Coronavirus: The challenge of trading off health and economic security

Coronavirus: The challenge of trading off health and economic security
Don Marcello Crotti blesses the coffins with Don Mario Carminati in the San Giuseppe church in Seriate. Restrictions are due to end on Friday but what happens next? Picture: AP Photo

Like any country, Italy cannot keep its economy shut indefinitely. But the virus hasn’t been defeated, only contained, so what happens next? Ferdinando Giugliano reports

Among western nations, Italy has been the canary in the mine of the Covid-19 epidemic.

For the past month, the daily life of Italians has been marked by a dreadful combination of a rising death toll and tightening restrictions. 

Soon, it turned out that the rest of the world was no different: From Spain to Britain and Ireland, countries have had to impose draconian lockdowns as they try to ease the strain on overburdened healthcare systems.

At least the Italian outbreak appears to be receding finally. 

The percentage daily growth rate of registered cases has slowed to the single digits for more than a week now; the daily death toll, while high, has stabilised too. 

That’s a blessed relief for the government and its citizens, who can see the steps they’ve taken were not in vain. These include closing down schools and most economic activity, and restricting freedom of movement.

However, Italy’s leaders will soon confront an equally daunting question: What next? Many restrictions are due to end this Friday. 

The government looks set to extend them for another couple of weeks, but discussions are happening over which ones to drop afterwards.

Italy, like any country, cannot keep its economy shut indefinitely. Citizens, who have been extremely compliant, will want to resume at least part of their daily lives. 

From haircuts to house sales, many activities cannot stay frozen much longer. Yet the virus hasn’t been defeated, only contained. Recovering countries are vulnerable to new outbreaks, which could lead to a second phase of deaths and lockdowns.

So politicians will face a continuing challenge over how to trade off health and economic security. Of course, the two aren’t mutually exclusive: A society where the virus spreads uncontained cannot function.

At the same time, if the economy stops too long, the government will have no money to pay for health care. Balancing these countervailing forces will determine how well countries emerge from this crisis.

Italy starts from an extreme position. 

Ten days ago, the government decided to shut all “non-essential” economic activities, including many factories — barring, for example, those supplying food, drugs, or energy. 

This followed earlier decisions to close gyms, swimming pools, bars, restaurants and most shops, with the exception of pharmacies, supermarkets and the like. 

This may have slowed the infection rate, but it carries a heavy economic and social cost. The government will struggle to convince citizens that working is safe again, especially in close quarters with colleagues.

Some parts of the economy will suffer for a long while yet. Large gatherings — including conferences and sports events — were among the first to be banned and will probably be the last to restart. 

The hospitality business won’t recover any time soon. Politicians may let restaurants to open again, but will people have much appetite for them? It’s hard to see foreign tourists flocking immediately to Italy or any other destination. 

This will be a horrible summer for the travel business.

Less affected are those who, like myself, are lucky enough to be able to work easily from home. There’s no reason why they should rush back to the office. This includes much of the services sector, which is becoming accustomed to using video to replace in-the-flesh interaction. 

The public sector should head in this direction too. Keeping a large part of the “clerical” workforce at home will mean less crowded public transport and less chance of mass contagion. 

This shift could have long-term benefits: It might make employers more trusting of their staff working remotely, and even improve people’s work-life balance.

For those who must go into work, such as factory employees, the government should try to mitigate the contagion risk as much as possible. 

This will involve widespread testing, on the scale of South Korea, to isolate infected individuals even when they don’t show symptoms. 

Ideally, there should be tests too to detect those who’ve already carried the disease, since they may have become immune.

 Our societies may need to become less squeamish about privacy. Singapore has kept coronavirus under control thanks to intrusive monitoring of its citizens.

Unfortunately, mass testing is difficult to implement in bigger countries. 

The governor of Lombardy, Italy’s worst-affected region, says at the current pace it would take him nearly three years to test the region’s population of 10 million. 

Rapid testing technology that can be used at home will be essential, but no one knows how quickly this will be available.

As for tracing people who’ve been in contact with the infected, it’s a very effective tool, but it would require a gigantic change in Europe’s bureaucracies, which would need to finally embrace the digital revolution.

The best hope lies in mimicking Japan by trying to contain the outbreak through social norms and obsessive hygiene. 

Italy and other countries that want to return to work must accept the widespread use of face masks, extreme social distancing and constant hand washing. Companies will need to redesign their workplaces to minimize contact. 

Those at greatest risk — namely older workers or people with preexisting conditions — may need to remain at home. 

Yet some degree of risk is inevitable, so maybe the most exposed workers could be compensated with higher wages.

An economy in the immediate aftermath of an infection peak will still rely on enormous state support. 

Some industries might find it impossible to restart until a vaccine or drug treatment is found. 

There will be calls for greater redistribution, but it would be foolish for politicians to discuss the possibility of higher future taxes now, since this would push citizens to save more, further depressing the economy. 

As such, governments will have to continue to rely, wherever possible, on greater budget deficits.

Of course, there’s no guarantee that any of this will work, given the unprecedented impact of the outbreak. 

Italy and other countries could find that the situation quickly becomes unmanageable again if further outbreaks happen after they try to reopen the economy. 

Governments will have to take a gradual approach, rely on the collaboration from their citizens — and hope for the best.

- Ferdinando Giugliano writes columns and editorials on European economics for Bloomberg View.

He is also an economics columnist for La Repubblica and was a member of the editorial board of Financial Times

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