As bad news continues to pile up, pressure is increasing for governments around the world to begin reopening their economies. And some are planning to do just that – at least in phases.
The big question underlying their decisions, however, is whether this strategy could ultimately lead to a costly global setback in the fight against the novel coronavirus.
Politicians are getting increasingly nervous about the dramatic financial fallout from this pandemic. Every day seems to bring a new report detailing the economic shock caused by the fight against COVID-19.
Predicted for the United States is another round of layoffs that will throw millions more out of work. The International Monetary Fund, meantime, warned recently that the world economy faces the worst downturn since the Great Depression, with quarantines causing economic output around the globe to crater. If the pandemic persists, the IMF is forecasting economies to contract by once unimaginable percentages – as much as 6 per cent in advanced countries.
Beyond the economic devastation, unease is growing among governments that the public will soon begin bristling under continued quarantine. All the more reason to get people back to work.
This is why we are hearing European countries that have started bending the virus curve downward talk about a staggered reopening of their economies. Germany announced this week that it will begin its lockdown thaw on Monday, when certain businesses will get the go-ahead to reopen amid strict physical distancing rules. U.S. President Donald Trump seems adamant that the American economy will begin returning to normal at the end of the month – despite the advice of his chief medical officer that this would be too soon.
Here in Canada, Prime Minister Justin Trudeau’s pronouncement on Wednesday that there are no immediate plans to take the shackles off the economy will likely be met with strong resistance in various parts of the country. But it’s a decision that could end up saving thousands of lives.
And for evidence of this, I offer you Singapore.
Most will recall that the island city-state was hailed for its aggressive, and mostly successful, approach to containing the spread of the virus after its initial detonation in China. Early on, officials in Singapore commenced a program of widespread testing and contact tracing. Those who were infected were isolated, and those who had contact with the infected were quarantined. Physical distancing became de rigueur.
Perhaps not surprisingly, the success of the Singapore model led to overconfidence. Standards, including physical-distancing requirements, began slipping. Scenes of crowds of people suddenly were not uncommon. This led to a predictable conclusion: an explosion in new cases.
On March 15, Singapore had only 226 reported cases of COVID-19. As of Wednesday, the number stood at 3,699, with a record 447 cases reported in one day this week. The government has now closed schools and non-essential businesses. Residents have been instructed to stay home. The overall containment approach has been escalated dramatically.
This phenomenon has been duly noted by public health officials in this country. It’s one of the reasons that Mr. Trudeau was trying to temper talk about easing confinement measures. He understands what will happen if we begin to slide backward in our containment strategy: We will quickly lose much of the ground we have made in our fight against the disease.
The most realistic take I’ve seen on reopening economies was written by Matthew Harrison, a biotech analyst for investment giant Morgan Stanley. He does not believe the U.S. has reached the zenith of the virus’s assault on the country, a milestone unlikely to be reached for weeks yet.
Mr. Harrison also does not anticipate widespread easing of current restrictions until there is capacity guaranteed in hospitals for unexpected surges in virus cases, as well as a program in place for both robust testing and contact tracing in order to curtail “hot spots” from developing. He anticipates small waves of workers possibly going back to their jobs by midsummer, but a number will not be able to return – period – until a vaccine is developed.
“Based on this view of the delayed peak and slow return to work, our U.S. economists have revised their U.S. growth forecasts," he wrote, noting that Morgan Stanley does not foresee a return to previrus levels of economic activity until the end of 2021.
Let that sink in for a moment.
As depressing as it is to consider, nothing on the immediate horizon looks like normal. Not here, not anywhere.
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