You have seen it in the news - strings of protests against the Covid-19 lockdowns of cities and countries around the world. Protests ran the gamut from 20 states in the US, to Brazil, India and as far away as Lebanon. To protesters, economic pain is more real than the death threat from the virus. Are these people unreasonable? How could livelihoods be more important than lives?
A coin always has two sides. The public has heard enough from health experts. It is time to hear from economists. There is an article titled “The Macroeconomics of Epidemics” which appears as a National Bureau of Economic Research (NBER) paper. Economists know well that research papers from the NBER are of the highest standard. Furthermore, this particular research paper is a collaboration of professors from the Northwestern University, the US and a professor from Freie Universitat, Berlin.
Therefore, the quality of the research should never be in doubt. The professors simulate, through macro-economic and epidemiological models of the US economy, the effects of a complete lockdown of the US for one year and no-lockdown with free spreading of the virus for one year. In the paper, they assume there will be an anti-Covid-19 vaccine at the end of one year and the outbreak is contained.
A complete lockdown of cities would cause US GDP to shrink 22% while a no-lockdown policy would result in a reduced recession to -7% of GDP growth rate in 2020, but with additional deaths of 500,000. From the simulation result, it can be calculated that each life saved is equivalent to a cost of US$6.4 million (209 million baht) to the US economy.
Please make no judgement here. Economists just want to show that each health choice has an associated economic cost. By the way, the paper actually recommends a complete lockdown of US cities as the valuation of a US citizen's life is $9.5 million by the US Environmental Protection Agency (US EPA) which is higher than the cost of saving a life ($6.4 million per person). Surely, the US EPA’s valuation of $9.5 million per American is up for debate.
Unfortunately, nobody has done such research work for Thailand so the government can better determine which Covid-19 containment measures should remain and which should be lifted as they are too costly to the economy. The Bank of Thailand (BoT) and the National Economic and Social Development Council (NESDC) are probably busy doing something else like setting up a Bond Stabilisation Fund and performing a consumer confidence survey.
From my calculation, personal consumption is calculated to be at 8.5 trillion baht per year in our national GDP (latest 2019 figure) and that is roughly 704 billion baht per month. I need an assumption here because I do not have econometric models for simulations like those of the BoT and NESDC. If we assume the current lockdown causes a 30% reduction in consumption spending due to closure of shopping malls, closure of markets, work from home, travel restrictions, and curfews, it will translate into a 211 billion baht of monthly GDP loss.
Health experts could help estimate the casualties of the alternative no-lockdown policy - just wearing masks, providing free alcohol cleansing gel, and standing 2 metres apart. Of course, I am no health expert. But using the Imperial College of London’s estimation method, I am able to deduct that Thai casualties from Covid-19 would be 1,988.6 people per month. Let me round up the number to 2,110 Covid-19 deaths per month. The cost of protecting a life will be 100 million baht per person to the Thai economy.
With collaboration of epidemiologists and economists, more precise numbers can be determined. Listening to expert views from doctors is nice, but the government will see only one side of the coin. Balancing between saving lives and saving livelihoods is central to the success of the Covid-19 containment programme. If not, people who struggle to make their daily ends meet will not follow doctor’s orders and the whole Covid-19 containment scheme will fail.
Denmark (along with Austria and many countries) has learned the hard way that they cannot afford to completely control the spreading of the virus. To eliminate economic burdens on its citizens, the Danish government provides full wage support by paying 75% of the wage to all salary earners (employers provide the remaining 25%) and paying 90% of income to freelancers. This is similar to a suggestion by a Thai business tycoon. However, after actual implementation, a one-month lockdown is about to bankrupt its economy, and the Danish government is now accelerating the easing of its lockdown.
Danish Prime Minister Mette Frederiksen says that: “Our job as a government is not to look after the interests of certain groups, but to find a balanced solution that is good both in terms of health and also provides significantly better conditions in terms of jobs.” I am in tears and immediately understand why Denmark is the second happiest nation in the world.
According to rumours, the government is about to ease certain restrictions of the lockdown. It is most likely that the easing is based on recommendations by health experts. But as equally important as health, people want to hear about economic consequences. How many people will be put back to work and how much growth will the easing measures create? I do not think the public wants “nice to hear” but “low on impact” measures. Be informed that the 5,000 baht monthly support from the government for the lucky few is much lower than the average monthly income of 21,231 baht (Thai monthly per capita income). Everybody would rather have jobs than measly monthly support. Do they need to be on the streets like protesters in the US and elsewhere before the government listens?
Thank you so much doctors for taking care of the national health. You guys have done a great job. But can I see the bills now?
Chartchai Parasuk, PhD, is a freelance economist.