COVID-19: the economic impact of lockdown

Historian Sir Max Hastings, in The Times last week (March 24th), posed the question at its starkest. Should the government, through its ‘lockdown’ policy, risk such severe long-term damage to the economy, and especially to the future prosperity of today’s young people, merely to preserve the lives of a few thousand older people, part of ‘the most fortunate generation in history’ and facing ‘inevitable extinction’ anyway?

The language used by Hastings is clearly controversial, and unhelpful to what is evidently a sensitive subject. Perhaps no group in our society is better qualified than doctors and health professionals to grapple, as they do daily, with questions about the life and death of individual citizens. Others cannot even begin to imagine how frontline staff are coping today with what neurosurgeon Henry Marsh, in a searing analysis of the COVID-19 crisis in the Financial Times (March 28/9), described as ‘the grotesquely larger’ number of life or death decisions they are now having to make.

But, at a national, as opposed to an individual level, these issues take on a very different complexion. Government ministers repeat endlessly their mantra that their decisions are being guided (they imply almost dictated) by their scientific advisers.

As Lord O’Donnell, a former Cabinet Secretary, told the BBC last week, the government has some very difficult ‘political choices’ to make in coming weeks because of the pandemic. What are they? Alongside how to minimise the human costs, they include what to do about the already spiralling economic costs, especially to the government.

Computerised economic models, it is true, depend heavily on theoretical assumptions and the validity, volume, timeliness and reliability of the data pumped into them – but so do epidemiological models! John Ioannidis, Professor of Epidemiology at Stanford University, has branded the current data about the epidemic as ‘utterly unreliable’.

The Sunday Times (March 29th) says that, unusually, the government has been relying heavily on a team of modellers under Neil Ferguson, Professor of Mathematical Biology at Imperial College, London. Responding to criticism from other scientists that they cannot understand how his models work because they cannot decipher the thousands of lines of computer code in the model, Neil Ferguson is quoted in the newspaper saying: ‘For me the code is not a mess, but it’s all in my head, completely undocumented.’ This, prima facie, would indicate that it cannot be ‘peer-reviewed’, one of the essential disciplines to which even academic economists have to subject themselves.

The evidence that the health crisis is damaging the economy is already too strong to ignore. As the economy plummets, economists at Barclays Bank are expecting the country’s unemployment rate to soar to 7% in the second quarter of this year. (Barclays “Global Outlook” March 26th.) This means that the government’s tax receipts will fall even as its spending on social welfare soars. Chancellor Rishi Sunak’s support packages in the past two weeks will add tens of billions to the government’s annual deficit and to the national debt; however, this does not inevitably condemn today’s workers to penury for years ahead as Hasting, for one, seems to suggest.

Governments can and do default on some of their debts. Indeed, many American bankers judged that this is, in effect, what Britain did after World War I. Or, they can inflate them away, a choice which, for over two decades after WWII, the British government was particularly partial to. Either that or you can grow out of them, which is hard to imagine today but it may be possible in future years. Or the government can raise taxes! This policy is typically anathema to leading Conservative Party politicians. However, Chancellor Sunak has hinted that this will be necessary, while Michael Gove, Cabinet Office Minister, during a BBC interview of Sunday morning studiously ducked the issue.

Scientific advisers are necessarily being drawn into the debate on how to start to ease the lockdown to revive a tumbling economy. Their assessments and projections about how quickly the COVID-19 death toll may rise, when it has peaked, whether it will return, and if so when and how virulent it might be, are opaque, but important elements, in the government’s political calculations.

The government’s scientists were put on notice on Sunday morning in Mr Gove’s interview when he said the minutes of the meetings of the scientific advisers will be provided to explain the government’s decisions. If those decisions were solely based on the minutes of scientific advice and not unrecorded political calculations, then most of the medical scientists could acquit themselves quite well. If not, they could find the politicians skulking in the wings as they face embarrassing questions akin to one the Queen posed to professional economists at the London School of Economics after the 2007/8 financial crisis: ‘why did the experts fail to see this disaster coming’?

Stewart Fleming, journalist and previous foreign correspondent for the Financial Times in Washington. 

