Every conversation I have been having recently invariably includes a debate on whether we should be relaxing the restrictive measures we had so far or not. Like everything in Malta the diametrically opposed poles have formed up. Those that I would call the “zero risk takers” and would have us live in a quasi lockdown until a vaccine is found and then those who fear for their future, their job, their business, their employees and advocate to re-open the economy as quickly as possible.
It is true that at this stage the greatest challenge we face in the current crisis is striking the right balance between preventing not only the health damage inflicted by Covid-19 but also that which comes from a severe contraction of economic activity. This is a matter of both life and death and prosperity or poverty, as a deep recession is likely to cause widespread hardship, including increased mortality rates for reasons other than the virus. We must, therefore, find smart strategies for reopening businesses while minimising health risks. I actually think we have no option but to do so. Hence why I believe that we have to find a balanced third way and that remaining at either end of the opinion spectrum is both unrealistic and harmful.
I have been reading various inputs by both local and international economists, who have explored a variety of options: a long lockdown or quasi lockdown, full relaxation with rules, stop-and-go restrictive measures and phased-in relaxing of restrictive measures. All the research seems to be indicating that provided the country has adequate intensive care unit capacity and testing and tracing protocols, the sequential opening of sectors starting with those least likely to generate a substantial resurgence of the virus — is the most promising course of action. I will elaborate why.
A Long Lockdown or Quasi Lockdown
While economists around the globe are finding difficult to be precise when coming to calculate the economic cost of continued lockdowns, all agree that the effects are massive. In Switzerland, for example, the loss of value added is between CHF 0.7 and 1.4 billion per day. In Spain, the cost is slightly above €3 billion per day. In the United States, it is a staggering $14 billion per day. There may well be other less visible but potentially significant non-monetary costs, including depression and other mental health problems, domestic violence, the saturation of hospitals impacting the treatment of other diseases, etc. Ideally, societies would find a risk-free approach for reopening, for example by waiting for a vaccine to be discovered. However, this could take as much as 12 to 24 months. We cannot remain in full lockdown that long.
Full Relaxation with Rules
Could we lift all restrictive measures we have taken all at once by imposing only strict rules on the wearing of masks, social distancing, and other sanitary rules applied? This is what some business leaders and those who represent them seem to be pushing for. I think this approach has severe limitations. Will people really follow the guidelines? It is rather obvious to me that this approach creates conflicts between personal and collective interests. Will a retailer or restaurant who doesn’t have the space for social distancing be prepared keep her shop closed when a direct competitor with a larger floor is allowed to open?
Stop and Go
A fast and large-scale lifting of the restrictive measures would likely lead to further restrictive measures the near future. There are several important drawbacks to this stop-and-go approach. First, governments and health authorities are still not able to closely monitor the spread of the virus as Data lags and political decisions take time. This creates the risk of generating new Covid-19 explosions, which eventually will make a stop-and-go option even more costly — medically and economically. Second, a stop-and-go period would greatly increase uncertainty, curbing business investment and economic growth beyond the effects of the pandemic. This will be not only about the dates when the economy starts or locks down again, but also about how workers, suppliers, and consumers. There are also fixed costs involved in restarting businesses, including payroll adjustments and commercial effort reactivation, which will have to be incurred irrespective of whether the “go” period is short or long.
Phased-in Re-opening in Sectoral Waves
I have come to the conclusion that the the best option is a gradual release by sector — in several waves — with the objective of avoiding a congestion of hospitals and especially intensive care units. From all my readings this seems to be the preferred approach by various countries and this suggests that it is actually possible. The sectors to be released from restrictive measures as a matter of priority could be chosen based on the following analysis:
(i) Inability to conduct core business from home. Industries such as accommodation and food services, healthcare could be the targets of a first wave of the relaxing of restrictive measures because they are less suitable for virtual work.
(ii) Importance to the national economy: Besides tourism and services (IT, financial) the operators of the internal wholesaling and retailing in Malta are among the largest contributors to Malta’s GDP.
(iii) Business viability. One must also take into account the viability of certain sectors. For example, retailers are facing severe hardships and the business model makes it harder for state support to compensate for their losses. Having said so even businesses which are seeing restrictive measures relaxed should see if certain functions are either dispensable in the short term or easier to perform remotely. Companies reopening would therefore determine which jobs could remain virtual or begin later. Think of support staff, coordination, and reporting jobs, certain maintenance and service tasks and management.
(iv) Confronting this measure with an evaluation of the risk of contamination — that is, the density of the workplace and the resulting ability of workers to operate while observing requirements of social distancing and hygiene.
(v) National ability of proper monitoring – The adherence to social distancing rules cannot be left to personal adherence to guidelines. They need to be well monitored so that appropriate sanctions are taken when non-adherence is spotted. There is too much at stake.
One has to consider that this sectoral phased approach would be spread over a substantial amount of time as for example the economy cannot re-start in a meaningful way before the reopening of child care centers and schools. However this approach would at least progressively put businesses back into full action at a pace that would have to be adapted to national circumstances and with reduced risks of overwhelming hospitals.
There is no perfect strategy, at least not with the information we have today. But I think this approach, will allow us to get through this pandemic with as little loss of life and life opportunities as humanely possible.