“We cannot let the cure be worse than the problem itself. You’re going to lose more people by putting a country into a massive recession. You’re going to have suicides by the thousands.”
These are the words of US President Donald Trump. His assessment of the balance of risks in easing restrictions designed to stop the spread of COVID-19 probably owed more to worries about the political risks of an economic shutdown than to any genuine concern about American lives.
But did he nevertheless have a point?
No one regards Trump as an expert in the economics of pandemics. But at almost the same time that he made his claim, the Times of London reported on a very similar argument, made in a seemingly reputable academic research paper by a professor of risk management in the Faculty of Engineering at Bristol University.
His paper was accompanied by lots of equations, with the oddly precise conclusion: “If the coronavirus lockdown leads to a fall in GDP of more than 6.4 percent, more years of life will be lost due to recession than will be gained through beating the virus.”
This was immediately seized upon by professional right-wing contrarians, such as the Spectator columnist Toby Young, a proponent of “progressive eugenics”, and others with only a tenuous grasp of arithmetic, let alone economics. More seriously, it was picked up by the BBC and, weeks later, is still being reported as fact – the very definition of a “zombie statistic”.
In fact, the underlying research is, not to put too fine a point on it, junk: written by an academic with a background in safety control systems for nuclear power plants. While this is undoubtedly a vitally important topic, it is not one that confers any expertise whatsoever in health economics.
The paper is to be published in a journal entitled “Nanotechnology Perceptions”.
Suffice it to say that this is not where you would expect to read credible research on health economics. But what evidence does he present?
The paper points to the well-known, and common-sense fact that countries with higher GDP per capita tend to have longer life expectancies. Therefore, he argues, if GDP falls as a result of the lockdown, so will life expectancy.
But just because people in richer countries generally live longer does not mean that the sharp fall in GDP resulting from the current crisis will cost lives.
The relationship between GDP and life expectancy is complicated and probably works both ways. Countries which improve the health outcomes of their population grow faster.
More importantly, this argument confuses the long-term correlation between health and wealth with the impact of a short-term fall in GDP.
So what does a recession actually do to life expectancy? The research literature does have a clear answer to this and it is not the one that most people, or even most economists, would expect.
Angus Deaton, an economics Nobel Prize winner and a leading expert on the relationship between economic conditions and life expectancy, summed it up thus: “Many papers, many places, many times find that all-cause mortality falls in recessions.”
In other words, there is lots of evidence from different countries at different times that the short-term impact of a recession is actually to prolong life expectancy.
He notes, for instance, that Greece and Spain – among the countries worst affected by the 2008 to 2009 financial crisis and its aftermath – saw significant falls in death rates.
Why should a recession mean we live longer? A study looking at the experience of European countries after the financial crisis found that accidents fell. Perhaps more surprisingly, so did alcoholism and related deaths.
Suicides do go up by about 34 percent – President Trump was right about that – but they only represent a tiny fraction, about 2 percent, of all deaths, so the impact is more than counterbalanced by these other factors. Overall the “all-cause” mortality rate goes down by 3.4 percent.
Does this mean recessions are actually a good thing? Of course not. But it does mean that we should not worry too much about the direct, short-term impact on life expectancy of the current restrictions. The idea that they are costing more lives than they are saving is both wrong and dangerous.
This does not mean that we should not worry about the longer-term economic impacts.
Indeed, Professor Deaton won his Nobel Prize in part for his work (with Anne Case) on their book, Deaths of Despair. In this, they show how long-run structural economic changes led to increased rates of addiction and mental health issues for white working-class Americans; which in turn has, over the last two decades, reduced life expectancy among those affected.
Economics does matter. If we allowed the COVID-19 crisis – a short-term health issue – to lead to long-term unemployment or rises in poverty, then it would indeed damage our collective health over the long-term
So, the important thing is not to obsess about the inevitable short-term fall in GDP during the period of the lockdown but about what happens next.
Last week, the Office for Budget Responsibility (OBR) in the UK published its coronavirus “reference scenario“, which sees UK GDP drop by an astonishing 35 percent this quarter – more than US economic output dropped over the first three years of the Great Depression.
But the OBR also assumes a quick bounce-back – what it calls a “V-shaped recovery” – with things getting back to “normal” in 2021.
This scenario, if it materialises, would mean that the permanent damage – both to our economy and our health – would be minimal. So, ensuring that it does should be our main priority.
Crucially, in the short term, that means maintaining, not removing, the lockdown; the precise opposite of the argument made by President Trump.
The worst possible outcome would be to relax the restrictions for economic reasons and then to have to reimpose them for health reasons as the virus reappears.
If that happened, there would be very substantial costs – political and psychological as well as economic – to such an approach. Both business and consumer confidence would be damaged, jeopardising any prospect of an early strong recovery.
Far better to keep the current measures in place until they can be phased out in a controlled but predictable way. And, indeed, far from arguing against this approach on economic grounds, economists – across the political and ideological spectrum, both in Europe and the US – are close to unanimous that this is the right course of action.
Unfortunately, there is yet a further risk. One thing that is certain is that the crisis will leave government debt and deficits at much higher levels in most countries as spending to cope with the crisis soars and tax revenues disappear.
We have seen before that this might lead to damaging economic policy decisions when the immediate danger is past.
In the UK, there is considerable evidence that cuts to public services and the welfare state after the 2008 to 2009 financial crisis reduced life expectancy for the poorest in society.
It was these cuts after the recession – not the recession itself – that did the damage. The then-Chancellor, George Osborne, famously promised that he did not intend to balance the budget “on the backs of the poor”, and then went on to do precisely that.
As the current crisis has revealed, this cutting of funding to health and welfare was a false economy.
Even before the COVID-19 outbreak, the UK government responded to public pressure by increasing the National Health Service (NHS) budget, and further increases will now be necessary. Moreover, the sharp rise in unemployment is revealing the inadequacy of safety-net welfare benefits, and these, too, have been increased.
If, when the crisis is over, we seek to reduce the deficit by making the same mistakes we made after the financial crisis, the poorest will suffer again. But that will not be the fault either of the virus or the measures we are taking now to combat it – it will be the fault of policies and politicians. We are free to choose a different path.
Most importantly, there is nothing stopping us from taking the opposite approach to that adopted in the UK in 2010, and investing in health, decent public services and a more generous benefits system, financed in the short term by borrowing if necessary, but in the longer term by higher taxes, especially for those who have done well over the last decade while many middle and lower-income groups have struggled.
In the US – where inequality is even higher, the safety net far weaker and the health system even more inadequate for the poorest – the case is even stronger.
As Professor Deaton says – echoing the similar message in the UK from Professor Sir Michael Marmot’s review of health equity in England – reducing income inequality would reduce inequalities in health and life expectancy.
That would make our societies more resilient for the next crisis, whether it is an economic one, a health-related one or both.
The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.