The Economic Consequences of Peace With The Virus
by Scott DeMichele
The pandemic has rocked world economies with supply and demand shocks, both short-term and long-term. Besides industries that have been directly damaged by the pandemic, (airlines, tourism), these shocks are affecting almost every business other than well-capitalized tech. If McDonalds is permanently closing 200 stores, you can imagine what smaller businesses with meager cash reserves are going through. Many will not survive. If your average person is making less and spending less, businesses have less incentive to invest, and your vicious cycle amplifies.
Such is the reason for the clamor to reopen as soon as possible. However, when businesses in the US opened up over the summer, they opened up to a different world. In addition to the new spending habits, there is a hidden economic cost for which we are paying a dear price. There is a human toll, not just in lives, but damage to the overall health of populations. About 1 in 3 survivors are experiencing prolonged health issues several months after recovery, with symptoms including fatigue, body aches, difficulty in breathing and concentrating, and headache. Economists have yet to compute the multi-billions of additional burden on productivity and healthcare resources, but much of these costs will be structural and will be with us for years to come.
This is the new normal in which we find ourselves, muddling through a pandemic the way a 19-year-old might muddle through credit card debt; paying only the minimum and getting nowhere. The pandemic is a high-interest debt burden on the economy, growing by the day. The longer the pandemic persists, the more failed businesses, more chronically ill, more death. This is a bad trade-off in terms of lives and prosperity.
Forever shutdowns are not the alternative. Forever shutdowns just mean we are not doing it right. The US shutdowns in March and April were haphazard, sporadically enforced, had inadequate testing, allowed travel to continue unimpeded, and were relaxed before stopping the spread. Effective, targeted shutdowns are not only possible, but essential to bringing us closer to normal living. Compare the results of US shutddowns with other developed countries.
By incorporating what other countries have done right, for example New Zealand, It is possible to in implement an effective plan that will limit the economic damage being done to the US, save lives, and preserve population health. An effective 5-week quarantine could end the pandemic.