• Marco Annunziata

Coronavirus: A Targeted Strategy To Save Lives And Jobs

After weeks of economic shutdowns, the health cost of covid-19 seems to have slowed, but the economic cost has accelerated dramatically. In the US, some 22 million people have lost their jobs in the past four weeks—with the impact falling disproportionately on lower-skill workers.

This has opened the way for a more pragmatic debate on when and how to reopen the economy. The White House issued well thought out guidelines to US states last Thursday. In Europe, countries such as Spain, Germany, Austria, Denmark and the Czech Republic have taken or announced the first steps.

Until recently, anybody broaching the topic was branded as irresponsible, so this is progress. But the debate still suffers from a lot of confusion and misconceptions. Here I want to highlight what I see as the key considerations and hard trade-offs we face.

1. Shutdowns do not eliminate the threat of the virus. Enforcing extreme social distancing and shutting down large parts of the economy was the fastest way to bring contagion under control. As an emergency measure it made some sense—though not every country resorted to it. But it implies that very few people get exposed to the virus and we do not get any closer to herd immunity. Hence the virus remains a threat until we have developed a vaccine—which most experts say will take at least 18 months.

2. The economic and human costs of shutdowns will rise in a non-linear way… We all know the virus strikes in an exponential way: new cases and fatalities rise slowly at first and then surge. But so will the adverse impact of the shutdown. For the time being, there are few bankruptcies and most layoffs are temporary, as businesses hope to reopen and rehire their workers. Emergency measures like cash assistance to households and credit to businesses keep the economy alive. But if the shutdown lasts much longer, more businesses will throw in the towel, fueling a rise in bankruptcies and long-term unemployment; the ensuing destruction of human and physical capital will make it a lot harder for the economy to recover.

3. …and they include massive health and human costs. The health and human damage of the shutdown might be harder to detect at this stage, but is just as important. New York City has already recorded a surge in deaths from cardiac arrest, according to The Economist, probably because people are more reluctant to go to a hospital at an earlier stage of symptoms. All elective medical procedures have been suspended, but something that is elective today will become urgent and possibly critical tomorrow—this sudden halt to preventive care will have consequences. Finally, rising unemployment and falling incomes will result in more suicides, domestic violence, drug addiction and mental health issues.

4. We need more targeted interventions because health risks are unevenly distributed... Everyone can catch the virus; but the risk of hospitalization and death is much higher for people who are older and / or are immunocompromised or have comorbidities like heart disease or hypertension. A recent study of five European countries finds that about half of all coronavirus deaths happened in care homes. This extraordinary number implies that we could have avoided a large share of the fatalities using measures targeted to protect the elderly, rather than across-the-board stay-at-home orders. We must be able to keep those most vulnerable safe with more targeted interventions than indiscriminate extreme social distancing: we can encourage more vulnerable people to maintain social distancing for longer, for example, and “seniors only” opening hours for grocery and other retail stores should be kept in place; and everyone in retirement homes should be tested, including workers and visitors.

5. …and the economic risks are also unevenly distributed. The economic cost of the shutdown is falling disproportionately on lower-skill workers with limited savings—something that seems easy to forget for those who debate the issue in the media and in expert circles and can still draw a paycheck while working from home. A gradual reopening of the economy will provide the most durable help to those at highest economic risk.

6. If the coronavirus follows the flu’s seasonality, we must take advantage of it. Medical experts cannot yet guarantee that covid-19 contagion will decrease substantially as the weather gets warmer. But if it does, we should be ready to exploit with a faster relaxation of social distancing to accelerate economic growth while we bolster the response capacity of the health care system.

7. There is no zero-risk solution—and limited information does not justify permanent unlimited caution. There is still a lot we do not understand about the coronavirus. Extreme social distancing reduces contagion—it has also driven flu cases to record lows. But the correlation is not as clear as we would like. Sweden has been criticized for not locking down, but it has fared better than many countries that have. In Italy, an early exodus of people from the northern region of Lombardy (the most heavily affected) a day before the lockdown has not caused surging contagion in the south.

8. We have to accelerate efforts on biomedical research. As Andrew von Eschenbach and I argued last week in a Statnews First Opinion piece, biomedical research has made tremendous progress in recent years; this is the time to double down on our efforts and investments in the field, because the potential payoff is enormous—the faster development of therapies and vaccines not just for Covid-19, but for the next viral threats that sooner or later will follow.

Economic shutdowns are not a sustainable strategy: the human and economic costs will become exorbitant well before a vaccine is ready. They are not the most effective strategy to minimize the death toll: focusing efforts on protecting the most vulnerable would have saved thousands of lives.

We need to transition to a more targeted response that trades off the health risks of covid-19 against the health and human costs of a deep prolonged recession. We need to take calculated risks, allowing those who are less vulnerable to covid-19 to resume working while safeguarding those at higher risk. This will allow us to avoid an economic catastrophe, gather more information on the virus through continued testing (including on antibody) and build a higher level of immunity in the population while we bolster the capacity of health care systems and accelerate research on therapy and vaccines.


@ 2018 Annunziata + Desai Advisors, LLC