Comments (19) Add yours ↓
  1. Roger Kirby Professor of Urology

    Another great blog Stewart! So many issues to discuss about COVID-19. Readers check out this webinar from David Heymann which is very informative:

    April 3, 2020 Reply
  2. Hannah Warren Urology Registrar

    Lots of important points raised here that I am sure will require years for us to fully realise. One thing at least healthcare workers have to be thankful for in all of this: a stable income!

    April 3, 2020 Reply
  3. Fo Retired

    Great article. Would love to see more articles like this one. Helps to clear the air over #covid19 and future outcomes to economy and NHS.

    April 4, 2020 Reply
  4. Mark Becker Consultant

    Very good article. A balanced view and voice on the socio economic damage and long term negative impact on our society of extended lock down.

    April 4, 2020 Reply
  5. David Redman Cons Anaes again

    It grieves me to agree with Max Hastings but his brutal analysis is probably correct for a change. I have two of my three children without a job, the lockdown is bad news for all but the old who have been very lucky so far in life. Let’s get back to normal, Boris is daring and may give us hope.

    April 4, 2020 Reply
  6. Scott Cormack Partner KPMG

    A thought provoking piece, grounded in fact rather than some of the bluster we have been hearing thus far. Thank you.

    April 4, 2020 Reply
  7. Culley Carson Professor of urology

    Whoa!! Frightening thoughts but worth some thoughts. Unfortunately, older patients are not the only ones suffering as many illnesses and deaths are in the under 60 groups. Ir we open the economies before the pandemic slows, businesses will be functioning with partial staffs and constant absences. While the opinions and mathematical models are valuable, they cannot substitute for the reality that antiviral meds and vaccine are the only answer to this crisis.

    April 4, 2020 Reply
  8. Mark Frydenberg Academic Director of Urology, Cabrini Health, Professor, Department of Surgery, Monash University;

    Thank you Stewart and I thought I may contribute with an Australian perspective.

    The provocative language used by Hastings was indeed used by an Australian journalist when questioning our Prime Minister. Whilst our PM could have easily responded that there is now ample evidence that this disease kills younger people as well as the elderly in significant numbers (albeit at less frequency), he simply responded (and I paraphrase) with the comment “every life matters, to him, to his government, to every member of Parliament both at a federal as well as state level”. Our Government has stated clearly from the outset that this was a battle on 2 fronts – the health and the economic and always put health first, and then dealt with the economic consequences.

    With regards to the health measures, there has been an early but phased approach to a gradual lockdown as opposed to our neighbours New Zealand that enforced a hard lockdown immediately. Our measures started with very early closing of borders to those travelers starting their journey from Eastern Asia, to over a 2-3 week period strongly encouraging all Australians not to travel anywhere abroad, encouraging all expats to return home as soon as possible, to mandatory self quarantine of all returned travelers initially at home voluntarily and now in hotels under guard, and now a closure of our borders to all non citizens of Australia. This was combined with aggressive early testing protocols, contact tracing, self isolation requirements and social distancing rules, with abolition of gatherings both indoor and outdoor (cannot be in group of more than 2 people outdoors unless it is immediate family), and eventually the closing of some Australian state borders. These are measures that no one could have ever imagined could happen to our country 2 months ago.

    The rules, as mentioned, were introduced in a phased manner. It appeared that the Government may have wanted the Australian public to demonstrate that it could abide by the new social rules by applying common sense and acknowledging community safety concerns. However the images sent across the world of the blatant flouting of these rules on Bondi Beach in late March essentially meant that the Australian Governments at all levels had no choice but to introduce and legislate tougher measures to cope with those citizens that either didn’t appreciate the gravity of the situation, or frankly didn’t care. The medical community wanted this strict lockdown much earlier, but it did eventuate over a relatively short period of time.

    So has it worked? Well perhaps, but it is too early to tell. Modelling suggested we would have 10000 plus cases in Australia by now, whilst we sit just above 5000 cases. Deaths remain low by world standards at 30 people as of yesterday. Our curves do appear to be flattening, and community spread present but low, with the majority of cases being in returned travelers or contacts thereof.

