Serious precautions and preventive measures are necessary to fight COVID-19, but the costs could prove to be massively out of scale with the risks
By Terence Corcoran, NATIONAL POST
The global economic experiment in pandemic control continues to expand, nation by nation, economic sector by economic sector, worker by worker. Governments are getting the headlines: In Japan there is talk of US$260 billion in government action. The U.S. is said to be aiming for US$1 trillion in new spending. Canada announced $82 billion in direct and indirect spending. France $550 billion. Spain $150 billion.
And so it goes around the globe, and where it will end, nobody knows. At his news conference Thursday, Prime Minister Justin Trudeau threw more measures into the mix when he noted the “massive” losses in the value of the pension assets of Canadians. He promised Ottawa “will be taking measures.”
Once the mandated global economic lockdown is ended, likely months from now, more massive national stimulus will be called for to allegedly stimulate the growth needed to pay down mounting government debt. I will leave it to professional economists at one of the banks to run up a tabulation of the trillions of dollars that governments have and will be committing to the cause of fighting the pandemic that their earlier negligence helped to create.
Whatever the total government spending number, it will be dwarfed by the dollar value of the damage done to the world economy by the collective actions of the world’s political leaders as they orchestrate the greatest deliberate peacetime attack on economic activity. The U.S. economic slowdown — if slowdown is the right word for the precipitous declines in activity — is already underway. China’s growth rate is cratering, Europe is right behind.
The stated objective of the economic shutdowns is to stop the spread of a disease that could kill hundreds of thousands of people. But hundreds of thousands die every year from other causes that do not prompt a mandatory economic shutdown. The World Health Organization, one of the orchestrators of COVID-19 pandenomic programs, estimates that 1.35 million die annually from traffic accidents around the world, including nearly 40,000 a year in the United States and more than 2,000 in Canada.
Annual flu season kills between 365,000 and 650,000 globally a year, according to the WHO. The 2018 U.S. death toll from the flu reached a record 80,000 and in Canada up to 3,500 can die from flu.
The point here is not to diminish the threat posed by COVID-19, but to highlight that the world is an unsafe place for millions of people who die every year from existential events without triggering a global economic shutdown.
The Manhattan Institute’s Heather Mac Donald recently noted the obvious. “We did not shut down public events and institutions to try to slow the spread of the flu. Yet we have already destroyed $5 trillion in stock market wealth over the last few weeks in the growing coronavirus panic.”
Serious precautions and preventive measures are necessary to fight COVID-19, but the costs of the new pandenomics could prove to be massively out of scale with the risks.
Excessive economic costs have been linked to viruses in the past. A 2008 World Bank paper cited by U.S. medical columnist Darren Schulte examined the economic costs of fighting previous viral outbreaks, including the SARS coronavirus event in 2003. The paper estimated the GDP loss from fighting SARS in Hong Kong, Singapore and Taiwan at $13 billion in 2003 dollars, a large number considering there were only 7,000 cases and 700 associated deaths.
The cause of the GDP losses were associated, first, with the voluntary adjustments made by individuals and businesses who altered their behaviour to avoid the SARS risks. But there was a second cause. “The distinctive feature of these episodes is that although they ultimately result in relatively little illness and death, they entail large economic costs which are primarily the result of excessive preventive behaviour by individuals and (on occasion) governments.”
By imposing travel bans and other measures that interfered with trade and other activity, governments added to the costs that exceeded the costs of dealing with the disease itself. In the current exercise in pandenomics, the economic costs of fighting COVID-19 will be staggering.
Once the COVID-19 economic shutdown has ended and recovery is underway, the measurable final GDP costs of fighting it will run to many trillions of dollars and will be accompanied by incalculable burdens borne by individuals and companies.
The trillion-dollar figures will be defended on the grounds that hundreds of thousands of lives were saved.
It could also be said, however, that these same lives could have been saved if Ottawa and the rest of the global political establishment had heeded earlier warnings of the risks of pandemic. The online Blacklock’s Reporter this week referred to a 2006 Health Canada study that clearly described how the pandemic could sweep the country. Did anybody read the study? Or were the bureaucrats too busy drafting climate-change preparedness plans?