Will the Economic Consequences of the Coronavirus Lockdown More Deaths?
When the economy is destroyed, what we end up talking about is poor people, suffering from a shortage of food and basic products and, depending on the magnitude of the crisis, we also talk about deaths
Spanish – Argentina’s President Alberto Fernández said that between the economy and life, he chooses life. That is the phrase that many people repeat these days, and they use it to accuse people like Trump – who plans to end the quarantine soon – of valuing money more than people’s lives.
Although Fernández’s approach is prevalent these days, it is a false dichotomy. When the economy is destroyed, what we end up talking about is poor people, suffering from a shortage of food and basic products and, depending on the magnitude of the crisis, we also talk about deaths. People are not only dying of the coronavirus, but they are also dying of other diseases and starvation.
Whenever there is a discussion about not slowing down the economy completely or for too long, some people think that only the big businessmen are protected. But in reality, it is the employees, the people who have no savings or earn just enough to live from one day to the next, who suffer the most. They are at the greatest risk when the economy is in crisis, and companies go bankrupt.
The coronavirus kills, but so do economic crises. So without downplaying the importance of either problem, we must pay attention to both issues. We have to try to save the lives of as many COVID-19 patients as possible without destroying the economy and thereby condemning millions to misery and many even to death. We cannot make the cure worse than the disease.
We are facing a virus that we can barely understand, and it has collapsed the health systems of developed countries such as Spain. The mortality rate of the virus is indeed low, but its easy and rapid spread allows it to wreck health systems, causing people who would have survived with adequate care to die due to a lack of medical resources.
And the problem is not only coronavirus patients but all patients who need medical care and cannot find it because all resources are dedicated to the care of COVID-19 patients. We are talking about people who will not go to the hospital at the right time because all non-emergency consultations are canceled. It could mean, for example, cancer patients not diagnosed on time. We are talking about people who will postpone their emergencies, thinking it is more sensible to avoid taking the risk of catching the virus by going to the hospital. We are talking about people with any illness other than COVID-19, who will not have an ICU bed available if they need one.
So early measures of social isolation, event cancellations, and closures of high traffic sites are necessary despite the low coronavirus mortality rate. However, each country’s specific circumstances will dictate how strict and sustained these measures should be.
Some countries have abundant testing available, and patients can easily find out if they have the disease. So they can isolate themselves before infecting many people. The healthcare system is efficient, and medical workers are protected adequately. Patients are quickly evacuated when they are tested and sent home. There are respiratory experts available to treat those who need to be hospitalized. These countries, which include South Korea and the United States, have medicines that are already working. So they can afford much shorter and less restrictive quarantines.
On the economic side, things are relatively simpler, and the same measures that have been proven to work for years will work in all countries. This is not the time to increase state intervention. On the contrary, it is the time to remove obstacles to the private sector, which is the one that creates wealth, so that it can move the economy forward in these difficult times.
Many governments are prohibiting companies from laying off employees, lowering salaries, and giving unpaid leave. If a company goes bankrupt, the employees will not be without income for just the month of the quarantine, but many more months.
Isn’t it obvious that if a company sees a significant reduction in sales, as most companies do right now because of the pandemic, it won’t have any revenue to pay its employees? And isn’t it also clear that if the owner is prevented from laying off some workers, or lowering their pay, all that is left is bankruptcy?
We need governments to give companies the freedom to readjust their organization in these times and to do what they can to sustain themselves so that when this health crisis is over, and most people can return to their daily work, companies will still be there and will eventually resume their normal dynamics including re-employing people who had to be laid off and raising wages again.
This is not a question of protecting entrepreneurs. In fact, most large employers have savings and networks and will certainly not have as bad a time as employees who will be left without a livelihood because the company goes bankrupt. It is about the people who are left without jobs and consumers who are left without products when a company goes bankrupt.
This is the moment when the employer and the worker must be given the freedom to negotiate the conditions under which they can continue, one hiring, the other working. Many workers would beg the politicians to allow the employer to lower their salary if that is the only way not to leave them unemployed indefinitely. Regarding how wages are determined, I have several articles explaining why state restrictions on negotiations between employees and employers only make things worse for workers.
Besides freeing up the labor market, we need to stop smothering employers with taxes. Now we need to take urgent measures to lower the tax burden on companies. They are not operating at the same sales level and have no way of paying taxes. If we want as many people as possible to keep their jobs and companies not to be destroyed, let us help entrepreneurs by lowering taxes.
We must always remember that saving a company is not saving a millionaire owner. It is primarily about saving jobs and allowing people to continue to have access to goods and services.
This is the time when we have to protect the business fabric the most. We want as many people as possible to keep their jobs. But this is not accomplished by prohibiting layoffs or salary cuts. If it were that easy, then we would prohibit poverty and put an end to all evils once and for all.
Right now, entrepreneurs will do what they know best: look out for market opportunities in a swiftly changing situation. They will have to find new ways to sell, deliver, and manufacture their products. Some will change sectors. Some companies have stopped producing regular clothing and shifted to coats for medical personnel. Others are producing hand sanitizers instead of perfumes. In short, entrepreneurs who understand demand patterns will do their job. But now more than ever, we need the government to allow them to function with ease. We need products, and we need jobs because economic crises also kill people.