What was an early assumption in the COVID pandemic – that it was a question of the Economy vs Human Lives.

What was an early assumption in the COVID pandemic – that it was a question of the Economy vs Human Lives.

Protecting People’s Health and The Economy: Was it a trade-off?

In response to the pandemic, some governments resorted to herd immunity to stave off the societal and ultimately economic impact that a more stringent reaction to COVID19 might bring. An assumption behind the varying approaches appeared to be that there was a choice between a rock and hard place:

  • Close the economy and save lives
    or
  • Keep things open at the cost of human life?

A year or so on, how did it work out?

Herd immunity:

There were a series of pushbacks against the herd immunity approach as it was billed.  It was largely dismissed as a flawed strategy because the idea essentially relied on more people getting infected which would inevitably result in more deaths.  The World Health Organization also responded that, “To safely achieve herd immunity against COVID-19, a substantial proportion of a population would need to be vaccinated, lowering the overall amount of virus able to spread in the whole population,” (Coronavirus disease (COVID-19): Herd immunity, lockdowns, and COVID-19 W.H.O December 2020. https://www.who.int/news-room/q-a-detail/herd-immunity-lockdowns-and-covid-19 ).

Protecting the Economy:

On the economic front, have the policies built around a hands-off, laissez faire, approach to the pandemic been able to achieve at least what they had set out to do, that is, protect the economy?  A study published in the second half of 2020 examined the results (“Which countries have protected both health and the economy in the pandemic,” Our World in Data, Oxford Martin School, September 2020 https://ourworldindata.org/covid-health-economy ).  The hypothesis is this: “countries face a trade-off between protecting people’s health and protecting the economy.  But is it true?  Is it a tradeoff?  Have the countries experiencing the largest economic decline performed better in protecting the nation’s health, as expected if there was a trade-off?”

The study found that contrary to the idea of a trade-off, countries which suffered the most severe economic downturns – like Peru, Spain, and the U. K. – were generally among the countries with the highest COVID-19 death rate.  The reverse is also true, countries where the economic impact has been modest – like Taiwan, South Korea, and Lithuania – have also managed to keep the death rate low.  It further adds that countries with similar falls in GDP have witnessed very different death rates. For example, while the U. S. Sweden, Denmark and Poland, all saw economic contractions of around 8 to 9 percent, their death rates are markedly different:  i.e., the U. S. and Sweden have recorded 5 to 10 times more deaths per million.

Takeaway

It is worth noting that in the study, the economic results are compared against death rates, which is telling.  The comparison is appropriate not just because the pandemic brought deaths and sufferings but more so because an economic result itself means little unless it is compared against the health and the livelihood in general of the people within that economy.  Although the study does not state as much, a key takeaway from it is that it didn’t have to be this way.

It was never a trade-off, there was no need for deaths to be so ubiquitous. The early assumption that it was a question of the economy vs human lives was invalid.  To quote Krugman, a Nobel laureate economist, from his opinion on the new administration’s proposed plan, “The U.S. economy will remain depressed as long as the pandemic is rampant, so the goal is to help those parts of our society hit hard by the constrained economy to make it through with minimum damage.” Simply put, it’s not the other way around.

Thankfully, conditions are improving in the U. S. as in other countries.  The U. S. economy, for example, contracted by 31.4 percent in the second quarter of 2020, has rebounded strongly since then. The unemployment rate stayed at 6.2 percent in February 2021 (“Policy Tracker,” International Monetary Fund, March 2021 https://www.imf.org/en/Topics/imf-and-covid19/Policy-Responses-to-COVID-19#U ).

Hopefully, the painful lessons learned will be remembered when another response to a disaster is framed as a trade-off between people’s lives and sustaining economic growth.

 

Paul Baik

Paul BAIK, REGULATORY ENABLEMENT MANAGER – AMERICAS

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