Life in the great indoors

Life in the great indoors

When do lockdowns start destroying lives more than saving them?

When medical disasters happen, it is easy to spout homilies but difficult to choose between alternatives that may all be dreadful. Most governments have responded to the coronavirus by encouraging social distancing and locking down movement and production in cities, states and entire countries. This should slow the speed of the virus’ spread, reducing infections and fatalities.

Lockdowns have serious economic consequences. Some experts estimate GDP will fall 20% until normalcy returns. If the problem lasts 12 months, the economic impact can be worse than in the Great Depression of the 1930s.

Lives must be given top priority right now. Lockdowns are necessary despite their high economic costs. The troubling question is: what if infections remain high for months, maybe even a year? Should we continue with lockdowns that constitute a governmentmade Great Depression? Especially since India lacks the capacity to follow up the lockdown with extensive testing to identify and isolate those infected?

Worse than even the economic consequences may be the medical and moral fallout. The economic disaster will itself cause additional illnesses and deaths. A point may come — sooner than you dare think — when the lockdown kills more people than it saves.

Countries everywhere have sworn to combat the economic disaster by gifting huge sums of money to all in need. Nobody prioritises fiscal prudence any more. Governments everywhere have pledged to bust fiscal ceilings to relieve distress. Since the government lockdown itself is the cause of economic distress, the government has the moral and economic responsibility to rectify that distress.

In India, maybe 80% or more people have bank accounts, and money can be sent directly to those accounts. This will help those who have lost jobs or business. It will not, however, prevent lakhs of businesses from going bust. To tackle that, GoI must devise a business debt relief programme with a few simple exemptions for most of the big boys. That will permit swift disbursement while reducing accusations of cronyism to benefit a few. The emphasis must be on saving small businesses.

Epidemic? One by One

Beyond one quarter, an economic crisis will have serious medical effects. Poor people suffering from malnutrition will succumb to many ailments. Hospitals swamped with coronavirus cases will not cope with hundreds of other killer ailments. Indeed, new epidemics might spread because India cannot deal with more than one epidemic at a time.

Millions hit by traffic and workplace injuries will be neglected. Longerterm killers like diabetes, hypertension and cancer will boom. Medicinal supplies will be scarce, both because lockdowns have curtailed production and also because Covid-19 has diverted attention from other needy areas. Thousands who would be saved in normal times will succumb for want of medicines or medical attention. Indeed, doctors, nurses and paramedics may get disabled or simply reduce working hours for fear of catching infections themselves.

A long shutdown will hit employment and livelihoods as badly as in the Great Depression. This can be partially mitigated by ‘helicopter money’, cash given freely to as many affected people as possible, providing purchasing power to the needy and checking the collapse of demand.

The US is considering a relief package of $2 trillion, almost 10% of GDP. Every adult may get $1,000 immediately, and more, in later instalments, if necessary. This gargantuan effort sets an example for India. Since falling tax revenue will slash funds needed for huge giveaways, the money should simply be printed by RBI to buy an enormous volume of new government bonds. GoI must not borrow additional sums from banks, whose funds should be focused on lending to distressed businesses. Large business debt relief packages — including government guarantees — must be quickly implemented so that businesses can keep paying workers, suppliers and creditors. Otherwise, the medical crisis will escalate into a giant financial crisis, with banks going bust.

Beyond one quarter, even printing money and providing debt relief to businesses will not suffice. Providing cash for spending will not revive the economy if there are no goods and services to spend on. Lockdowns have severely curtailed the production of goods and services. Existing inventories can be drawn down for a month or two. But beyond that, fresh production must begin.

This requires a tough moral and economic decision. Lockdowns must be lifted — partially or wholly. Even if lifted entirely, many people will not return to work for fear of infection. Many will forgo spending on travel, tourism, shopping or a thousand ‘normal’ things.

Unlock Those Down

The current lockdowns must be lifted, in phases, in one or two months at most. They cannot continue indefinitely. We already live with a huge number of diseases and fatalities and will have to learn to live with one more. Cash relief and loan waivers are not enough. India needs a return to an economy that hums with activity. Lifting lockdowns may mean the coronavirus spreads faster and takes longer to control. Yet, this may actually save more lives than it loses by accelerating economic activity and incomes.