There is a better way to mitigate the economic distress caused by the Covid-19 crisis. In fact, a large part of the initial $2 trillion package points the way. It earmarks $360 billion for guaranteed loans to small businesses. In contrast to the provisions for large firms, these loans include strong conditionality: They turn into outright grants if the business does not lay off its employees. This provision provides an explicit incentive for firms to limit layoffs and, when possible, repurpose capacity or innovate to participate in the fight against the pandemic.

Other developed economies of varied political orientations, including Denmark, France, Germany and the U.K., have already implemented policies that require or create incentives for large and small firms to use government funds to retain employees and pay a substantial part of their pre-pandemic wages.

Consider Denmark, where such policies have altered the way firms work with one another, and where their employees have mobilized for the collective effort needed to fight the pandemic. Danish authorities encouraged beer producer Carlsberg to divert 17,200 liters of beer and cider base to another firm, where it will be transformed into alcohol needed to produce hand sanitizer, which is in short supply.