Sun 17 January 2021

A year into the Coronavirus pandemic, Jonathan Portes checks what he got right about its impact and what he got wrong

“Coronavirus isn’t going to kill you” wrote Daniel Hannan almost exactly a year ago. He was right of course: I’m still alive, and so are you. His praise for the Governor of South Dakota, Kristi Noem, for making her state into the “control in the experiment” was also justified by events. The soaring mortality rate (for several weeks the highest in the world) conclusively demonstrated that the policies that she and he advocated were literally a death sentence for her constituents; a service to the world if not to those who died.

Boris Johnson rewarded Hannan for this prescience by putting him in the House of Lords. Encouraged by this no doubt, he has shown not the slightest contrition for his ignorance or irresponsibility. I’m more aware of my own limitations than the noble Lord (admittedly, not a high bar) so I have largely confined my forecasting and policy advice to the economic impacts – and the appropriate policy response – of the pandemic.

But unlike him, I think it is important to reflect on what I got right or wrong – to “mark myself to market”, as my colleague Brad Delong puts it, as I do every year for my economic forecasts. 

The Case For and Against Lockdowns

The first piece I wrote on COVID-19 – just a day after the first lockdown began in March – was entitled ‘Don’t Believe the Myth that We Must Sacrifice Lives to Save the Economy’.

It made two key, linked arguments. The first was that there was no direct trade-off between health and economics. In particular, people – whether politicians, economists, or commentators – who were arguing that the economic damage inflicted by lockdown would, directly or indirectly, cost us more (in lives or wellbeing) than COVID-19 itself would if left unchecked, were wrong. 

The second was that we should worry much less about the short-term economic impacts than about the longer-term; that while restrictions would inevitably mean an enormous fall in Gross Domestic Product (GDP) in the short-term, this need not and should not translate into lasting economic and social damage, provided the Government pursued appropriate policies. 

Nine months on, and these debates still remain central.

Does lockdown – via the direct impact on the NHS and on people’s physical and mental health, or the indirect impact of reductions in GDP and increases in unemployment – kill more people than it saves? 

There is no evidence yet of an uptick in suicides, in the UK or elsewhere. COVID kills. Lockdowns, mostly, don’t.

In the short-term, the evidence seems pretty clear. As I said then, short-term falls in GDP don’t normally reduce life expectancy “counterintuitively, the weight of the evidence is that recessions actually lead to people living longer. Suicides do indeed go up, but other causes of death, such as road accidents and alcohol-related disease, fall”. 

The data so far supports that – Office for National Statistics analysis suggests that the overwhelming majority of the excess deaths we’ve seen since March are down to COVID-19. Indeed, while there is no doubt that the past few months have had an adverse impact on mental health, there is no evidence yet of an uptick in suicides, in the UK or elsewhere. COVID kills. Lockdowns, mostly, don’t.

Nor is there any serious debate as to whether lockdowns ‘work’, in the sense of reducing the spread of the disease. Both common-sense (reducing human contacts reduces the spread of a respiratory virus) and careful empirical work demonstrate that.

But my broader argument was that, not only would lockdowns work in the short-term, but that the right thing to do from an economic as well as a health perspective was to maintain them until the Coronavirus was gone: “The idea that the way to minimise the economic damage is to remove the restrictions before they’ve done their job – definitively suppressing the spread of the virus – is a terrible one.”

Implicit here were three related arguments. First, that relaxing restrictions too early risked a second, and possibly more damaging, wave of the virus. Second, that restrictions would allow us either to eradicate the virus or to contain it at very low levels until a vaccine or effective treatment could be developed. And third, that the arguments of those who said that lockdowns only delayed inevitable illness and deaths – ‘flattening the curve’, rather than changing the area underneath it – were unduly pessimistic.

On this I and others have been vindicated – but arguably only by chance. We were right that premature relaxation of restrictions was dangerous, not just for lives but for the economy. And we were right to call for the re-imposition of restrictions when a second wave was clearly in prospect. The Government’s policy errors in opening up too early in the summer – and then compounding it with messaging that ranged from the inconsistent to the positively irresponsible, as in the now-notorious ‘Eat Out to Help Out Scheme’ – have cost tens of thousands of lives, as well as hundreds of billions of pounds.  

But, if it were not for the prospect of mass vaccination, would our arguments look good in retrospect? Suppose we were now confronting the new, apparently more transmissible variant of the virus, hard to contain even with a strict lockdown?

