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False illusion
Due to the specific nature of viral disease (high proportion of people requiring intensive hospital care), the fight against the coronavirus epidemic is mainly focused on slowing the spread to a level where the number of patients does not exceed the capacity of the health care system. More figuratively, the treatment is “flatten the curve!” According to the motto, focused on this stage of the epidemic:
The result, which hopefully will be more characteristic in a few weeks, was produced by a dramatic change in the behavior of actors in society. The population has become more cautious (especially “distant”) and governments around the world have taken strong restrictive measures. The price: recession prospects, rising unemployment, huge welfare losses.
Since the deteriorating economic outlook, it is understandable that attention is slowly shifting from the height of the curve to the width of the curve.
By curbing the epidemic, we have also slowed down the transmission of society, which means that the course is taking longer. During this period, some of the restrictions will remain with us at all times. That is, in exchange for a shorter and less severe career, we have restrictions that live with us for a longer period of time.
Until now, relatively little attention has been paid to this, as if it was still in our heads that after a few weeks or months of draconian austerity, order was somehow restored. However, this is not so much to expect that the famous Imperial College simulations directly predict that when the measures relax, the number of cases is expected to jump and that the measures will need to be reintroduced to remain in effect until the vaccine is released.
The price is higher than we thought.
Due to the above, we may still have restrictions with us for a long time, which will increase the economic shocks. Furthermore, the loss of demand in a significant part of the service sector is not much replaced: if such loss of income occurs in a wave, even the strongest companies will collapse and go bankrupt. We can say that To our knowledge of the epidemic, it is not certain that the economy will tolerate the form of control that we are currently using.
Prolonged or recurring restrictions cause severe damage that threatens to collapse economies.
The current solution is not a good one, at most temporarily tolerable. So you have to invent something new.
Here are some options that promise more success than general social distancing and factory closure.
Another solution is needed.
1. The miracle. If it turns out that an effective vaccine will not be available next year, but within a few months, or perhaps a large part of the population will rapidly acquire / acquire latent immunity, then the above explanation will be meaningless and the world will successfully traverse the entire crisis in a wave.
difficulty: To our knowledge, very unlikely.
2. The epidemic must be released. With the removal of restrictions, the circulation of economic life will be restored. Although more people die from the disease, there would be even more victims of economic collapse than an untreated epidemic.
difficulty: the virus does not cause enormous difficulty (although it is also high) mainly because of its death rate, but because of its intensive care needs. If the capacity exceeds the size of the epidemic, it could suffer up to ten times more victims than it does now, and the problems of overloaded medical care would spread to other areas. The damage from a released coronavirus epidemic would likely already be far greater than the negative effects of economic constraints. If only because people would become much more cautious about themselves due to the severity of the epidemic, much of the economic shocks would not go away. It is no coincidence that those who, however, considered this solution, quickly saw again its possible consequences.
3. Appointments for suffocation. Governments will keep the economy alive not only for the next two to three months, but, if necessary, up to two years with corporate subsidies and retail transfers. We can be sure that if we keep the economy’s capacity ready for deployment, there will be a rapid explosion with the end of the epidemic and the budget situation will improve.
difficulty: Huge budget deficits lead to an increase in public debt, limiting future room for maneuver, destroying financial stability and reducing potential growth. Furthermore, the effect of effective demand on spending is weak at the beginning of the crisis due to the nature of the shock.
4. “Printing money”, helicopter money, monetary financing. This is not yet openly and large-scale applied globally, but we have already seen smaller programs involving central bank-financed public spending. (Opinions are divided on the extent to which purchases of government securities by central banks in the secondary market, which are now routinely used, constitute de facto monetary financing.) These solutions promise that the state can provide assistance to its troubled citizens and businesses without budget constraints.
difficulty: If economic shocks last for a long time, the uncovered money supply carries strong inflation risks. Furthermore, this is precisely the reason why monetary financing is prohibited by law in many places (including Hungary, for example).
5. Great increase in sanitary capacity.. The above solution ideas are intended to mitigate the economic effects of the epidemic, apparently with strong limitations. That is why the true economic solution must be found in health measures. Measured in relation to the enormous economic damage, perhaps there would be no enormous cost in forcibly inflating intensive supply capabilities. Even in a war, much of the resources could be directed here, in exchange, a good part of the restrictions could be lifted and reserved specifically for vulnerable groups. In this way, the course of the epidemic can be accelerated.
difficulty: Capacity building in health is not only a question of money, but also of human resources. Many countries are still putting a lot of effort into this, but it is estimated that this is not enough to help the epidemic to develop faster.
6. Other more specific health control methods. In my opinion, more hope can be put into the development and application of techniques that can effectively and permanently curb the spread of the virus without causing an economic freeze similar to the current one. In this, simpler and more complex solutions can be conceived, some of them are already in use, others still need rapid development.
- Large sample tests, dense individual tests, on the basis of which the epidemic can be effectively curbed even with stricter restrictions.
- Technological developments such as monitoring of mobile applications and containment of the spread of the epidemic.
- Restrictions reserved for the highest risk groups (especially the elderly) to control the number of more serious cases.
- General use of masks and / or making it mandatory in subareas in the knowledge of the spread of the virus.
Of course, we do not know exactly to what extent and in what combination the above solutions are effective. However, as far as we know, it is almost certain that a strategy that does not require the same price as the current method of protection should be extracted from these and other similar instruments: persistent economic recession, declining living standards, unemployment, severe deprivation of certain groups in society and ultimately, in turn, measurable harm to human lives that can be measured for a coronavirus pandemic.
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