Options for the slow road back

When and how to start loosening anti-virus controls is a vexed question in countries around the world, writes Rod Oram

Fighting Covid-19 remains the absolute priority for governments and citizens. But pressure is building to allow more social movement and economic activity along the way.

Once again China is the trail-blazer. Wuhan, the megalopolis where the virus first surfaced late last year, ended its 11-week lockdown on Wednesday. It and its province, Hubei, have begun the journey back to some degree of normality. But they have a long way to go, socially and economically, as the New York Times reported recently.

Moreover, Wuhan still has some restrictions designed to stop a resurgence of the virus. For example, schools are still closed and people are still urged to stay at home. Anyway, for all the important lessons China offers, very few countries would dare to be as draconian as it.

Some European countries offer us more useful examples. France, Spain, Belgium and Finland have established expert committees to advise their governments on a gradual reduction of restrictions.

Hopefully such work is underway in Wellington. However, our Government must make that far more explicit and open. That way would capture the best ideas and give people a strong incentive to stick with the lockdown as long as it’s needed to contain the virus.

Austria, Denmark and Norway have gone further. They have announced in recent days their timetables for allowing their first few easings of rules. Notably, they are modest and spread over many weeks. While they would enable some increase in economic activity, they are in no way economic recovery strategies.

After Easter, Denmark, for example, will open kindergartens and primary schools for the first time in a month; and the government will start talks with business leaders on gradually moving employees back into workplaces.

So far, they are coming to some diametrically opposed conclusions, such as opening schools or keeping them closed.

Austria will allow small shops to reopen from April 14, as well as large DIY stores and garden centres. From May 1, other businesses seen as slightly higher risk, such as hair salons, will be allowed to resume. The government says restaurants and cafes might begin operating in mid-May but no public events will be allowed until July. It has not set a date for schools to reopen; and it has made the wearing of face masks mandatory in shops and on public transport.

It’s far from clear, though, how these governments are making such decisions. No doubt epidemiology and health experts are advising them on how the virus spreads and how effective various counter measures are. Those factors must remain paramount.

But how they work out which restrictions to ease within those constraints to give the greatest social and economic benefits requires far more complex decision-making. So far, they are coming to some diametrically opposed conclusions, such as opening schools or keeping them closed.

A few suggestions of how they can make better decisions are emerging from think-tanks, academics and consultants in various countries. For example, the American Enterprise Institute has produced a paper entitled "National Coronavirus Response: a road map to reopening". It suggests four phases: Slow the Spread; Reopen State by State; Establish Protection Then Lift All Restrictions; and Rebuild Our Readiness for the Next Pandemic.

But the paper focuses almost entirely on epidemic and health issues rather than economic ones. This is surprising, given the Institute is a bastion of neoliberal economics. Maybe it’s working on a companion piece to promote its pre-occupation with unfettered enterprise.

Meanwhile IFO, an economic think-tank based in Munich, has produced a paper entitled "Making the Fight Against the Coronavirus Pandemic Sustainable".

It proposes a “risk-adjusted” strategy whereby some age groups, regions and social and business functions can resume activity before others. Schools could resume given children are less susceptible to the virus yet the burden of their closure falls on working parents. Conversely, older people and other high-risk groups should remain in isolation for some months. Similarly, highly automated factories could resume but nightclubs would be the last businesses to reopen. In between, for example, hotels and restaurants could reopen in a “carefully and controlled” way.

From the UK comes a paper by Gerard Lyons and Paul Ormerod, two economists, entitled "The traffic-light route to ending the economic lockdown".

The red phase would mean, for example, tight restrictions on shops, such as enforcing social distancing, to allow more categories of them to open; domestic travel would be discouraged and international flights remain banned.

In the amber phase, for example, unlimited private car travel would be allowed; people using public transport would have to wear masks and disposable gloves; and restaurants could reopen if they had strict social distancing.

Only in the green phase would church, sporting, large scale events and other mass gatherings resume.

From the Brookings Institute in Washington comes a paper proposing ways cities can build up their viral resistance and restore their economies such as: pandemic-proofing airports, convention centres, stadiums, theatres and other places people gather by, for example, requiring face masks and temperature checks; embracing tele-working; ensuring Main Street survives; focusing on leading industries and economic clusters; and protecting the arts and the creative economy.

The last example of the five is the only one that offers a way to evaluate the complex health and economic factors underpinning decisions to ease restrictions. It comes from Castalia, an economic consultancy with staff in New Zealand, Australia, the US, France and Colombia. Its paper lays out a framework to make decisions about relaxing restrictions that balance “the risk of further outbreaks against social and economic costs.”

First, it identifies the main interventions for reducing transmission of the virus, estimates from scientific literature the effectiveness of each, and groups them under five categories: Detection and isolation; Promotion of personal and public hygiene; Travel restrictions; Restrictions on gatherings; and Forced closures. Next, it estimates the economic cost of each intervention, and groups them in the same categories.

The chart below shows the top five interventions are among the more cost effective. Applying all 18 interventions would dramatically reduce transmission of the virus but some of them come at a high economic cost.

Castalia stresses, though: “To properly apply the framework, we need to gather and assess information on the economic costs of the various interventions. Additional, more in-depth analysis is required before applying the framework to ease any restrictions.”

Meanwhile, it suggests some possible easings of restrictions that would have a relatively small negative impact on the effectiveness of the suite of interventions but generate a larger positive impact on the economy. Its prime candidate is the relaxing of domestic travel restrictions, as the chart below shows.

In essence, this approach is a top down one across the economy. In my column last week, I argued for a bottom up one that would allow workplaces to reopen if they could show they had reorganised themselves to comply with strict anti-virus measures required under Level 4 of our national alert system. As we progress in our fight against the virus and the government moves us down to Level 3, more workplaces would be able to comply with the requirements under it.

Clearly, though, we need top down and bottom up strategies, and rigorous, systematic ways to design and apply them, while ensuring eradicating the virus remains our paramount objective.

Economic analysis is a useful guide. But not as we’ve practised it in recent decades. We have let it dominate our decisions.

Just as we all need to learn new and better ways of doing things, so do economists. They have to fully incorporate in to their work the social, cultural, environmental, equity, fairness and other bedrock values that shape our lives. If economic “rationality” suppresses them again, our recovery will be more perilous and fragile than our world was pre-Covid-19.

Go hard, go early was the only way to start.

But go carefully, go slowly is the only way to finish.

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