It is far from impossible that we would now have to admit defeat – that a strategy based on containment was unsustainable, not just economically but socially. In that case, temporary lockdowns wouldn’t have been for nothing – they would still have prevented the NHS from being overwhelmed and saved some lives by allowing time to develop better treatments. But I would have had to admit that the strategy hadn’t worked. That we are not in that position is down to the scientists who delivered the vaccine, not to my good judgement. 

Government Economic Policy

What about the economic policy response to the pandemic? Here again, I think I got the basic economics right, but miscalculated about the length of the crisis and what that meant for policy. In particular, I argued that with the private sector saving like never before and interest rates at their lowest in recorded economic history,  we shouldn’t worry about the enormous rise in the debt and deficit.  

In response to some particularly ill-judged comments by the BBC’s Political Editor Laura Kuenssberg, I wrote that “anyone making claims that we ‘can’t afford’ to support jobs and families during and after the pandemic, that there is ‘no money left’, that we’ve ‘maxed out the nation’s credit card’, that we’re ‘loading debt onto our children’ is talking economically illiterate nonsense”.

All of this was, and is, based in sound economics – as shown by the fact that even now the Government can still borrow at negative real interest rates, with no end in sight. An excessive focus on what the pandemic meant for the Government’s finances was at best a distraction and at worst positively damaging. Instead, we should be worrying about the long-term impacts and, in particular, the potential scarring effects of unemployment, business failures and school closures.  

But again, over-optimism bias got the better of me. Most obviously, here on Byline Times in April, when I likened the impact of lockdowns to summer holidays – a temporary shutdown that need not have lasting economic consequences. On that basis, and with the right policies, including furlough schemes and massive support to business, I said that there were “grounds for optimism… true, some firms will go under. Most are likely to be relatively small firms in sectors, such as retail, hospitality and tourism, where turnover is relatively high in normal times. That doesn’t make it a good thing, but it does mean that the damage will fade out relatively quickly”. Effectively, I predicted a ‘V-shaped recovery’.

In mitigation, I also said that this could be jeopardised – as indeed it was – by the premature removal of restrictions and a consequent resurgence of the Coronavirus. But still, I should have been more cautious. And that led me in turn to a further error, when I supported the Government’s decision last August to phase-out the furlough scheme on the grounds that, as we moved from the pandemic into a new phase of recovery and restructuring, extending it might mean that we were paying for jobs that no longer existed and that it was time to transition from supporting existing jobs and businesses to helping to create new ones.

I corrected that error in October – as, subsequently, did the Government. But both I and the Chancellor Rishi Sunak should have thought harder about what the policy should be if things turned out, not as we hoped for, but as we feared.

Worst-Case and Best-Case

So what have I learned? I think there are two key takeaways.

First, my economic instincts – and those of most other economists, across the political spectrum – were right, even in these extraordinary circumstances. We were right that thinking about policy as a trade-off between health and the economy was wrong, and instead that we should think about the trade-off between the short and the long-term – and prioritise the latter. And we were right about debt and deficits and how to think about their causes and consequences.

This is reassuring. If you had told me before the Coronavirus pandemic that I was going to find myself, for the best part of a year, in near-total agreement not just with Simon Wren-Lewis, Tony Yates and Frances Coppola, but Ryan Bourne and Julian Jessop, I’d have been at best bemused.

But I was also over-confident and over-optimistic in several respects. Like the Government, I thought about policy on the basis of a ‘reasonable best-case’ scenario both for the course of the pandemic and for the degree to which government policy would follow the evidence and the science (and, in some respects, attain a basic level of confidence).

In fact, a ‘reasonable worst-case’ would have been closer to what happened. And so, while I would stand by the economic analysis, if it were not for the early and successful delivery of effective vaccines, some of what I had written would look at best irrelevant. 

What does that, in turn, tell me about my predictions going forward? For the Financial Times’ annual survey, I was optimistic again about growth and unemployment:  “Conditional on the relatively successful and speedy roll-out of a vaccine, and a non-catastrophic Brexit (but assuming some short-term disruption), I’d expect a relatively strong recovery on the back of pent-up demand. I’d expect employment rates to recover relatively strongly with unemployment falling to 5% or so by end of 2021.” 

I’m fairly happy I have got the economics right here. But I think the lesson of the past year is that, while we might hope that the vaccine roll-out is speedy and successful, it would be foolhardy and dangerous to count on it. It is not too early to think about what we should do if it doesn’t work out that way. 

Jonathan Portes is Professor of Economics and Public Policy at the School of Politics & Economics at King’s College, London

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