• Marco Annunziata

Long Covid: The Macro Version



You’ve heard about “long Covid”: people who suffer for months from fatigue, headaches and “brain fog”. This blog talks about a similar phenomenon: the long-lived effects this pandemic will have on our economy and politics; they include a generalized “brain fog”, together with PTSD-induced risk aversion similar to the post-Great Financial Crisis period. Some are positive, most are negative. Below I discuss the 10 symptoms of this “macro long Covid”.


Positive:


1. An innovation renaissance. The pandemic spurred manufacturing companies to accelerate the adoption of digital innovations, to cope with supply chain disruptions and achieve desperately needed efficiency gains. Digital-industrial innovations are scaling more rapidly and starting to deliver on their promise of faster productivity and growth (more details here and here).


2. More flexible work arrangements (for some). “Work From Home” (WFH) worked well for some companies, less for others. Some are now calling everyone back to the office, others continue with WFH. As we keep seeking the right balance, a significant number of workers will enjoy more flexible work arrangements – though for now this benefits mostly high-skill, high-wage workers.


3. More geographically balanced economic growth. As companies adopted flexible work arrangements, people started rethinking where to live and interesting job opportunities are becoming more widely dispersed: tech startups flourish outside Silicon Valley, financial firms move from New York to Florida. Helped by new technologies in communication and manufacturing, this can spread growth and job opportunities more evenly across the country, as former AOL CEO Steve Case argued recently.


Negative:


4. PTSD-induced risk-aversion, similar to post-Global Financial Crisis. For years after the GFC, the media kept predicting new impending recessions or crises; business leaders were on edge and afraid to invest; workers and consumers felt financially insecure. I expect something similar this time around. The media jump on every new virus variant, because it fits their business model: more fear, more clicks. Policymakers will remain trigger-happy, ready to impose new arbitrary restrictions at the first signs of danger. Individuals and businesses will have to factor in a higher risk that from one day to the next they might be forced to shut their operations, prevented from going to work or on vacation. Higher risk-aversion can hold back investment, career risk-taking and consumption, so we need to see how this plays out after the initial economic rebound.


5. Recurrent imposition of arbitrary restrictions. It is happening again. The CDC has just recommended everyone wear masks indoors in areas with high infection rates, whether vaccinated or not. There is no scientific evidence that masks help slow the spread; we have strong scientific evidence that vaccines work; available data indicate only about 0.01% of fully vaccinated Americans have contracted Covid. Still the CDC wants everyone to mask up again; some local authorities want masks outdoors as well. The reimposition of restrictions on activity can’t be ruled out. And since the virus will keep evolving, it’s not clear if this will ever end.


6. Damage to kids’ learning and mental health. This, in my view, is the most serious and underestimated long-term consequence. UNICEF has called out the damage school closures have been causing to kids. Learning from home does not work, especially for low-income children. Scientific evidence has long shown children are at very low risk from the virus. Yet in the UK hundreds of thousands of kids have been forced to self-isolate and miss school this summer; in the US the CDC wants K-12 children to wear masks when schools reopen – in line with teacher unions desires, and against medical evidence that masks can become “a breeding ground for bacteria”. Academic studies show that lower education outcomes lead to lower lifetime earnings and worse health. These children will have worse careers, lower living standards and less healthy lives; the longer we impose these restrictions, the bigger the problem.


7. Greater distrust of science. On most Covid-related issues, the experts have changed their minds with embarrassing frequency. This recent blog post documents how the CDC and experts like Dr. Fauci have repeatedly reversed their position (most recently on whether vaccinated people need to wear masks). As new data come in, our understanding of the situation can change. But every time, health authorities and politicians portray their mandates as undisputable truths based on The Science and Data. They appeal to science, but they impose it like a religion – hence the recurring profession of faith “I believe in Science”. Traditional religions have employed this tactic to good effect, but they know it’s best to keep your Truths unchanged over time and to make them untestable. If the Truth keeps changing or goes manifestly against the evidence, sooner or later people stop believing. We have lamented the declining trust in the experts – but experts who act like politicians and snake-oil peddlers cannot be trusted. True science becomes collateral damage.


8. The disinformation age. Trust in the media and information has been broken. Beyond their click-bait survival instinct, media organizations have become propaganda machines. Their political preference dictates not just the tone of their editorials, but what news they publish or ignore and how they twist their stories. This predated Covid and goes beyond it. Google’s algorithms bury stories that go against officially accepted views (try searching for “bacteria in kids’ masks” with Google and then with DuckDuckGo). Facebook will now collaborate with the US government to stop Covid misinformation, which will be amusing since the CDC recommendations on masks and vaccines of early July became misinformation by late July. The same problem plagues reporting on crime, immigration, terrorism and more. This leads people to distrust information and stick to what they already believe.


9. Greater political polarization. With people scared by the pandemic, the media fanned panic, experts presented their theories as unquestionable truths and politicians used them to impose life-changing restrictions. Inevitably, the population split into believers and non-believers. And as traditional and social media censor every voice that deviates from the official orthodoxy of the day, the two sides can’t have a rational debate. The result is deepening polarization.


10. Debt and monetary overhang. The economic policy response to the pandemic has been massive; governments keep spending and central banks keep printing money. Loose monetary policy boosts financial stability risks; higher public debts will at best constrain governments’ ability to react to future crisis, at worst become a source of financial instability. Additional risks to long-term economic performance come from the widening range of government interventions and controls even in market economies.


It’s taking longer than we hoped to get the Covid-19 pandemic behind us. Its longer-term effects will also be deeper and longer than we think.

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