    In the meantime, hospitals and staff prepare as they are all over the planet. Protocols are developed, training is performed, ventilator capacity enhanced. We strive to get hold of personal protective equipment (PPE) with significant uncertainty as to supply lines . We put in place protocols to divide units without clinical overlap, so that the whole departments are not infected at the same time rendering surgical care impossible.

    However as surgeons, we are also faced with the enormity of converting all our consultations from face to face to telehealth, We are all faced with the heartbreaking task of telling patients with suspected or proven cancers that they have to wait for care, and making judgement calls as to their level of risk. In parallel we are faced with the stress that the consultant staff (ourselves included), our registrar and junior medical, nursing and paramedical staff are all putting themselves at risk every day they come to hospital. The stories of young nursing staff in the UK succumbing to this virus whilst just trying to care for others is nothing short of heartbreaking, and is being repeated all over the planet. This combination of the fear for patients and for ourselves, pulling in opposite directions is indeed highly stressful for all health care workers, and I am sure mental health support will be needed for many of our staff in the weeks and months ahead.

    Economically, our Government has taken drastic measures to protect the economy and in particular the people. My cousin is the Australian Treasurer, and at the outset I would say I never discuss anything political with him at any time, and he would be bound by confidentiality anyway. However being part of a close extended family, I am concerned for his welfare too. I recognise that this event is unprecedented for our Treasurers or Chancellors or Secretaries of Treasury. They are having to make educated decisions to protect their constituents, without a rule book to follow. I do sincerely believe that they are all trying to do the best they can to minimise the impact of COVID, and we should take a step back and realise that they are just people, trying their best to make sense of this madness. It is their job to do so, just like it is ours to look after all our patients, but just like we face an unprecedented battle medically and will make errors along the way as we learn to negotiate this minefield, so will all Governments politically and economically.

    Our Government has introduced expanded measures to deliver medical care, allowing reimbursements for telehealth consultations widely. They have been instrumental in ensuring private hospital capacity is brought in to assist the public hospital capacity so the 2 sectors work side by side in this battle whilst guaranteeing the viability of the private institutions in the meantime. They are working to deliver greater stockpiles of medication and PPE for all hospitals across the country. They have put in place financial safeguards for workers throughout the country, both those seeking work, and those still employed (although often underemployed), and some modest tax breaks for businesses. Nonetheless many businesses will not survive despite all these assistance packages. Private medical practices are one such industry that ironically may not survive. The combination of patient self isolation, quarantine, lockdowns, limited telehealth rebates, and the inability to do anything but the most urgent surgery means that many surgical practices may need to lay off staff and close doors and this economic stress only adds to the stresses mentioned above about the health and welfare for themselves, their families, staff and patients.

    As a child of holocaust survivor parents, I always recall my late mothers recollections of her time in Auschwitz. She always mentioned the 3 sentinel events where acts of kindness, often random, saved her life. She taught me that there is good in every bad situation, no matter how horrific. So what good have I seen? I have seen opposing political parties actually working together for a common goal and putting their people first and foremost. I have seen widespread, rapid adoption of innovation with much of medical care, primary, secondary and tertiary education, and business decisions now delivered almost exclusively on line. I have seen supermarket chains show leadership and take responsibility to ensure people don’t hoard products. They have employed laid-off Qantas workers to assist in the food supply chain and have ensured the elderly and disabled, and more recently health care workers, have a dedicated hour to shop so they can get access to what they require.

    I have seen my colleagues going to battle every day in hospitals knowing their own lives may be at risk in order to help others, I have seen surgeons recognising that their anaesthetic and ICU colleagues are at even greater risk, and act accordingly to protect them, and I have seen surgeons work outside their comfort zone and area of training to simply help sick COVID patients. It makes me proud to be a doctor and it is so inspiring for us that so many people all over the world have recognised what we do as health professionals and have acknowledged us publicly. .

    Most of all, I have seen that despite adversity we have all risen to a challenge and adopted social distancing as our temporary new norm out of respect to our fellow citizens. I have been inspired by the human spirit that seeks to find humour in these most dire of situations simply to provide a distraction, some cheer and a simple laugh to others. I have seen that as a global community we have reached out to our friends, relatives and colleagues all over the world to simply make sure they are alright and lend support from afar. Crises like this have the ability to bring out the best and worst in people, and in my opinion we are already seeing much of what is good in this world, and sincerely hope that this pandemic is over soon so we never have the chance to see the worst.

