Why are governments killing their economies to suppress the spread of SARS-CoV-2/COVID-19? That is the question I have been grappling with since the pandemic began to attack the nations of the earth.
Brainstorming Why Governments Are Killing Their Own Economy
A massive global conspiracy by governments. While conspiracy theories will abound regarding the source and spread of the virus for decades to come, As with all conspiracy theories about governments killing their economies, Occam’s Razor is a better process: Researchers should avoid ‘stacking’ information to prove a theory if a simpler explanation fits the observations. Occam’s Razor is the process of paring down information to make finding the truth easier. My undergrad training in Philosophy has caused me to reject most conspiracies, although always considering that conspiracies do occur, and wars using biological weapons are real.
Bad data from Neil Ferguson at Imperial College COVID-19 Response Team. I looked long and hard at The UK report that triggered governments worldwide titled “Impact of non-pharmaceutical interventions (NPIs) to reduce COVID19 mortality and healthcare demand.” Making decisions based on bad data is real, and is common. Could governments be killing their own economies due to bad data? Combine bad data with panic, politicians, and confirmation bias, and there is real possibility of an overreaction policy. The unknown variable with COVID has been knowing the denominator–what is the true number of cases so we can calculate the mortality rate. The arguments here are worth consideration:
Due to this virus spreading so quickly and easily, no one really knows when the proliferation began. The Chinese data from Wuhan is questionable. Older public health management of infectious disease protocols such as tracing not being accurate (since no one knows when the disease actually started spreading so tracking did not start soon enough).
The panic contagion in response to Italy. To most Westerners, a Chinese epidemic would be largely dismissed because of their live animal open-air markets being viewed as primitive and their own fault. Then, when TV reports from Italian hospitals hit the internet, first world nations began thinking if it can happen there, it can happen here–will it happen? As I have outlined in my article, “China, Questions, and a Responsible Australian Business Response to COVID-19,” Italy has a direct connection to China via The Belt and Road Initiative. Chinese migrant workers in Italy, and the travel between the two countries released the COVID epidemic into Italy, then Europe. The same with Iran, a Belt and Road parter releasing the disease into The Middle East. It was at this point that if countries worldwide has closed their borders, the spread could have been suppressed. In retrospect, human skepticism and the cost to GDP of any suppression policy would need to be proven to any world government quickly.
My Search for Why Governments Are Creating Unemployment and GDP Loss at Great Depression Levels
Since 1 March, I have researched and read dozens of papers produced by academics, think tanks, and government policy over the last three weeks in order to answer several questions (below). For awhile I was stuck on the mortality rate being what was driving policy in terms of its impact on GDP. That was a rabbit trail because it is only one variable in the GDP formula.
Secondly, my need to understand why governments are killing their own economies is also business related. In my executive role, I work with my colleagues to formulate the optimal strategic response, make budget recommendations, and operate our company. In the future, businesses now need to truly understand how government views business sectors in terms of their value to GDP production when it comes to crisis planning.
Finding Answers: Not Doing Anything = Self Destruction
1. Why would governments who are always working to produce the highest GDP possible destroy their economy in a pandemic?
A: The actions we have seen taken such as closing schools, businesses, quarantine, etc.will last for a period of time that produces the highest GDP as compared to if government did nothing which is far more costly and potentially self-destruction.
Every person is viewed as producing $151.88 GDP per day in America where the model in this paper has been produced. I am working on getting the data to produce Australian numbers. The numbers don’t really matter because the principles are enough.
Then the quarantining, travel restrictions, and business closings cost $18.7 billion weekly. Total weekly cost to GDP is $35.79 billion to suppress the virus (annualised at 8.7% of 2019 GDP) for an optimal period of time until the cost of suppressing surpasses the cost of doing nothing and letting the virus run its course. Doing nothing would cost $9 trillion or 43% of GDP.
So governments have decided they can take a hit of 10% loss of GDP and weather the pandemic nationally before the country can no longer operate optimally or be secure.
Finding Answers: How Are Governments Determining How Long to Lockdown?
2. What determines how long everything is closed?
A: This is determined by the R naught which is how many people each infected person infects. The cost per day to GDP combined with the R naught is how the cost to GDP is being throttled by suppression measures.
Finding Answers: Value of Statistical Life
3. How does the government look at me?
A: The value of statistical life is an economic value used to quantify the benefit of avoiding a fatality. Basically, what are you worth to the government in GDP dollars as a productivity unit. Look it up in Wikipedia to see how the calculation is made.
When it comes down to it, the government response to the pandemic is about shutting down businesses to limit the spread at the lowest lost productivity cost to GDP. Industries with higher productivity contribution to GDP (revenue) are open and businesses with lower productivity contribution to GDP (cost) are closed. Public health policy is a means to preserve enough GDP to survive as a nation. The collapse of nations due to COVID is a chilling reality. Of course, the geo-political survival of the fittest would likely be large nations taking over small nations lacking the necessary resources to survive.