Trump
thinks he can snap his fingers and reopen the economy. It won't work
Even if we
thought it was acceptable to risk millions of deaths by ending physical
distancing, it’s not clear the economy would rebound
Nick
Obradovich and Renee C Wurth
Fri 27 Mar
2020 10.18 GMTLast modified on Fri 27 Mar 2020 13.56 GMT
The
coronavirus-related deaths in the U.S. topped 800 on Wednesday, while the
number of cases reached over 55,200, according to latest figures by Johns
Hopkins University.
‘Should we
restart our economy while the virus is still rapidly spreading?
Should we
reopen the US economy in a couple of weeks? Both sides of the argument have
their merits. We need to put US workers back to work as quickly as possible to
slow the economic damage inflicted by mass physical distancing policies. We
also must minimize US deaths from the coronavirus outbreak. Barring a miracle
cure, experts markedly disagree about how best to strike the balance.
But even if
it were deemed optimal, can America realistically reopen our economy right now?
Economic
hurdles
We’re
possibly facing a 1918-style pandemic if we relax physical distancing and a
Great Depression-level economic shock if we don’t. Yet our economy today is
dramatically different from that of the early 20th century.
American
goods and services are reliant on the output of other countries around the
world, whose production is in turn dependent on the output of still other
nations, and so on. We can’t successfully put American companies back to work
unless other countries simultaneously do the same with their domestic
industries.
Production
of US automobiles, for example, simply won’t be feasible until nations that
produce required components also reopen. And if US automakers can’t source the
materials they need for domestic production, related service companies – like
marketing firms – won’t have much work, either. If marketing companies have
little to market, online advertising giants such as Google and Facebook will in
turn see limited revenues.
Our global
economy is remarkably interconnected. Pull out an important thread, and the
whole tapestry of our production system unravels.
This
economic interdependence necessitates all parts working in harmony.
Unfortunately, the pandemic is asynchronous – it hits countries at different
times with different rates of growth and severity. While China is reopening,
India and the US are shuttering. If portions of Chinese production require
unavailable intermediate goods from India or the US, such production won’t be
possible. Even if China can produce items for export, if their normal buyers in
the US are closed, who will they sell to? And what happens when China – still
lacking herd immunity – needs to close its economy again right when India or
the US are looking to reopen and use Chinese inputs?
The
staggered nature of the virus outbreak coupled with worldwide production
presents a remarkable – and quite possibly insurmountable – global coordination
problem. Globalized on-demand supply chains simply aren’t well suited for a
worldwide pandemic.
Political
hurdles
The
economic argument for reopening US production assumes that it would be broadly
socially acceptable to sacrifice the lives of Americans to save our economy –
and that politicians will therefore be willing to pursue it. We suspect, to the
contrary, that premature reopening will soon be revealed as political suicide.
Once the
lag in deaths catches up to the exponentially increasing number of cases in the
US, myriad heart-wrenching stories of the lives of those lost will ensue. And
while the economy certainly matters to voters, we suspect that any politician
that wants to win re-election is highly unlikely to push workers back to
offices and factories while obituaries are overflowing and we’re using skating
rinks to store our dead. Explicitly putting a price on lives will probably be
even more impolitic in the coming weeks than it is today.
Psychological
hurdle
Crises like
the coronavirus pandemic also alter our individual choices, behaviors and
attitudes. Before the virus arrives, it can seem abstract, distant and even
unthreatening to an uncritical or untrained eye. Yet its speed and severity
take many by surprise as it rapidly runs through communities. The marked
difference between expectations and reality exacts a heavy psychological toll.
Once the
coronavirus touches citizens’ lives, they are quite unlikely to immediately
switch back into status-quo behavior. Even if officials were to remove
restrictions on movement and social gatherings, we suspect most people will
continue to limit non-essential outings. How many residents of Bergamo, Italy,
want to spend time in crowded shops or restaurants right now? Our guess is:
very, very few. If you knew coronavirus was still ravaging your city, would you
head out to the barber shop or go to a concert?
Many normal
activities, from the enjoyable to the mundane, now produce some level of
anxiety. That association won’t be undone overnight, and fear is a remarkably
powerful deterrent to economic activity.
So, should
we restart our economy while the virus is still rapidly spreading? Regardless
of whether it’s a necessary evil or a terrible atrocity of an idea, we probably
can’t.
Dr Nick
Obradovich is a PhD political and data scientist who trained at UCSD, the
Harvard Kennedy School, and the MIT Media Lab. He is currently senior research
scientist at the Max Planck Institute of Human Development in the center for
humans & machines. Dr Renee C Wurth is a PhD population health scientist
who trained at Northeastern and the H Chan school of public health at Harvard
University
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