    I wish you all the very best from Australia, and may you and your loved ones always stay safe.

    April 5, 2020 Reply
  9. Sir Marcus Setchell Retired Gynaecologist

    Early on in the CovID-19 outbreak and friends started asking my opinion I quickly learned to reply “Don’t listen to retired doctors pontificating, unless they were experts in the field. Only listen to scientific and medical experts, especially the CMO and CSO”.

    We are now at the stage where the public are being exposed to a much wider range of opinions from WHO, and other respected ( and ? some less respected) ‘experts’ and pundits.
    Stewart, and Max Hastings review of scientific, economic others quoted in Max’s article is a valuable contribution because they ARE experts, even if retired from their previous big jobs, in analysing and condensing facts and opinion. A great read thanks.

    A generation or so ago the pub was where amateur pundits held forth and their rantings went no further;
    Now the “pundits “ , real or apparent, views go viral , so Thanks to real expert views for sharing theirs.
    Winston Churchill: “Experts should be on tap but not on top”. In this day and age give me the scientific expert, with peer review, and then history or expert journalists can spread debate and views, but preferably not too much criticism while we’re in the thick of it.

    Marcus Setchell

    April 5, 2020 Reply
  10. Christopher Smallwood Former Chairman of Kingston and St George's Foundation Trusts

    I suggest the lockdown should be lifted sooner rather than later. The School of Hygiene and Tropical Medicine has suggested that each infected person is now communicating the disease to only 0.62 others, in which case when the decline in numbers starts, it will be steep. So the lockdown might be relaxable quite soon.

    [I am suspicious of the Imperial College projections of 250,000 deaths without the lockdown because Prof Ferguson is associated with exaggerated claims of disaster before (see mad cow disease). He criticises the Oxford study which suggests half the population may already have had covid because it has not been peer-reviewed. But his model has not been peer reviewed. It is extraordinary that all this is being done on the basis of one man’s modelling.]

    The longer the lockdown goes on, the higher the costs incurred – in terms of people’s health, non-covid-related deaths, and the economy. So the stronger the case becomes for relaxation. (My sister for example has skin cancer next to one eye – it is not being treated at the moment.)

    How to come out of the lockdown? This could be partly geographical – most cases are in London and Birmingham, so why should the rest of the country continue to be locked down? Secondly, vulnerable people could be encouraged to self-isolate, whilst others are released. Why should young people lose their jobs and middle aged people have to watch their businesses fold for the sake of old people with comorbidities, many of whom would shortly have died anyway? Not sustainable.

    Anti-virals which could mitigate the symptoms and help to avoid deaths would be extremely helpful. If one could be developed, the NHS should be fine – even in present circumstances there are more ICU beds and ventilators than we need. I would really like to know from our expert medics what they think the chances of developing one soon are.

    I am not so concerned about the economy provided the lockdown is relaxed after no more than three months. As a former Treasury economist, I am hugely impressed by the support packages the Treasury has produced in such a short time. These will preserve the framework of the economy, enabling recovery next year. Many of the self-employed activities folding will be able to start up again.

    I just don’t believe the present lockdown is sustainable for more than three months anyway. It already seems an age and it is only two weeks. When Parliament comes back on April 21, there will be increasing pressure to start raising it.

    Raising the lockdown is not just a question for epidemiologists. The Imperial team are looking at one set of considerations, but there are many others. Would we really want an epidemiology professor as prime minister? Keep well.

    April 5, 2020 Reply
  11. Nicola Stingelin Ethicist: advisor to academia, commercial sector and the NHS

    Who should contribute to bearing the spiralling economic costs? The major actors in a health crisis are States, government agencies, and global institutions such as the WTO, WHO and UN. However, there is a ‘C’ for ‘Corporate in ‘pandemic’. What responsibilities should be laid at the feet of the pharmaceutical sector in the age of pandemic?

    Health care research and development has been largely (perhaps oddly in many respects) delegated by society to the private commercial sector. Milton Friedman famously wrote back in 1962 that the social responsibility of business in free economy is to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game. “The game” the pharmaceutical industry is engaged in is contributing to improving access to the highest attainable standard of health (that has long been declared by the UN and WHO to be a human right).

