Covid tells us that you cannot separate economics from epidemiology
Shadow of Omicron variants Shrouded the global economy. Although we still don’t know anything about its infectivity, virulence, and ability to evade protection from vaccination or previous infections, now is the best time to assess the economic lessons of the past two years to help formulate policies.
Most importantly, when a serious virus is spreading, you cannot separate economics from epidemiology. Obviously, there is a trade-off between restricting normal daily life and short-term economic activities, but the root cause of health and economic problems is the severity of the epidemic. Controlling the virus is the most important thing.
The early and strict lockdown will be most successful in 2020 and is working well in most of the Asia-Pacific region. But this year, as long as countries can encourage and force sufficient numbers of people to be vaccinated, effective vaccines and treatments can bring life in Europe and the United States closer to normal. The promise of an effective vaccine also reduces the cost of temporary economic restrictions at the beginning of the wave, because the interruption is convincingly about to end. They eliminate the need for the strict restrictions inherent in the zero Covid approach.
If the link between economics and epidemiology is a case of learning-by-doing, then the pure economic policy of a rich country is a triumph, based on the lack of popular ideology.Last year witnessed the most serious decline in global per capita GDP since World War II, but OECD latest forecast It shows that by the end of 2022, compared with the forecast in November 2019, advanced economies will regain all lost ground. For these countries, “rebuilding better” is not an empty slogan, but the most likely outcome.
With the ingenious deployment of economic policies in developed countries, successful vaccination has changed this year’s prospects. Financial support for individuals and companies affected by economic restrictions is prompt and generous. In emerging economies, the lack of fiscal space hinders equal financial support and explains why they are performing worse and why they are currently assessed to suffer lasting damage from the pandemic. In order to obtain the vaccine, they also initially lowered the pecking order.
The central bank’s swift action to calm the initial turmoil in the financial market and the government’s willingness to tide over the crisis by purchasing large amounts of assets, borrowing and spending also played an important role. No one should worry that the taboo on the monetization of government debt has been broken, as long as these policies are temporary and willing to prevent continued inflationary pressures.
The return of inflation is the most obvious proof of the third lesson: It is impossible to fine-tune the response to the crisis. With the surge in global commodity demand, higher prices have become inevitable and almost unavoidable. Rising prices are more entrenched in the United States, and wage inflation has risen. This is a valuable reminder that resource constraints in the economy are real. The government cannot simply run the economy under higher pressure without overheating.
The last economic lesson of the past two years is that policy details are important.OECD recently Economic outlook It shows that the recovery of the United States is better than the euro zone in terms of GDP, but lags behind European countries in terms of employment.
This has to do with the type of financial support provided during the pandemic and indicates an important trade-off. European countries link employment support with employers to keep workers dependent on their jobs, but at the cost of reduced productivity and delays in ensuring the creation of new jobs in areas where demand and expenditure are high. The United States is better at redistributing employees to new jobs by providing support to individuals rather than employers, but at the cost of finding that more employees have completely withdrawn from the labor market. It is too early to assess which one will be more successful in the end.
With these lessons in mind, we can turn to the Omicron variant.Early Evidence reveal It is more communicative than the Delta variant. It may also be milder, but it is not clear whether the lower virulence is the innate attribute of this variant, whether it is the result of protection from serious diseases from past infections or vaccinations, or, more worryingly, positive cases The age characteristic has been so far still very young in South Africa.
Countries need time to formulate policies, but in South Africa and the United Kingdom, Omicron cases seem to be growing Extraordinary speedThe lesson from the early stages of the pandemic is to act quickly instead of seeking optimization, so it is time for governments in rich countries to adopt the precautionary principle and speed up vaccination.
This means re-implementing restrictions on daily life on the basis of travel restrictions, and at the same time, if further restrictions are needed in the next few days, fiscal policy tools must be prepared to restore vitality.
Let us hope that these measures prove to be an overreaction, especially if the vaccine is effective in preventing serious diseases. Will not cause long-term damage. This is much better than waiting and risking a worse Omicron wave.