Is there really a trade off between saving lives and protecting livelihoods ? The evidence.
1. Trump and the supporters of a health- economy trade off
Since the onset of the COVID-19 pandemic, policy responses have mostly been framed in terms of striking a balance between saving people’s lives and protecting the economy. As a result, the decision on when and how to open borders and ease lockdowns becomes the unenviable task facing policymakers as they consider the trade-off between the health of their population and the health of their economies.
The overriding question is whether there is an evidence-based trade off between lives and livelihoods.
Speaking about this difficult choice , President Trump famously stated that he cannot let the cure ( lockdown that affects the economy ) be worse than the disease (the death from Covid 19 ). He believes that both problems can’t be solved at the same time. He argues that the damages of keeping the economy closed would be worse than losing more people through the pandemic. He advocates choosing the lesser of the two evils between the likely destruction of jobs and businesses and the death tolls. ‘That’s the way it is ‘, he concluded.
2. The IMF and the WHO on mutual interdependence between health and economy
In a joint statement on the subject, Dr Kristalina Georgieva , Managing Director of the IMF and Dr Tedros Ghebreyesus , Director General of the World Health Organisation, strongly contend there is no trade off between the two and that we can and should deal with both crises simultaneously with the right policy mix. They wrote about public health and the economy being mutually interdependent rather than a trade off and the necessity to work in tandem with a prerequisite to a sustained economic recovery dependent on a sensible public health approach to tackling the virus. They advance that a premature return to business could reignite infections and expand Covid-19 which could inflict more severe, longer-term damage to the economy.
They hold that
“At face value there is a trade-off to make. Either save lives or save livelihoods. This is a false dilemma. Getting the virus under control is, if anything, a prerequisite to saving livelihood. Fighting the pandemic is a necessity for the economy to rebound. As we all work together, with little time and finite resources, it is essential that we focus on the right priorities to save both lives and livelihoods.”
The MD of the IMF and the DG of WHO are in a privileged position to fully understand the economic and health dynamics of the pandemic. The IMF exists to protect the health of the world economy , to advise on economic priorities, and to provide financing to countries while the WHO protects the health of people and is well-placed to advise on health priorities. Tellingly, they represent the two sides of the Covid- 19 coin. Economy and health.
The trade-off side contends that as the world responds to Covid-19, economic activity is in sharp decline as measures to contain the virus shut human interactions, affect workers , firms and supply chains and lower spending. And these have spillover effects . The mutually interdependent side submit that getting the coronavirus under control is absolutely essential to saving the economy. And that policymakers do not have to make a choice between public safety and reviving the economy.
3. What do the available evidence show on this trade off across countries ?
The answer lies in assessing the health and economic impacts of the pandemic in different countries. If there were a trade off between lives and livelihoods, we would expect the following outcomes from policy actions.
- Countries that suffer most from an economic decline would have lower deaths ;
- Countries that have lower economic disruption would have higher deaths.
Up to now, in comparing the Covid-19 death rate with available GDP data, it appears the opposite is happening. Countries that have managed to protect their population’s health have generally also safeguarded their economy. While many that have tried to protect the economy have had the worse of both worlds with high death rates and sharp GDP decline.
The chart below shows the cumulative number of confirmed Covid-19 deaths per million people on the horizontal axis and the fall in GDP on the vertical axis.
There are some key findings from the quadrants .
- The top left represents countries with low deaths ( less than 250 per million) and low economic stagnation ( less than 10 % fall in output and in some cases less than 5 % while in China far lower) . This is the best scenario with both lives and livelihoods being saved. China, Vietnam and South Korea have done very well on both metrics. Finland, Denmark and Japan have also fared well with relatively few deaths and minimal economic contraction;
- The bottom right shows countries with high deaths and huge economic hit. This is the worst of both worlds with significant losses of lives and sharp GDP decrease . Belgium has an extremely high Covid-19 death rate even though it implemented a strict lockdown. And a substantial output loss too. Italy and Spain had even harsher lockdowns and both are also among the most devastated by the virus and with significant GDP decline. The UK has experienced severe economic losses combined with high death rates. Mexico, Argentina and Columbia have not performed well on both indicators;
- The bottom left indicates countries with fewer deaths and high economic disruption. This is the case for India. One could place Mauritius in that category with only 10 deaths and a significant GDP decline of about 33 % in the second quarter ;
- The top right shows countries with high deaths ( more than 500 per million) and a small economic hit, which is supposed to be the Trump option . It is not obvious that we could include the US in that category as both metrics are relatively high. Sweden, which opted for a very mild shutdown, now has a high mortality rate per capita and its deaths are at least 5 times those of Norway, Denmark and Finland which have chosen a different confinement strategy.