    By the start of the 20th century the reality of ‘Corporate social responsibility’ (CSR) has been adopted by the pharmaceutical sector. The WTO adopted in 2001 a Declaration on intellectual property rights and public health in response to concerns that patent rules restrict access to affordable medicines in health emergences. This ‘Doha Declaration’ affirmed the sovereign right of governments to take measures to protect public health, giving primacy to public health over private intellectual property.

    How is the conduct of the pharmaceutical sector in the ‘Age of Pandemic’ faring? It seems to be responding with speed to leverage expertise in vaccine development; develop antiviral therapies; develop and market test to detect the novel virus and antibodies; undertake drug repurposing trials, as well rushing the manufacture of ventilators. The preparedness of China to share accurate and complete coronavirus data with the WHO, academia and the commercial pharmaceutical sector has become a central requirement. The COVID-19 Therapeutics Accelerator was launched in March 2020 by the Gates Foundation, Wellcome, and Mastercard comprises 15 major pharmaceutical companies who have agreed to share their proprietary libraries of molecular compounds.

    The Pharmaceutical Research and Manufacturers of America published their “Principles on Beating Coronavirus” based on ‘share’, ‘collaborate’ and ‘work with’ governments and fellow companies. The industry will furthermore coordinate with governments and insurers to ensure that treatments and vaccines will be available and affordable for patients. AbbVie is reported as deciding not to enforce patents (foregoing thereby higher level income streams) for its HIV therapy KaletraTM, a candidate COVID-19 repurposed drug.

    To conclude, the pharmaceutical sector in the age of pandemic; feeling the pain, loving the responsibility? Does the future lies in the sector embracing organisation such as the Medicines Patent Pool, a non-governmental organisation backed by the United Nations that supports access to drug treatment through a voluntary licensing mechanism for low- and middle- income countries?

    We are indeed all in this together; corporate social responsibilities must encompass global solidarity as an essential part of retaining a ‘licence to operate’ in times of global health crisis.

    April 7, 2020 Reply
  12. Roger Kirby Professor of Urology

    Figures released yesterday showed an additional 980 deaths of people with coronavirus symptoms, including 19 healthcare workers, in UK hospitals – the largest daily total of the outbreak so far, bringing the overall death toll to 8,958. Addressing Stewart’s central question “Why didn’t the experts see this coming?” – I do think that there will be questions that will need to be answered about the speed and timing of the UK’s reaction to the pandemic. Boris Johnson’s breezy and bouncy optimistic announcement in March that we will “send the Coronavirus packing by Easter” – when the reverse was very nearly the case as far as he was concerned – illustrates some of the flawed initial thinking by Government when faced with the COVID-19 pandemic. Quite apart from the delays in ordering sufficient PPE, ventilators and testing kits, all of which have been the subject of intense debate, there is an obvious question mark over the timing of the UK introduction of social distancing. The CMO Chris Whitty stressed that introducing it too early would result in the public tiring of it and flouting the recommendation, however, delay in its introduction arguably allowed the virus to spread unchecked, with the probable consequence of more deaths and a longer overall lockdown requirement. The recent reduction of hospital admissions for COVID-19 related illness is encouraging, but we have a long way to go yet before we can put this epidemic behind us.

    April 11, 2020 Reply
  13. Anjna dr

    Dear Stewart,
    I think your blog is an incredible article rather than a blog. Very thought provoking. Thank you. I’m seeing people I have known for years now dying. One place that has been leading misinformation and has been welcoming editing is–20_coronavirus_pandemic

    April 11, 2020 Reply
  14. Roger Kirby Professor of Urology

    A rather damning piece in the Sunday Times today – just as supplies of PPE in NHS hospitals are running critically low

    April 19, 2020 Reply
  15. Christopher Woodhouse Emeritus Professor of Adolescent Urology

    1. The great benefit of hindsight is being re-visited everyday. That which is thought to be right today will definitely be thought wrong tomorrow, as we have so little truth to guide us. I dread the ‘post mortems’ on this pandemic almost as much as the pandemic itself.

