People’s health or economy? It’s a false choice

by Edilberto C. de Jesus
Originally published in Rappler April 14, 2020

Key Philippine government officials and business leaders decided on the side of prudence in declining to risk the premature lifting of the COVID-19 lockdown. They thus rejected the false choice pushed by some of their counterparts in the United States: save the lives of the people or the life of the economy.

Fortunately, President Duterte deferred to their judgment.

It is a false choice, first, because while people die, economies don’t. Even cavemen maintained some kind of household economy, but there is no economy without people.

Second, no rational choice is possible without data and we have not adequately pursued the intensive test-and-trace strategy needed to determine where we are on the contagion curve. We hope for the best but, as Dr. Anthony Fauci keeps preaching, “the virus sets the timeline.”

Making the hard decision, government should find comfort in a survey conducted by the Initiative on Global Markets, a research center of the University of Chicago’s Booth School of Business. IGM’s expert panel consists of over 60 leading economists in American universities. The striking consensus among the experts belies the joke about the need to find a one-armed economist to get a recommendation beyond the caution that: “on the one hand . . ., but on the other hand.”

Ninety-seven percent (97%) accepted the need to tolerate “a very large contraction in economic activity until the spread of infections has dropped significantly.” Eighty-nine percent (89%) agreed that sustaining severe lockdown restrictions to control the pandemic would cause less total economic damage than a resurgence that followed their premature lifting. That the government should invest more heavily in expanding treatment capacity and providing incentives for a successful vaccine gained unanimous approval (78% “strongly agree” and 22% “agree”).

Lessons from history

Historical evidence marshaled by economists from the Federal Reserve Board and MIT reinforced IGM expert opinion. During the 1918 flu pandemic, the lack of mandatory federal guidelines allowed American cities to act on their own. New York and St. Louis intervened forcefully to order social distancing. New Haven and Buffalo permitted public gatherings weeks after the evidence of a public health crisis.

Researchers expected the cities that maintained normal economic activities to rebound and recover more quickly from the pandemic. In fact, the cities that took aggressive action against the contagion, even at the cost of depressing the economy, not only saved lives but also more quickly restored growth in employment and banking assets.

The lesson: protecting lives protects the economy. That said, the issue of saving the economy remains.

Treating economic fallout

Treating a patient with traumatic head injuries, doctors might decide to induce a coma to spare the brain from further damage. A comparable treatment might be necessary to deal with the economic consequences of COVID-19.

Suppressing the pandemic must remain the priority, even if it means locking down the economy, excepting only such critical supplies as food and drugs. We don’t want people flocking to restaurants or packing cruise ships, airplanes and tourist hotels, or immediately congregating in factories, lest they trigger another surge of COVID-19.

Comatose patients still need care and nurturing. The government must focus, as it is trying to do, on the most-heavily burdened people, the working, underemployed and jobless poor. But accountable agencies admit that even available funds are not flowing fast enough to beneficiaries. Assurances that delivery should be made within two weeks provide little comfort, even if Mr. Panelo contends that going hungry for a month will not kill people.

The lack of a comprehensive list of beneficiaries and a system for distribution and delivery of material and financial assistance on a massive scale presents the critical problem.

Part of the solution may require radical measures, such as the use of private delivery mechanisms at government cost. A soft loan against the Heal as One Act budget, perhaps payable from future tax obligations, so that companies can keep their personnel on the payroll, even if they are not reporting for work.

Meet 3 objectives

UK, Denmark, Canada, France and the UK are already moving along these policy guidelines. This plan would enable employers in the formal sector to cover perhaps minimum wage levels of personnel during the lockdown.

It would avoid delays, sparing companies, their staff and the government itself from the paperwork and potential litigation that accompanies the termination of employment and their rehiring after the pandemic. Albay Representative Joey Salceda might consider this approach to help SMSEs and to meet the plea for assistance to the middle class.

Assistance and its documentation for those in the gig economy present a more difficult problem. Some documentation of their engagement (from tricycle or jeepney associations, barangay records, payments from passengers or retailers whom they service might suffice to grant them a minimum wage payment for the same duration.

The jobless, including the street people, may need the funneling of government assistance through churches or people’s organizations.

The priority goal must be to meet 3 objectives:

  • ensure that people who are unable to earn because of the lockdown can continue without further delays to provide for the survival needs of their families;
  • maintain the quarantine against COVID-19 without provoking social unrest; and,
  • keep the workforce in place for the eventual economic reboot after the pandemic