The economics of responding to pandemics

As we approach the close of this worrisome year, it will be one that few will have regrets in seeing the end of. Eleven months on from the first signs of Covid-19 becoming apparent in China

(although those immersed in the epidemiology had some inklings 12 months ago), and 9 months since it started to dawn on the western world, that unlike past epidemics, this would hit them,

there remain mammoth unknowns about how to deal with it, and how to respond, especially in terms of economic policies.

Contradictions continue about the incidence of Covid-19. The Economist magazine recently ran an interesting short report on Japan, highlighting the early arrival of the infection in the

country. It drew attention to Japan’s apparently bungled handling of the cruise ship Diamond Princess which docked at Yokohama Port in February. Covid-19 had already broken out on board yet

many of those who were ill were allowed to leave without isolation, risking Japan’s generally old population, and with no real testing in place. However, Japan currently reports low numbers

in terms of illness and especially deaths among G7 countries. Among the possible reasons, the Economist piece highlighted Japan’s broader use of technology to be available whenever necessary

to stop hotspots and serious super spreaders, and a number of other quite sensible things. In particular, the introduction of diagonal seating in many common indoor areas to simply make it

more difficult for people to breathe over each other. Perhaps also shared with many other Asian nations, having some genuine respect for the societal consequence of each person’s own

actions, especially when it comes to social distancing and use of face masks, is at the centre of these seemingly obvious choices.

It certainly still seems true that many parts of Asia, including most of north Asia, but also much of south-east Asia, and Australia and New Zealand, appear to be coping better than a great

deal of the rest of the world. The inclusion of the latter two countries, not stooped in traditional Asian culture raises the possibility that it is not just aspects of culture – indeed,

neither experienced the SARS and other infectious diseases in earlier years that might have meant many Asian countries were better prepared than much of the rest of us.

Then of course, there is Africa, where, so far, the huge surprise relative to expert predictions is that, while many of its economies have struggled, it has been more to do with trade links

to the rest of the world, and most African countries have not yet suffered anywhere near what was expected, given their health systems. The youthfulness of their populations and lack of

densely populated buildings may be part of the explanation.

And then we look to Europe, the Americas and elsewhere. It had become reasonably conventional wisdom after the first wave in spring, that Germany seemed to be dealing with it much better

than other larger European nations, including the UK. But, as we grapple with this second wave, that is far from clear. I write on the day that Germany reported close to 1,000 deaths the

previous day. And of course, Sweden, which appeared to take the cold, hard-edge path towards accepting the basic realities of an infectious disease and would encourage some kind of herd

immunity, seem to have no better answers than the rest.

Against all this, we do have remarkably encouraging news that a number of vaccines have been discovered, less than a year after their inventors started on their journeys. This is a truly

fantastic scientific endeavour. As 2021 unfolds, we are going to witness more good news, but also find out whether the actual vaccination of our populations is either reasonably manageable

or just as fraught as the infection testing systems. Let’s hope for the former.

Turning to economics, governments have had no reluctance to pour huge amounts of public money into their domestic economies, supporting businesses and workers in considerable ways. These are

all steps that have been completely understandable, but as endlessly debated, without massive post-disease economic recovery, and with that, government finances, there is a price to be

paid, somewhere. But this isn’t the striking thing – governments often had little choice, given they drove their economy’s weakness largely due to their decision to close vast parts of

economies down.

What is also equally clear is that so many countries have been content to splash the cash for all sorts of testing regimes, treatments, diagnostics and especially vaccine discovery, for

their own populations.

First, how eager countries are to respond to crises with endless cash, but so timid to use government coffers in more normal times, whether this be for general use of government money to

influence their economies, and also, to build stronger health systems, which presumably would allow for many countries to be so much better prepared for when crises appear.

Second, those admirable international agencies that are at the forefront of trying to ensure equitable availability of treatments, diagnostics and vaccines to lower income countries appear 

to be so far not succeeding in getting wealthier countries or their businesses to provide the monies.

On the first, as a result of the coincidence that I led the independent Review into Antimicrobial Resistance (AMR) in 2014-2016, I have been strongly persuaded of the merits of investment in

health systems as a tool of macroeconomic policy making. Our review recommended that, around $42 billion worth of investment over a decade to help with 29 different interventions would

greatly diminish the chance of some 10 million people dying by 2050 and stopping the loss of some $100 trillion worth of economic gain that otherwise might accrue. The arguments to spend

similar amounts urgently, both to strengthen health systems to boost resilience for future pandemic resistance and AMR are surely so clear, and in this era of dramatically low interest rates

and apparent domestic government spending largesse, surely something which should be at the forefront of policymakers intentions? Spending for investment is clearly much more economical

than spending for consumption, or in this case, (health) maintenance.

And on the second, the same rational holds true. As fantastic as it is that during the first part of 2021, many in the most advanced economies can expect to see vaccination of their citizens

start in earnest, not withstanding all the implementation challenges, it shouldn’t be that difficult for decision makers in the same countries to see the enlightened self-interest benefits

of accelerating vaccines for the low income world also. And this should not just be for our governments but also the captains of those industries that connect with the rest of the world, in

travel and tourism, as the longer it takes, the more costly it will be for them directly, and indirectly, for all of us that either need or want to recommence a world of travel.  I have

often written about the era of “profit with purpose” having arrived. Let’s see some broader buy-in, as 2021 appears around the corner.

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