How the Economy Restarts

It’s not going to happen soon or fast, but maybe the process begins by June.


Sadly, any serious article about restarting the economy has to begin by brushing aside the misinformation coming from the White House.

Disclaimers. The economy cannot be restarted safely any time soon.

It won’t happen on Easter (as the President was envisioning Tuesday, but has since backed off of). We won’t even reach the peak daily death total by Easter (as he predicted yesterday). If we’re lucky, we might see the daily new-cases totals peak by then, but deaths trail diagnoses by at least a week. (Italy’s new-cases peak was March 21. Deaths might or might not be peaking now.)

Public health experts agree that certain conditions and capabilities need to be in place before it will be safe to relax social distancing practices, open non-essential businesses, or allow people to start congregating. Those conditions and capabilities aren’t in place now and won’t be for at least several weeks, and probably longer. Trump’s notion that the country will be “well on our way to recovery” by June 1 seems wildly optimistic.

The talking point that shutting down the economy to stop the virus is “worse than the problem itself” (which Trump tweeted a week ago yesterday) is nonsense. COVID-19, unchecked, could kill millions of Americans (which Trump finally admitted yesterday: “Think of the number: 2.2 million people, potentially, if we did nothing.”) The idea that the economy might putter along normally while people are dying in those numbers is just absurd. (I think of this as the Masque of the Red Death theory.)

The supporting talking point that “You are going to lose a number of people to the flu [i.e., coronavirus], but you are going to lose more people by putting a country into a massive recession or depression” is likewise nonsense. Not only won’t a depression kill millions of Americans, the effect usually goes the other way: Lower economic activity means fewer overall deaths, mostly because traffic deaths and heart attacks go down.

We find that in areas where the unemployment rate is growing faster, mortality rates decline faster. So during the Great Recession in the U.S., we saw increases in the unemployment rate of about 4-5 percentage points, so that translates to about 50,000 to 60,000 fewer deaths per year

Smithsonian magazine looked further back and found that “The Great Depression had little effect on death rates.”

Prerequisites. OK, now that the decks have been cleared of some widely distributed bad information, we can start talking sensibly about how the economy restarts

Let’s start with the prerequisite conditions. Dr. Thomas Inglesby of Johns Hopkins listed five:

  • The number of new cases starts going down over time.
  • The health system can quickly and reliably test people who may have been exposed to the virus, even if their symptoms are minor or non-existent.
  • Caretakers have a sufficient supply of masks and other protective equipment.
  • Hospitals have sufficient resources: ventilators, ICU beds, etc.
  • Systems are in place to trace the contacts of any new cases.

These five conditions are consistent with what Anthony Fauci and other public-health experts have been saying. Together, they paint a picture of a South-Korea-like containment: The virus hasn’t been eliminated, but the public health system has identified and isolated almost everyone in a region who is infected. As new outbreaks happen, they can be quickly found and traced, so that the newly infected can also be identified and isolated. Moreover, public health workers have the means to protect themselves, so that a new virus outbreak won’t break the system.

It should be obvious that those conditions don’t exist now. Even in New Rochelle and Seattle, early hotspots that took early action, the optimistic story is that the rate of increase in cases is down, not that the number of cases has actually peaked. (The curve is being bent sideways rather than bent down.) Some parts of the country, particularly rural areas, have not seen large numbers of cases yet. But their numbers are increasing and none of them have the virus contained in the way the experts envision. Tests are not as rare as they were a week or two ago, but the number needed has grown to stay ahead of the number provided, so they still are not plentiful. Better and quicker tests have been developed, but are still not widely available.

Perhaps the best evidence that ventilators and masks are scarce is that Trump has stopped denying it and started finding other people to blame for it.

It’s worth pointing out what’s not on this list: a vaccine or a magic anti-viral treatment that changes the whole nature of the struggle. Such advances will happen eventually, but almost certainly not in the next few months, and maybe not for a year or more.

First steps. So it’s not happening tomorrow or next week, but you don’t have to wear rose-colored glasses to imagine a time when the prerequisites have been fulfilled. No matter how bad the pandemic gets, the number of cases has to peak eventually. Tests exist and are being manufactured in ever larger numbers. Ditto for hospital equipment. Infection-tracking systems work in other countries and could work here.

So it’s anybody’s guess how long it will take to get there, but we will get there. And what happens then?

Ezekiel Emmanuel envisions how a restarting process might go. He pictures a nationwide shelter-in-place policy lasting until about June (except in places — are there any? — with so few cases that public-health officials can already track them all), during which he imagines achieving more-or-less the same things Dr. Inglesby described:

State and local health departments then need to deploy thousands of teams to trace contacts of all new Covid-19 cases using cellphone data, social media data, and data from thermometer tests and the like. We also need to get infected people to inform their own contacts. It would be easier to lift the national quarantine if we isolate new cases, find and test all their contacts, and isolate any of them who may be infected.

