Maintains re-opening economy too quickly would be counter-productive
With COVID-19 still spreading and uncertainty remaining as to whether there will be a second wave of the virus next fall, questions are being raised as to the approach that should be taken – with economic recovery paramount in many people’s minds.
According to the Johns Hopkins University School of Medicine, there are more than three million confirmed COVID-19 cases in 185 countries and territories. And without any doubt, the coronavirus pandemic is having a devastating impact on the global economy.
The economic impact
Many businesses have been closed for nearly two months, which has caused layoffs and furloughs. Countries are creating economic recovery plans and guidelines for reopening businesses in phases with proper precautions.
But how long can an economy feasibly remain closed down? Should government officials give in to growing public impatience and begin to allow life to come back to normal? Or should they continue, at least for now, with the shutdown?
Should they consider taking a systematic approach – acknowledging there will be an estimated “collateral” casualty count – as measured against damage to the economy from a continuing shutdown? Or do we go on pursuing COVID-19 protective measures until infection and mortality rates reach safe and satisfactory levels – no matter how long that takes if this proves to be necessary?
Virus must be contained
“We’re hearing a lot of people and politicians who look at the economic damage, which is awful, and say Oh gosh, we have to re-open to save the economy,” says macroeconomics expert Dr. Alan Green, department chair and associate professor of economics at Stetson University in Central Florida.
“But what I’m saying, and what I think every economist that I’ve seen publicly say something is saying, is that they’re doing it backwards. Even if you legally allow everything to re-open, the economy’s not going to recover until the virus is contained.”
On the one hand, he maintains, dropping enforced protective measures won’t necessarily help to restart the economy. As people begin circulating openly once again, remnants of the highly contagious SARS-CoV-2 virus will begin spreading again, sickening more people while causing the level of public fear and apprehension to escalate once more.
Could backfire, says economist
“Part of this instinct to try and move quickly to re-open in order to get the economy going really is probably going to backfire,” Green said.
“What will have to be the priority is the public health aspect of broader testing, knowing where the virus is, waiting until case loads have declined, to a point where you can actually keep testing and tracing. So that once we re-open, if there are outbreaks in different areas, we can close them off more precisely.”
‘The economy’s not going to recover until the virus is contained,’ says Stetson University’s Dr. Alan Green
As for the alternative argument, that we should balance potentially escalated casualties against the greater economic losses from not moving forward faster, Green said he has a problem with that line of thought.
Says health should come first
“It assumes that the total number of deaths from the virus is kind of fixed and inevitable,” he said. “It implies that a lot of people are going to die either way, so we might as well trudge on ahead and get the economy moving. But the total number of deaths is not fixed at all. It’s completely dependent on the public health response.
“And again the point I’m trying to drive home as an economist is that if we kind of proceed, and there are going to be some deaths but we’re just going to try and open the economy, people are going to be afraid and they’re not going to participate in the economy and we will still be in a major recession. And they’ll be justified in being afraid, because people don’t want to die and people don’t want to get their family members sick. So if the virus is not contained, then there’s no way things go back to normal.”
Maintain shutdown, he says
His advice? “Keep the economy closed down longer, which we can afford to do, dramatically ramp up testing so we can know where the virus is, and then trace people who’ve got it,” said Green. “And although it’s still a bit early, that seems to be working, at least in some other places.” He argues that in emphasizing the importance of the human toll, in the long run this will favour a better economic outcome. “Because if we contain the virus, then we can actually re-open with less fear because we’ll have more accurate information, more people will come back and participate. So you get a much better economic recovery with the right public health measures.”