Economies can be restarted if bold and imaginative choices are made

Central banks must continue to lend without limit to governments for as long as needed to counter the damage caused by the pandemic

A near-deserted Grafton Street.

A near-deserted Grafton Street.


What does the evidence suggest? There are some brilliant sites for the numbers: is the best. Meta-surveys of original research are particularly helpful. A great example is the extensive work of Noah Smith, a Bloomberg writer. This, tentatively, is what I conclude from trawls of the published research and data.

If proper track, trace and quarantine regimes had existed at the right time, draconian lockdowns would not have been necessary. That’s the experience of South Korea, where restrictions were relatively mild.

The Korean example doesn’t offer a unique solution. New Zealand implemented a stricter regime – they didn’t have a ready-to-go testing system. The Kiwis eliminated the virus and are releasing their economy having now built a comprehensive test and trace infrastructure. New Zealand has a slightly lower death rate (per capita) and a touch higher incidence than South Korea.

The data, imperfect and incomplete, painta a stark picture. New Zealand has had 4.36 deaths per million of its population. South Korea, 5.15. Japan, with its elderly population has had 6.29 deaths per million. The UK’s equivalent number is 531.

It’s worth repeating: if effective testing and tracing regimes exist before widespread community transmission takes hold, you don’t need draconian lockdown. The disease will still spread but not overwhelm. That’s the managed trade-off that involves more politics than science.

Not all risks are the same. The authorities either don’t understand this or don’t trust the ability of their citizens to distinguish between different risks. Risk management is the business of life. Mark Paul wrote brilliantly about this last Friday in The Irish Times.

There is more than one way of managing the virus. Closing the border is one of them, but there won’t be much of an economy left by the time the vaccine arrives. Quarantining arrivals from next month, as in the UK, is a policy to accompany the slamming of Augean stable doors. It reveals the absence of testing capacity. It’s incoherent and unsustainable.

Being indoors with people is risky. Being indoors, without any protection, close to people singing, shouting or talking is very risky. Candidates for viral super spreading: ski resorts, church gatherings, parties and care homes. Being outdoors is lower risk, particularly if you don’t come into physical contact and don’t get sneezed on.

The longer you spend near an infectious person, the higher the risk. “Viral load” is important: you can get the virus from multiple sources but it is suggested that people carry the highest load, surfaces less so.

Lockdowns are necessary when you need time to build testing and tracing capacity. Let’s put this forcefully: strict lockdowns are absolutely necessary until you have built that infrastructure. Releasing economies without creating a testing system risks a second wave.

The media

There is a difference between a million and a billion. Do spend billions on shutting down the economy but don’t then balk at allocating millions to track and trace. The latter will save billions. It will cost billions if you don’t do it.

Modellers, particularly in the UK, have been naïve. They gave cover for dodgy decisions. The scientists are appalled to find themselves being lined up as fodder for the coming inquisition. Every witness will begin their testimony with “we were following the science”.

In the UK, managing the media is more important than managing the health crisis. Government by PR has produced chaos. The objective is to manage the headlines while never admitting to a mistake, never answering a question.

The latest wizard wheeze is to sneak through a hard Brexit hoping nobody will notice. I can’t wait to see how PR government deals with a looming glass and syringe shortage if and when the vaccine is found.

Europe is having a typical crisis, with stumbles and calamities. The German Constitutional Court’s ruling against ECB money printing would normally attract attention as a potential catalyst for the destruction of the euro. As ever, after all these pratfalls, Europe does the right thing: Macron and Merkel’s €500 billion coronabond scheme is a big deal. Perhaps Merkel was prompted into restarting the Franco-German engine by that court decision.

Economies can be restarted if the right steps are taken. Without them, the risks of renewed lockdowns are high. But as well as too much risk, there can be too little: lockdowns should be released once the testing and tracing capacity is in place. Caution is natural but can be carried too far.

Economic policy has three virus dimensions. First, huge deficits are not “stimulus”. These deficits arise because of replacement spending. We haven’t been hit by an asteroid or declared war. We haven’t had an oil price shock that raises costs and transfers our incomes to oil producers. Our productive capacity still exists. Governments have to step in when they have forced everyone to stop spending.

Stimulus will be the second stage of policy, getting economies into that V-shaped recovery, once lockdown is over. Even more spending – and tax cuts – will be needed then.

That’s not been fully thought through: warnings about economic overheating have been replaced with warnings about debt. As with the virus, economic policy involves trade-offs and risk management. This is a time for bold and imaginative choices, not tired shibboleths. Third, central banks need to continue to lend without limit to governments for as long as necessary.

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