Countries have experienced economic depressions before, but not usually as a matter of choice.
The nation-wide coronavirus shutdowns over the last two weeks have ground parts of the American country to a halt. We have probably never before in our history seen so much economic activity vaporize so quickly — within days or even hours. The Great Depression and the panics of the 19th century are the only possible analogues.
Goldman Sachs is forecasting a 24 percent drop in quarterly gross domestic product. Morgan Stanley is anticipating a 30 percent decline in quarterly GDP.
These are the top-line numbers of a devastation that will throw millions out of work, stress families and blight personal lives, destroy the dreams of small-business owners and bankrupt industries. This is a tale of human misery, not just of declines in the stock market and in GDP.
The federal government can alleviate some of the damage, but even the biggest, best-designed stimulus bill is no fix for shuttered store-fronts and factories. And how many times can Washington pass $2 trillion bills?
No, this is not sustainable, nor will people stand for it except as a temporary expedient. President Trump is already expressing impatience with his own guidance against gatherings of more than 10 people for the next 15 days.
If that sentiment is understandable, it’d be foolish to give up on the lockdowns before they have much of a chance to, in the cliché of the hour, flatten the curve.
And it is important to remember that the disease itself is imposing an economic cost. It would have caused a recession regardless of government policy.
Would New York City restaurants really be full if it weren’t for the Gov. Andrew Cuomo-ordered lockdown? Would people be eager to get on airplanes? To book a cruise? To see a Broadway show? To go to Disneyland?
If the disease had been left unchecked, it would have exacted an enormous price, in lives of the infected, in the breakdown of the hospital system, in the follow-on effects on people ill with conditions that would have gone untreated. No matter how bad today’s lockdowns are, imagine if we decided to undertake them at a time when America already had a million cases and the health-care system was in deep crisis.
The answer to our current situation doesn’t require downplaying COVID-19, or going about business as usual and hoping for the best. The advantage of the lockdowns is that they make every other public-policy option look cautious and inexpensive by comparison. What can be more radical than telling tens of millions of American to shelter in place?
Our aim should be to shift from the blunderbuss solution of mass shutdowns to rifle-shot remedies, on the model of what South Korea has done with its widespread testing (although it has much more favorable conditions as a smaller, more cohesive country with an outbreak centered on one church).
We should focus on the production of tests, ventilators, masks and other protective gear on an industrial scale. Whatever the federal government has to spend or do to get it done should happen — just as if we were on a wartime footing.
The first priority should obviously be backstopping the hospital system and protecting front-line medical workers. But, as economists Paul Romer and Alan Garber argue, we need to widen out from there to create a system of population-wide testing and the distribution of protective gear to workers interacting with the public to protect against coronavirus spread, while allowing for ordinary work.
This regime would depend on innovation — cheaper, faster tests, etc. — but that is surely within our power with enough will and resources.
Then, we could begin to return to normal with much less risk, even if vulnerable populations and metropolitan hot spots still require extraordinary precautions.
Whatever path we take will be costly and have its downsides. All we can know with certainty is that the current path is untenable.