Public health interventions will drive economic recovery from COVID-19

“Raring to go” or clamping down on the virus?

As a significant part of the world continues to reel under the impact of the novel coronavirus pandemic, lockdowns have become commonplace in many countries. The resulting economic losses have led to much debate and controversy about whether the global financial recession or the next great depression is lurking around the corner. Heads of state are concerned about whether prolonging the lockdowns will delay economic recovery, and many are in a hurry to get the country back to work to limit the losses.

However, this is precisely the opposite of what the paper says. Rather than relaxing the public health measures aimed at reducing deaths from the pandemic, the best way to ensure a more robust economic recovery is to implement stricter measures like shutdowns and banning public gatherings.

The study

The study is based on an analysis of US data from the great flu pandemic that swept the world in 1918-19. The researchers looked at data from the US Centers for Disease Control (CDC) on mortality during the pandemic; economic data from the period from the US Census Bureau; and banking data from the reports compiled by economist Mark D. Flood, using the government-published “Annual Reports of the Comptroller of Currency.”

The researchers looked at 43 cities affected by the pandemic. Overall, there was a drop in manufacturing output by 18% during this period, lasting until 1923, even though the last of the pandemic receded in 1919. Other measures of economic output that declined markedly and persistently included bank loans and the inventory of consumer durables. Both manufacturing power and purchasing power were reduced during this period.

Social distancing and economic outcome

Those familiar with public health crises and interventions know that social distancing has always been related to differences in health outcomes. The current paper adds the aspect of resulting changes in economic activity to this awareness. They found that economic outcomes changed with the strictness of the social distancing policies.

The authors say, “Cities that acted more emphatically to limit social and civic interactions had more economic growth following the period of restrictions.” This applies even to cities like St. Louis, which brought in strict public health recommendations just ten days earlier than other more lenient cities like Philadelphia. The former category saw a 5% increase in manufacturing jobs relative to the latter, from 1919 through 1923.

Again, cities which had social distancing in place for 50 extra days, like Oakland, California, Omaha, Nebraska, and Portland, Oregon saw a further 6.5% increase in manufacturing jobs compared to those which didn’t (like Philadelphia; St. Paul, Minnesota; and Lowell, Massachusetts).

Bank struggles

There were a lot of loans written off in the years following the flu of 1918, chiefly because banks were accepting these loans as losses due to the economic upheaval secondary to the pandemic. However, it is interesting that cities like Albany and Syracuse, New York; Boston; and Birmingham, Alabama – all of which had social distancing in place for less than 60 days – experienced greater banking instability compared to other parts of the country.

What is the conclusion?

Today’s US economy is more service-oriented than in the 1920s, with less manufacturing output. Secondly, the flu pandemic targeted healthy young adults, dealing a body blow to manufacturing industries. Despite these differences, however, the economists see a clear lesson for today’s policymakers.

The first lesson, he says, is simply this: “Pandemic economics are different than normal economics.”

Verner says, “We find no evidence that cities that acted more aggressively in public health terms performed worse in economic terms. If anything, the cities that acted more aggressively performed better.” This means he says that there is no validity in the concept of a trade-off between economic welfare and public health. Instead, the greater the impact of a pandemic, the greater the delay in rebuilding the economy. It’s as simple as that. Therefore, the government should wholeheartedly devote all its efforts to clamping down on the pandemic right now. Because public health interventions not only save lives, but soften the economic impact of a pandemic.