Are ministers neglecting the health of the economy?
Members of the Scientific Advisory Group for Emergencies (Sage) don’t think ministers are doing enough to contain the spread of coronavirus.
Yet many in Conservative Party circles feel that the new restrictions imposed in recent days go too far, and claim they will excessively damage the UK economy. They complain that the advice from scientists is not being appropriately balanced with advice from economists and people in business.
This seems to reflect a tension within the cabinet too, with the chancellor reportedly playing a leading role in rejecting the proposal from Sage for a national “circuit breaker” lockdown three weeks ago on the grounds of its harmful impact on the economy.
Do the critics of the new restrictions have a point? Is the government failing to acknowledge a trade-off between the economy and public health in this phase of the pandemic? Is the prime minister unduly prioritising the fight against the virus over preserving the health of the economy?
Before trying to answer this it’s worth disentangling this issue from the debate about whether certain policies, such as the 10pm curfew on pubs, are likely to be effective or not in curbing the spread of the virus. Everyone can surely agree that an ineffective health policy intervention, if that’s what it is in place, is bad for the economy and damaging for public health and should be avoided.
It’s also worth acknowledging that some opponents of the new public health restrictions are concerned about the knock-on impact on the wider health services, such as the interruption of cancer consultations, or elective hospital operations, or on the mental health problems to which new restrictions on socialising might contribute.
But these are debates about the balance of emphasis within health policy, rather than the question of how to balance concerns for public health against concerns for the economy.
In terms of that central argument, it’s essential to clarify “counterfactuals”. In other words: to consider what would happen if the restrictions were not imposed.
Some of the opponents of restrictions argue that the virus poses serious health dangers only to certain vulnerable groups and that it should be possible to “protect” these groups while opening up normal economic life for the rest of the population, perhaps allowing a natural “herd immunity” to take hold as more people became exposed to the disease with only mild or even no symptoms. For them, the counterfactual is a mild and manageable health impact and a faster growing economy.
But there’s another counterfactual. Many argue that failing to suppress the virus would result in soaring infections, hospitalisations and, ultimately, deaths, and that this, in itself, would inflict grave harm on the economy as consumer and business confidence collapses.
“As long as those who are not vulnerable think there is a real risk of death or serious complications from Covid-19, most will stay away from pubs, restaurants and other areas of social consumption of their own accord,” says the Oxford economist Simon Wren-Lewis. “It is not the lockdown that kills the economy but fear of catching the virus.”
From this perspective, there is, in fact, no trade-off between health and the economy. Protecting public health protects the economy in the medium term. “A successful economic strategy is one that suppresses the virus and vice versa,” is how the King’s College London economist Jonathan Portes puts it.
Some take the counterfactual further and argue that an earlier and more restrictive lockdown would actually be beneficial for the economy in the medium term relative to the current set of restrictions because it would suppress the virus and enable a more rapid reopening of activity than otherwise.
“Lockdowns impose short-term costs but may lead to a faster economic recovery as they lower infections and thus the extent of voluntary social distancing,” argue Francesco Grigoli and Damiano Sandri of the International Monetary Fund (IMF).
So the question is: which of these counterfactual scenarios is more realistic?
There is some compelling evidence that doctors are much better able to treat coronavirus cases, reducing fatalities, than they were earlier in the year. New drugs like dexamethasone have helped. Yet most estimates of the infection fatality rate remain ominously high to follow a herd immunity strategy (the World Health Organisation cites a range of 0.5 to 1 per cent). And there is also the possibility that people infected by coronavirus – even if it does not kill them – could have long-term health problems. That prospect alone could deter a great deal of economic activity.
Economies around the world saw historic plunges in GDP as many governments locked down their societies to curb the spread of the virus. Yet some economic studies, including one this month from the IMF, suggest that a large share of the huge fall in peoples’ movement earlier this year was voluntary rather than a result of lockdowns.
It might be going too far to argue populations would have essentially locked themselves down if governments hadn’t done it, but this evidence does support the view that the easing restrictions in the face of rising infections would undermine consumer confidence and spending.
Where the critics of restrictions might have a glimmer of a point is when they argue that the economy and health should be considered together rather than in silos. The economist Tony Yates argues that the economic and epidemiological modellers should work together to give formal advice to ministers. He argues that the epidemiologists would be able to benefit from the insights of economists in how people would be likely to respond to new health restrictions.
The former cabinet secretary, Gus O’Donnell, thinking on similar lines, points out that what seems to have been missing in Downing Street is “a policy framework that can properly assess the costs and benefits of different measures”.
“This [is] a ‘mixed’ crisis involving health issues and economic and social factors arising from decisions made to reduce the Covid death counts,” he says. “Multiple analytical approaches need to feed into such advice as goes to ministers.”
In the end, the health-versus-economy framing of the policy choice is inappropriate – and not just because solving the health crisis underpins the success of the economy.
There are other important terms in the equation. One of the arguments for tighter restrictions is to give officials time to sort out the well-publicised problems in the government’s test, trace and isolate (TTI) system. Some other countries that have an effective TTI infrastructure seem to have been able to nip new outbreaks in the bud, avoiding the need for new restrictions and lockdowns.
When he introduced the 10pm curfew last month Boris Johnson made the case that “a stitch in time saves nine”, meaning taking action early can be much less costly than taking it late. He – and his anti-restriction critics – should consider the economic as well as the health logic of that argument.