Randy Tuaño
IN the past few weeks, there have been a public debate on whether the quarantine restrictions in the Metro Manila and the surrounding regions, while good for keeping the number of Covid infections and deaths down, have restricted economic activity and worsened the downturn in income growth and therefore adversely affected employment and household welfare.
The decision to lift last Wednesday the modified extended community quarantine imposed in Metro Manila has been regarded as a means of “reviving a battered economy” or “to restart a plunging economy” or “boost a tanking economy.” At the same time, the decision to impose additional health and safety protocols in urban areas have been said to result in “grimmer economic prospects” or even “triggering an economic crisis.”
What many people, including those in government, do not clearly understand is that controlling the pandemic is key to sustainable economic growth. While undertaking lockdowns and reducing the contact people have with others in public spaces, including restaurants, shops, offices and sporting and entertainment events may reduce the spread of the pandemic, the consequent changes in economic and social life are ultimately inefficient, as those isolated are not only the infected but also everyone in general. This increases joblessness and lack of work, the loss of income, and other attendant social issues. At the same time, lifting lockdowns without vigorously strengthening public health institutions only allows the pandemic to return with full force. Therefore, the most viable choice for countries would be to strengthen the capacity of health and social institutions to arrest the spread of the pandemic, so that business activity can reach as close to the pre-pandemic period as possible.
The 2020 Sustainable Development Report, published by the Sustainable Development Solutions Network, a global organization of universities and research institutions, shows that countries with poor leadership, which generally are led by populist or dictatorial governments and would likely dismiss scientific evidence and therefore respond weakly to the health crisis, tend to do poorly also in terms of economic outcomes. Their failure to effectively respond to the crisis sets back the medium and longer-term revival of tourism, and business and trade activities.
The Report also provides a novel way to measure the extent of control of the Covid-19 pandemic across developed countries using mainly three indicators—mortality rate (as measured by the number of Covid-related deaths per million), effective reproduction rate (defined as the average number of infections that an infected person transmits to susceptible individuals) and another measure called the “epidemic control efficiency,” which compares the reduction in the number of new infections with the average number of contacts that a person has.
Epidemic control measures, the last variable, is assumed to be more “efficient” if the reduction in infections is due to the lower rate of probability of contact made by an infectious person and also is due to the decline in the number of days that an infectious person is circulating in the community. In effect this is saying that epidemic control measures such as improved personal hygiene and early isolation or quarantine in public facilities that can be undertaken through contact tracing and others are better, compared to implementing widespread lockdowns, as the former has less adverse effects on the movement of people and therefore on economic activity.
Using data from the Organization of Economic Cooperation and Development (OECD), a grouping of the most developed economies around the world, and from other sources, the range of the Report’s “Covid Index” can be as high from 0.90 (in South Korea) to as low as 0.39 (in Spain). Unfortunately, only data on the stated indicators are available for advanced countries. South Korea ranks highly due to its high-quality public health system, the quick response of Korean biotechnology firms to produce effective tests and the ability of government and the private sector to effectively utilize technology to develop contract-tracing apps, developing distance-learning tools and communication tools for emergency notices.
Comparing the Covid index and the second quarter 2020 gross domestic product growth rates of rich countries that were already able to report these figures show a high degree of correlation between the effective response to the pandemic and the change in economic activity. South Korea, with the highest Covid index, has been least affected by the pandemic in economic terms with a negative 0.3 percent growth rate. On the other hand, Belgium and Spain, which ranks the lowest in the index, have some of the worst economic growth rates in the April to June 2020 period.
Clearly, what the evidence shows is that countries have a clearer alternative rather than the false dilemma of economy versus health. And that preference should be toward responding smarter and more effectively to the public health crisis, which would allow us to economically recover at a much faster rate. The question is whether we have the national leadership that will direct us in this preferred choice.
(Endnotes)
1 From Table 1 of the 20202 Sustainable Development Report.
2 From the OECD Statistics quarterly national accounts site https://stats.oecd.org/index.aspx?queryid=33940
Randy Tuaño is associate professor and chair of the Economics Department, Ateneo de Manila University, and country manager of the Sustainable Development Solutions Network Philippines.
Image credits: Nonie Reyes