The national quarantine would give hospitals time to stock up on supplies and equipment, find more beds and room to treat people, get better organized and give clinical staff a respite to recuperate for the next onslaught of Covid-19 care. Without these measures, any Covid-19 resurgence would be far harsher, and economically damaging.

Whether all that happens by June or not is debatable. But even with those capabilities in place, the restart happens gradually. Nobody flips a switch or makes an all-clear announcement.

The first people Emmanuel would send back to work are those who have recovered from the virus and provably have anti-bodies to resist reinfection. And even they would need some rigorous training in safe working procedures: frequent hand-washing, avoiding unnecessary contact with others, etc.

Next, low-risk parts of the population could be allowed to congregate, while higher-risk people continue to shelter in place: Colleges might be allowed to hold in-person summer sessions. Summer school, camp, and daycare for K-12 children could be attempted — with ubiquitous testing to spot any viral resurgence.

If that works — it might not, and then retreats would have to happen — public venues could slowly start returning to almost-normal: Offices, libraries and museums, and bars and restaurants could re-open, but with reduced occupancy limits. (I heard a Starbucks executive interviewed on CNBC. He described the gradual reopening of Starbucks outlets in China: First take-out only, then dine-in with one person per table, then dine-in with at most two people per table.)

This is hardly a let-it-rip vision, and I think that it ultimately relies on some kind of treatment or vaccine developing: The economy isn’t completely closed down, but limps along for a year or so until medical developments rescue it.

Herd immunity. Thomas Friedman has tried to popularize a more ambitious opening envisioned by David Katz, who IMO gives way too much credence to the economic-contraction-will-cost-lives theory. The argument here is to focus on protecting the vulnerable (mainly the elderly), while letting the less-vulnerable behave more-or-less normally.

Even here, though, the same ideas show up: A period of lockdown, during which ubiquitous testing and research give us a much better idea of who has the virus, how it spreads, and who the vulnerable really are. (Some young people are dying too.) There is, I think, too much optimism about how quickly this period could be brought to a close. (Katz proposed two weeks, which is already about to expire without the kind of testing availability his plan needs.)

Once the vulnerable are sequestered — how you keep vulnerable parents away from their virus-exposed children and grandchildren is never specified — the virus spreads more-or-less harmlessly among the rest of the population, resulting in ever more recoveries with corresponding immunity. (We’re not totally positive immunity happens or how long it lasts, but it’s a reasonable theory.) The ultimate result is a general population with enough herd immunity that the virus no longer spreads like wildfire. As time goes by, then, more and more of the vulnerable can return to society.

Science Alert’s Gideon Meyerowitz-Katz dissents on this view: Herd immunity requires something like 90% of the population to be immune, and 20% of COVID-19 infections are serious enough to require hospitalization. So if you picture even the minimal overlap, about 10% of the population winds up being hospitalized. That will break the health-care system, even if it manages to save almost everybody — which it probably won’t.

So again, I think some kind of treatment or vaccine has to appear before the economy gets back to hitting on all cylinders.

Summing up. In every re-opening vision I’ve seen, conditions more-or-less like Dr. Inglesby’s have to be met first, and it’s hard to picture that happening much before June. By then, the $1,200 checks the government is sending out will have been used up long ago, so another trillion or two or three will have to be spent, both to keep people eating and to supply the public-health system with what it needs to get through the crisis.

And there’s not going to be an everybody-come-out-now announcement. Re-opening will happen slowly, and probably in fits and starts. Some things will reopen too quickly, start a new outbreak, and have to close again. Some new habits will have to continue for a long time, and maybe we will never go back to washing (or not washing) our hands the way we used to. Cubicle-farm offices may never reopen with the same density. Business travel may never recover. Working from home may become permanent for many jobs, or working-from-home augmented by rare trips to the home office.

When will we be able to pack into stadiums again? Or elbow-fight for armrest-space in theaters? That will probably have to wait for a vaccine, which is at least a year away.

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Comments

  • Anonymous  On March 30, 2020 at 12:03 pm

    I heard an interesting interview with the author of a book about the Spanish flu. There were apparently three waves of flu, several months apart, because people started “going back to normal” too quickly and they started a new wave of infections.

  • George Washington, Jr.  On March 30, 2020 at 12:15 pm

    Here’s a great article by Ed Yong in The Atlantic that describes several possible scenarios of how the pandemic ends.

    https://www.theatlantic.com/health/archive/2020/03/how-will-coronavirus-end/608719/

  • Nat Kuhn  On March 30, 2020 at 12:21 pm

    Thanks, Doug, great as always! People are not really talking about the importance of in-country travel restrictions so that resurgences in one area don’t quickly escape to others. IMO that will be a key part of recovery. Also: some more permanent changes may be good: more people working from home, or from workspaces near home, means less commuting, less congestion, and less carbon in the atmosphere. More telemedicine means less time in the doctor’s waiting room, etc. And dare we hope for some new-found appreciation of the reality that we are in this together (both within the US and internationally), that our biggest problems transcend national boundaries, that government is necessary and while we may disagree about the scope of its role, it is not inherently evil.

