No recession is easy but the Covid recession must make governments around the world nostalgic for the usual ones where you just slash interest rates, shovel out money into the economy and do all you can to get things moving.
OK, it’s never that simple and invariably things take longer to recover than they did to fall, but at least there is an established pathway to follow.
And sure, conservative governments always seem to think the pathway involves cutting taxes and reducing expenditure earlier than they should, but at least even they will pretend to be Keynesians for a little while.
But the current pandemic recession has been much tougher because of … well, the pandemic. This recession is as much about health as it is about economics.
It is hard to stimulate the economy and get people working when health restrictions prevent that occurring.
It has led some (mostly conservative) commentators to argue there is a necessary trade-off between higher economic growth and fewer deaths. It also led to a pretty morbid and generally ignorant discussion about how governments will have to decide how much each life is worth.
And yet analysis of the performance of OECD nations, which make up the major advanced economies in the world, shows this thinking is completely wrong.
What we find instead is a clear link between higher numbers of deaths from the virus and a weaker economy.
The United Kingdom and Spain, which aside from Belgium have lost the most citizens per million to the virus within the OECD, are also the worst performing economies.
In the 12 months to June, the UK’s economy crashed 21.7%, while Spain dropped 22.1%. You might be able to argue that was worth it if it had meant lives were saved, but the UK has suffered 611 deaths per million while Spain is up to 622.
At the other end of the scale, South Korea has had just 6.3 deaths per million and its GDP has fallen a “mere” (mere is very relative in these crazy times) 2.8%.
Australia at the end of August finds itself in a good position, both health-wise and economically, compared with nations such as Canada, France, Mexico and Italy.
The performance of the Scandinavian nations is also quite instructive.
Sweden, which bizarrely became the poster-child of the free-market/anti-lockdown crew, has suffered 577 deaths per million and yet its GDP fell by 7.7%, worse than its neighbours Norway (down 5.3%), Finland (down 6.3%) and much the same as Denmark’s 7.8% fall.
And yet those three nations have had much fewer deaths – Denmark is the worst at 107 per million.
In reality, the performance of Sweden and the rest of the Scandinavian economies are closely linked (and more so with Germany); all the Swedish government was able to strongly affect was the number of people who would die.
They chose poorly.
The best Sweden and the USA can argue is they achieved a better economic growth than other nations like them that have the highest number of deaths per capita. But they have had much more death than other nations with the same level of GDP growth.
In effect they got it half right – and the half they got wrong meant people died.
This data does not mean that stronger lockdown measures are preferable, or that NSW’s action are better or worse than that of Victoria or any other state.
What it does demonstrate is that if your health measures reduce deaths, your economy appears much less likely to crash as badly as it would.
The data shows that there is not a trade-off between deaths and economic growth – rather the two work together. Regardless of restrictions, if people are dying in large numbers your economy is stuffed.
Deal well with the health crisis and you can deal much better with the economic one as well.
— to www.theguardian.com