up to help others in need, often by means of a religious service group or a secular charity. In the capital market and financial sector at large, this pattern of personal charity holds true.
Governments haven’t traditionally had a reputation for assisting those in need, as history suggests. But post-war America and Europe have up in the 20th century in terms of support both domestically and abroad.
This is in part due to central banks’ involvement in financial safety systems, delivering infusions of cash and resources to nations in need, during a crisis, and in peace.
Our financial safety systems are far from perfect, of course, and this was made clear during the unprecedented events of COVID-19.
However, such programs proved their worth and made it more feasible for organizations to mobilize and deploy funding and support at the right place and time.
With so many financial safety systems working overtime from the start of COVID, it’s hard to pinpoint which ones did the heavy lifting in terms of relief.
We’ve sorted things out by the size and scope of each system, starting from the local level and moving up the ladder toward international governing bodies and non-government entities.
Money was already in the pipeline for state governments as early as March 2020 with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. This was the first of many legislative actions in response to the pandemic and the sign of much more to come.
State governments throughout the nation were already struggling with debt before the pandemic began and had little extra cash to spare when the virus hit. The $150 billion Coronavirus Relief fund filled in gaps early on, with more populous states receiving more than others.
Congress Passed the American Rescue Plan (ARP) Act a year later, bringing an additional $350 billion to states, cities, and local governments. These federal stimulus packages were vital to maintaining the economic health of communities in the midst of the pandemic and shutdowns, as individuals and families struggling with economic uncertainty and lack of income.
Many stimulus programs were designed to shoot right past state administrations and go straight to the people who needed them. The Paycheck Protection Program (PPP) was a leading example of federal action that delivered direct payments to industries and provided much-needed relief payment systems.
Manufacturing, construction, professional services, retail, and healthcare providers were just a few key sectors that received PPP loans in the first and second tranches of the program.
In addition to the $835 billion allocated for PPP, the federal government also sanctioned Economic Injury Disaster Loans (EDL) for the total price of $500 billion. These went to individual states in a direct effort to keep small businesses afloat.
Close to a trillion dollars were given out in other forms of income support, delivered via existing infrastructure such as SNAP and unemployment benefits. Stimulus checks and other direct payments were offered as well, depending on the needs of the household.
While those $600 and $1,200 checks seemed insufficient to many, resources were in high demand during the peak of the pandemic.
In all, more than $3.5 trillion was issued by legislative means within the United States, representing some of the most drastic measures on a global scale.
Far more complex was the fiscal policy that resulted from the onset of the pandemic, as central banks reacted strongly to mitigate the impact that they foresaw from the start.
Financial institutions across all major economies used tools such as interest rate measures, lending and borrowing, asset purchasing, reserve policies, and foreign exchange operations to lessen the strain on local economies and maintain the health of the global financial system.
The most common risk management theme among all central banks was a cut to interest rates, as well as liquidity provisions and targeted lending plans to infuse cash into economies at rapid rates.
Purchases of government bonds were also widespread, while other instruments such as exchanges and remuneration gave short-term advantages to lenders and firms. With the goal of continued economic stimulation in a time of crisis, central banks rose to the challenge, allowing countries to soften the impact of slowdowns without grinding to a halt.
From the start of the pandemic to now, the United States Federal Reserve allowed more than $7 trillion in total assets to be lent out on a domestic level and throughout foreign markets, including roughly $4 trillion in asset purchases.
This new round of quantitative easing focused on increasing the money supply by purchasing assets like long-term Treasury and mortgage-backed securities.
NGOs and International Development Organizations operate independently of central banks and governments but played key roles during the pandemic nonetheless.
From Human Rights Watch to Amnesty International, Oxfam, World Vision, and Doctors without Borders, all attention and effort were turned to COVID as soon as news of the virus went global.
Other IDO heavy hitters such as the World Health Organization, World Bank, the World Economic Forum, and the International Monetary Fund also came into the spotlight at this time, pushing hard for new policies, standards, and a retooling of the global economy.
Since the movement of funds within these organizations is less transparent, it’s not fully clear how much was contributed from NGOs and IDOs.
However, we know that these organizations played key roles in publicizing the pandemic as a pressing issue and lobbied for world governments to take aggressive action with relief and support.
During the height of the pandemic, it seemed like every public and private company and citizen was stepping up to help those in need. Connectivity and support were the buzzwords. Entrepreneurs started funds to help small shops and restaurants, while billions in donations were given out by larger corporations worldwide.
As the pandemic took effect, it became clear that financial safety and assurance would be a core component of our mission moving forward at Steady, which has already helped put millions in members’ pockets so far.
There was no shortage of institutions that stepped up during crunch time as the pandemic spread, and it was inspiring to watch the best of humanity come forth and change lives for the better.
It wasn’t just money that made the difference during these times, but also support, guidance, hope, and the feeling that everything would be okay. That’s where we’re working to bridge the gap between short-term assistance and long-term change.
We learned a lot about financial safety nets during the pandemic, including their strengths and limitations. It took a combined effort from governments, NGOs, IDOs, and private companies to get to the other side - not to mention the everyday workers and health care heroes who did their part.
Now that the worst is behind us, what can you do to protect yourself moving forward and plan for a possible crisis, whether it’s another world health event or economic bumps in the road?
You can never be too organized when it comes to your finances, and we mean more than an emergency fund. From earnings and savings to budgeting, tax planning, and long-term investing, you should have every aspect of your finances structured ASAP.
With the partners we work with at Steady, you can take control of your financial situation faster by signing up for services that suit your needs. Plus, you can earn bonus cash for making better financial situations, making it a true smart money move for you.
More people realize that a single income source just isn’t enough, especially with the possibility of a pandemic looming overhead. Now is the time to sharpen new skills, get involved in the gig economy, or start the side hustle you’ve been thinking about forever.
This will not only give you an income boost in the short term but also provide a comfortable cushion if anything should happen moving forward. We simply can’t plan for certain life events, and every bit of risk reduction counts.
Use Steady to discover those new income opportunities, connect with key services, and accurately track every dollar of your income with our powerful Income Passport feature. That way, you’ll be organized and aware no matter what happens next, and whenever you need to submit and gather this information.
COVID shined a light on many issues in our society but also proved that certain financial safety systems can work in tandem to make a positive difference.
While you should aim for financial independence, it helps to know that people can look out for one another when it’s needed most.
Who’s Funding the COVID-19 Response? | Devex
Pandemic Economic Inequality | World Economic Forum
COVID Money Tracker | Committee for a Responsible Federal Budget