  • John W. F. Mcclain  On March 30, 2020 at 12:36 pm

    The whole notion the very first thing you would bring back is packed Easter Sunday services seemed especially bizarre. Should be obvious to anyone with a bit of sense you want a slow ramp (probably with a characteristic time of two plus weeks….)

  • John W. F. Mcclain  On March 30, 2020 at 12:36 pm

    The whole notion the very first thing you would bring back is packed Easter Sunday services seemed especially bizarre. Should be obvious to anyone with a bit of sense you want a slow ramp (probably with a characteristic time of two plus weeks….)

  • mfidelman  On March 30, 2020 at 2:15 pm

    This is just the right time to start thinking about restarting the economy with a Green New Deal. As we come out of our cocoons in a few weeks, or months, let’s NOT go back to (the new) normal – let’s rebuild the world we need now, in these early years of the third millennium of the common era.

    And… if you want to start thinking and talking about it, maybe start here: https://www.facebook.com/BurningWorldFestival/

    • frankackerman0617  On April 1, 2020 at 11:05 am

      This position is being mentioned around the blog and media sphere. I disagree. For me, mfidelman is suggesting that progressive use this devastating and heart wrenching catastrophe to advance their own political agenda. For me, their position puts them in the same boat morally as the Republican Senators who quashed attempts to include the USPS in the last bailout bill in order to further their agenda to privatize mail service.

      The results of the next national election hinge on roughly 20% of voters who are not intractably committed to Trump or anti-Trump. I don’t believe this cohort can be moved to vote against Trump using the despicable tactics that cement the Trumpsters.

      • mfidelman  On April 1, 2020 at 12:27 pm

        I prefer to think of it this way (excerpts from https://www.edie.net/library/-Normal-was-a-crisis—Why-the-Green-New-Deal-offers-hope-to-the-post-Covid-19-economy/6971?fbclid=IwAR0GGY1S20Pub7ZsBCX0Q5mgRCI4dgw1ByJZr0kCPxIQPoKrxSbN99CeMMA)

        American economist Milton Friedman once famously said: “Only a crisis – actual or perceived – produces real change…That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

        As such, seeking to return to economic normality poses risks for efforts to combat the climate crisis and reduce wildlife destruction.

        “There’s a lot of talk about returning to normal,“ author Naomi Klein said, when questioned by Greta Thunberg during a Fridays for Future online webinar last week.

        “Normal was a crisis. Normal was Australia on fire just a couple of months ago, the Amazon of fire just before that; normal was a third mass bleaching of the Great Barrier Reef…It’s why our bodies aren’t equipped to fight this crisis. It is hospitals being systematically squeezed by the politics of austerity. Normal is a crisis. It doesn’t allow us a safe future.

        “We are ready to reimagine what sectors need so that we are not so crisis-prone.”

  • frankackerman0617  On April 1, 2020 at 1:10 pm

    Yes, the prerequisites conditions for restarting the world economy are generally agreed on, but the social, political, and economic conditions that will prevail when these conditions are meet are murky, and probably more ominous than is general being imagined.

    From the NYT, 4/1/20, Why the Global Recession Could Last a Long Time, by Peter Goodman (https://www.nytimes.com/2020/04/01/business/economy/coronavirus-recession.html?action=click&module=Spotlight&pgtype=Homepage ):

    – “fears are growing that the downturn could be far more punishing and long lasting than initially feared”

    – “what was normal before may not be anymore”

    – “risk of triggering a financial crisis for cataclysmic proportions”

    While it’s still too early to get much clarity about a post-COVID-19 world, it’s not too early for the world’s intelligentsia (e.g., this blog and its commentators) to begin to advocate for starting to address probable post COVID-19 social and political conditions.

  • Eric Chetwynd  On April 1, 2020 at 10:59 pm

    Heard a distinguished economist talk about what is needed to re-start the economy. Three things. Households have to have resources. Businesses have to be in place (we can’t lose them during this crisis), and the financial system has to be flush with money for re-start loans. Seems to me the government, working with states and the private sector, can make all that happen. But, of course, first we have to whip this disease.

  • frankackerman0617  On April 3, 2020 at 6:20 pm

    Dozens of hospitals all over the country in desperate NOW need of life-saving supplies and equipment, but possible and unknown suppliers spread around the globe. No central authority. A powerful member of the Presidents inner team claiming that meager and outdated government stockpiles belong to them, not the country. Who could ever imagine that into this chaos would step profiteers and con artists? Really! Who could ever imagine such a situation?

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