    2. If we were to follow a model prioritising the economy, we would have to accept a triage system that actively allowed some people to receive no treatment. I doubt if that would be acceptable either at an individual or a State level. I have not read of any country that has done so.

    April 27, 2020 Reply
  16. Roger Kirby Professor of Urology

    Britain now has Europe’s second highest official COVID-19 death toll with more than 26,000, according to figures published on Wednesday that raised questions about Prime Minister Boris Johnson’s response to the outbreak.
    Some 26,097 people died across the United Kingdom after testing positive for COVID-19 as of April 28 at 1600 GMT, Public Health England (PHE) said, citing daily figures that included deaths outside of hospital settings for the first time.
    That means the United Kingdom has suffered more COVID-19 deaths than France or Spain have reported, though less than Italy, which has Europe’s highest death toll and the second worst in the world after the United States.
    “We must never lose sight of the fact that behind every statistic there are many human lives that have tragically been lost before their time,” Foreign Secretary Dominic Raab told reporters. “We are still coming through the peak and…this is a delicate and dangerous moment in the crisis.”
    Such a high UK death toll increases the pressure on Johnson just as opposition parties accused his government of being too slow to impose a lockdown to limit contagion from the new coronavirus, too slow to introduce mass testing and too slow to get enough protective equipment to hospitals.

    April 29, 2020 Reply
  17. Roger Kirby Professor Roger Kirby

    Introducing the coronavirus lockdown days earlier could have made a difference to the scale of the outbreak, the government’s chief scientific officer has admitted.
    Sir Patrick Vallance said: “When you look at everything that happened, maybe days either way would have made a difference.”

    May 6, 2020 Reply
  18. Christopher Smallwood Former Chairman of St George’s Hospital, and Economic Adviser to Barclays

    I wonder if I could share some heretical thoughts with you? Over the past few days I have had an uneasy feeling, growing into a conviction, that the response which has been developed to the coronavirus is a terrible mistake.

    We know that it involves enormous economic damage, blighting many people’s lives. We also know that it leads to many deaths which would not otherwise have occurred – all the complaints which the NHS is not now treating. It is not true that the NHS has not been overwhelmed; it has not been overwhelmed by coronavirus cases, certainly, but this is because they have been prioritised. It is in effect overwhelmed by all the rest: it cannot treat them.

    Policy is now evidently being driven by the R value. In fact, no one knows what this is; quite wide ranges are mentioned but how they are arrived at when we do not know how many cases there are is a mystery.

    Leaving that on one side, however, my contention is that steering by R is not the way to minimise the damage caused by the virus. I am deeply sceptical about modelling, having been exposed to many economic models, and I would prefer an approach which does not depend on them. What do we know? We know that the mortality rate for coronavirus is extremely low – between 0.1% and 1% generally, and for those below 50, virtually zero. Many people who contract it have no symptoms; others have an uncomfortable few days before recovering. We know that people over 70 suffer a higher mortality rate but that the vast majority (over 90%) of deaths are associated with underlying conditions. We know that the rate of hospitalisation even of those over 70 is low – say 2% – except for those with underlying conditions.

    All this does not seem to me to justify locking down the entire population. If the object is to protect the health service, locking down people other than the elderly and others with significant underlying conditions serves almost no purpose. They are unlikely to be hospitalised anyway. The people for whom self-isolation is relevant are those who are vulnerable. Policy should be directed towards protecting them.

    If this is correct and the self-isolation of the rest of the population is beside the point, then it is extremely important not to lock up the rest of the population, because they constitute the majority of the labour force. Taking them out devastates the economy.

    Isn’t the straightforward conclusion therefore to restrict policy interventions to the vulnerable groups and let everyone else go back to work – taking whatever precautions they think are appropriate when they are there?

    This conclusion holds whatever the value of R is. R can be 3 or 4 in relation to the great majority of the population and it won’t be especially important because they can weather the virus and bounce back in a few days. After a few months, herd immunity will be achieved and the emergency will be over. This was the policy until the Prof from Imperial came along with his modelling, and I think it was entirely rational. Trying to contain R for the whole population will produce far, far more economic damage than the other course, for very little extra health benefit.

    May 7, 2020 Reply

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