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More people could be killed from an economic recession than from the Coronavirus

Experts have warned that the health effects of shutting down the UK economy may kill more people than the Coronavirus. 

In a historic conference on Monday 23rd March 2020, the Prime Minister of England, Boris Johnson, urged the public to stay away from pubs, restaurants and theatres and to work from home in a bid to stop large numbers of people from contracting the virus. The government’s recommendations were based on a report by disease modelling experts at Imperial College, London, that showed that if a softer “mitigation” approach was taken, then the virus would kill approximately 250, 000 people. But under a more aggressive “suppression” method, that number would fall to 20, 000. However there is a cost to a lockdown, not only in the reduced functioning of society but in terms of human life. As the virus hits the global economy through travel bans, quarantines and infrastructure shutdowns, economists have warned of a longer-term impact – people dying as a result of an economic recession. 

Global market decline

Global markets have plummeted since the outbreak of coronavirus in January, with some experts already anticipating a recession as bad as the 2008 financial crisis. “In the worst case, we will probably see a large global recession, which looks like the early quarters of the 2008 crisis” said Harish Natarajan, Head of Economic Analysis at AKE International. Markets have already suffered declines as investors flee equities for safe havens. But while central banks have moved to respond and calm markets, the economic hit from Coronavirus is only just beginning. As countries increasingly isolate themselves and dedicate resources to containment, the slowdown in global trade is likely to be felt more strongly.

Why might an economic crash lead to deaths?

In 1975, Samuel Preston plotted life expectancy at birth against gross domestic product (GDP) per head and produced a smooth curve that described how citizens of richer countries live longer than those in poorer countries. Children born in sub-Saharan states can expect to live only to age 55, while those born in Japan are not likely to die before the age of 85. A difference of three decades. The message behind Preston’s work is intuitively clear. When countries are poor, they can’t devote as many resources to desirable health and safety measures for their citizens e.g. clean water systems, safer working practices in industry and high-grade medical services. Conclusively, therefore, if there is a sustained fall in GDP per head, then population-average life expectancy will decrease. Applying this philosophy to Covid-19 indicates that more life will be lost than will be gained if the disease countermeasures causes GDP per head in a developed country to fall for a significant length of time. For context, the UK experienced a drop of 6 percent in GDP per head in the financial crash of 2007-2009. This led to a stalling in the growth of life expectancy, cutting at least three months off average life expectancy.

The Covid-19 crisis is causing the global economy to decline at an unprecedented rate. The fundamental problem for a strategy of lockdown is that businesses cannot be switched off one month and then turned back on several months later. If a business ceases trading, it is very likely to fall into administration. According to Philip Thomas, a professor of risk management at Bristol University, the Coronavirus pandemic will severely disrupt business for at least a year, leading to a drop in economic output of 6.4 percent per person in the UK. In such a scenario, fewer people in the UK would be employed, and workers would generally bring home smaller paycheques. Many governments are trying to cushion the blow with grants and loans, but the longer the lockdown proceeds, the greater the fraction of business infrastructure that will be lost. 

In response to this damning revelation, the IFO institute analysed the effect of lockdown on Germany. A sector-by-sector analysis revealed that keeping the economy partially shut down for two months would reduce the nation’s annual GDP by between 7.2% and 11.2%. If those figures are representative of other developed economies, for example the United Kingdom, two months may already be beyond the point where the remedy is causing more harm than good. Implying that two months of lockdown is the longest that should be considered until the effects on business infrastructure become irreversible. Perhaps this study has some relevance to Boris Johnson’s decision to ease lockdown in the UK in early June

Loss of life

To date, the coronavirus has caused more than 400, 000 deaths worldwide. But looking at historical precedent, it’s likely that far more people will be affected by the knock-on effects of an economic recession, resulting in potential job losses, health deterioration and a fall in living standards. Studies from a range of scenarios have drawn connections between economic stress and public health. A study published in the British Journal of Psychiatry suggested that suicide rates across Europe rose in 2009 following years of falling and remained elevated until 2011. A similar trend was also seen in Canada and the US. Another study, published in medical journal The Lancet, found that the 2008 economic crisis was likely linked to around 260, 000 excess cancer-related deaths in Organization of Economic Co-operation and Development (OECD) countries alone between 2008-2010. “Unemployment rises were significantly associated with an increase in all-cancer mortality and all specific cancers except lung cancer in women,” the journal cited as a result from the study. Dr Bharat Pankhania, senior clinical lecturer at the University of Exeter, said it would be crucial to monitor the effect of economic losses attributed to the Coronavirus on death rates. However, he said it would be hard to identify deaths associated with economic losses because they would occur more gradually. Economic deaths happen in isolation and are not dramatic. They are more of an almost invisible event and are certainly not recorded as a mitigating factor in official records. 

While it is difficult to monitor the effect of economic losses on death rates, it’s possible to predict groups within society who are more likely to be affected by it. It’s important to note that these impacts are very unequally distributed across the population. Professor Sir Michael Marmot, an expert in health inequality at University College, London said that any coronavirus-related economic crash would hit the poorest hardest. Firstly, people in manual or service jobs would be unable to work from home so would be unable to follow “social distancing” recommendations. And secondly, poorer people tend to have worse health. If presence of sickness increases the seriousness of Covid-19, there could be a higher death rate in people at prior social disadvantage. In other words, those at the bottom of the income curve will be “acutely vulnerable to the effects of the inevitable economic downturn.” 

Governments in many countries, including the US and the UK, have moved to increase unemployment payments and help companies pay employees in an attempt to soften the blow of a virus-induced recession. But this simply cannot continue long-term. The development of a vaccine could take at least a year, even under the most optimistic assumptions. And even then, governments need time to mass manufacture the vaccine and organise mass immunisation programmes. Protecting citizens from the virus is paramount, but this must be balanced with the equally-vital need to ensure the economy survives post-Corona. 

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