Is the trade off between lives and livelihoods a false dilemma ?
4. Do findings contradict intuition ?
Contrary to the idea of a trade-off, countries which suffered the most severe economic downturns such as Belgium, Spain, the UK and Peru are generally among those with the highest Covid-19 death rate. And the reverse is also true as countries where the economic impact has been modest such as South Korea, Taiwan, Finland, and Lithuania have also managed to keep death rates low. Even within Europe there is a major difference between Germany that has fared relatively well with better health preparedness that France, Spain, UK and Italy. Also countries with similar falls in GDP have witnessed very different death rates. Sweden and Denmark saw economic contractions of around 10 %, but the death rates are markedly different as Sweden has recorded 5 times more deaths per million than its neighbour.
Of course, lockdowns have been devastating for economic activities and people’s livelihoods. However it appears that countries that imposed early lockdowns and introduced effective test, track, trace and isolate systems and provided massive medical support were able to come out of those lockdowns earlier and thus start to revive the economy.
The best example is China where Covid-19 first started. A very strict lockdown was imposed in Wuhan to isolate the disease from the rest of country. By April that lockdown was lifted , combined with aggressive contact testing, tracing and isolation measures and quarantine, ready hospitals for Covid-19 patients and community cooperation on social distancing. And China was able to rekindle its economy quickly. While its economy is now growing again, the major western countries are still struggling very hard to recover amid a second wave of infections and are waiting eagerly for a safe, trusted and widely available vaccine or therapy to provide the effective response to deal with the virus.
5. Is evidence conclusive or is the jury still out ?
Countries in East and Southeast Asia, Oceania and parts of Northern and Eastern Europe have done better than most western OECD countries. Southeast Asia has successfully learnt the experience from endemic diseases and previous virus outbreaks such as the Asian flu and SARS. While countries like China, Vietnam, Thailand, Taiwan, Malaysia and South Korea have very different characteristics, challenges and resources, they have all managed the pandemic well. They have saved lives AND contained the damaging economic impact. Those that have not well prepared their health systems, have failed to test and trace properly and have vacillated over lockdowns in order to ‘save the economy’ have ended up with more deaths and more destruction to their economies.
6. Are there policy lessons ?
The full effects of the pandemic are yet to be seen as we are in the middle of the second wave. We may have to wait for more data and analysis to ascertain whether the trade off is indeed a wrong assumption. However a preliminary examination of GDP statistics fails to support the idea that the consequences of economic meltdown could be more deadly than the disease. Rather the relationship between the health and economic impacts seems to go in the opposite direction. As well as saving lives, countries controlling the outbreak effectively may have adopted the best economic strategy too in the medium and long term. Containment including lockdowns can save lives and control the disease, thus enabling the economy to recover and people to get their livelihoods back. Furthermore, countries which acted more promptly saved substantially more lives than those that delayed.
Two metrics tell it all.
The US with around 4.25 % of the world population accounts for a staggering 20 % of global Covid-19 deaths. And its GDP was down by 32.9 % in the second quarter, representing the largest quarterly drop since the Great Depression of the 30’s. The US has failed to heed the advice of scientists to establish an effective testing, tracing, and isolating protocol . There was also no clear policy on social distancing, mask wearing and large gatherings.
China has 18 % of the global population and a very tiny 0.38 % of total Covid deaths. And its GDP grew by 3.2 % in the second quarter.
The evidence so far appears to give credence to the position advocated by the MD of the IMF and the DG of the WHO. That the trade off between lives and livelihoods seems to be a ‘false dilemma’ as health and the economy are mutually independent.
Could this be a call to avoid short sightedness and myopic policy making ?
Dr Rama Sithanen