Propitiating COVID With Cash

"The unique characteristics of a pandemic recession imply that fiscal policy during a pandemic should be geared much more toward helping those who are directly harmed rather than toward increasing aggregate demand more generally. That is, it should be aimed at providing social insurance rather than broad stimulus."

"Although direct payments [up to $1,200 per person followed by $600 and $1,400] surely gave many households a much-needed boost at a difficult time, most of the money went to people who had not been economically harmed by the pandemic."

"[If] stimulus payments that did little to help those most affected by the pandemic end up precluding spending $1 trillion on infrastructure or climate change in the next few years, the United States will have made a very bad bargain indeed."

Christina D. Romer, Professor of Economics, University of California-Berkeley

Pedestrians at the intersection of King and Yonge Streets in Toronto. Photo by Ernest Doroszuk/Toronto Sun/Postmedia files

Those that could, did. Wealthy countries of the world, struck by the terror of the global pandemic in the face of their hospitals flooded with COVID-19 patients, workplaces reduced, small businesses failing due to closures, stricken COVID patients dying, spent wildly in the belief that if they spent widely enough and wisely enough they could 'buy' their way out of the crisis, and suffer fewer catastrophic casualties than countries unable -- due to financial constraints -- to cast treasury funding at the problem.

 

So in hindsight how did they fare comparatively, the big spenders and the penniless sufferers?

 

There was in fact, an enormous variation in spending their way around the pandemic by various countries. Some pushed their budges to highs never seen before, taking on huge debts. Other countries were far less stridently defensive and restrained their horror at what was unfolding before their very eyes. It now becomes increasingly evident that more government spending was no guarantee of more relief from the pandemic.

 

Governments that spent the most lavishly during the pandemic's early days counted amongst themselves the United States and New Zealand; each spending 11.5 percent of GDP, with Canada following at 10.1 percent. Four of five biggest spenders were wealthy, English-speaking countries. As an example, the spending indulged in by the government of Canada was over double that of other countries such as France, Spain and Italy. 

It appears that the size of the national health crisis did not determine the size of the economic response; no evidence exists that countries with high COVID-19 mortality rates spent more on the pandemic than did countries with lower rates of population death -- or vice versa. "Countries in 2020 appear to have been constrained in their fiscal choices ... by their ability to borrow", explained Ms.Romer in a case study. Wild borrowing is what enabled these countries to spend as much as they could.

Those countries of the OECD with poor bond rating scores like Italy and Greece were forced by circumstances to spend substantially less than did countries with higher credit ratings. Canada began the pandemic with a top-rated AAA credit rating, representing one of the countries that borrowed and borrowed as though they would never be faced with a future invoice for repayment. In the process its credit rating descended in reflection of its vast borrowing amounts.

Canada was the fifth largest spender according to the IMF, its pandemic bill totalling a whopping 15.9 percent of GDP, but the prize goes to the United States, at a stratospheric 25.4 percent. Once more, four of the top five spots place wealthy English speaking countries in an overspending clique. Mexico, on the other hand, sits at the bottom with 0.7 percent of GDP spent on programs for COVID-19.

There seems to be no relationship that stands out between spending an historically immense wealth of borrowed money and a better health or economic outcome getting through the pandemic. The U.S. high COVID-19 mortality rate linked to its high spending reflects a poor return on investment with a death toll of 251 per 100,000 population, slightly worse than Mexico's 234 per 100,000 -- bearing in mind that Mexico spent negligibly on COVID-19.

The most efficient country leading the pack in outcome is South Korea with a mortality rate of 11 per 100,000 representing a fraction of what even Canada at 81 deaths per 100,000 experienced. Countries that spent less than average on COVID-19 policies, locking down less aggressively, were those that spent less than the average. South Korea stands out for its combination of below-average spending and above-average economic results, along with fewer population deaths.

The Science of Disagreement

"Smoking causes cancer, the earth is round, and ordering people to stay at home ... decreases disease transmission."

"A study purporting to prove the opposite is almost certain to be fundamentally flawed."

Critique, Dr.Seth Flaxman, University of Oxford

"[A hands-off strategy could yield] hundreds of thousands of deaths."

"Suppression will minimally require a combination of social distancing of the entire population, home isolation of cases and household quarantine of their family members."

COVID-19 Response Team, Neil Ferguson, epidemiologist, Imperial College London, U.K.

"Johns Hopkins itself did not even put out a press release about this study, and if you look at the media coverage, it's one of the biggest stories in the world today, and yet certain media outlets have not even covered it."

Professor Martin Makary, Johns Hopkins

 

During the prolonged stay of the global pandemic most research carried out on COVID out of the highly respected Coronavirus Resource Center at Johns Hopkins University has been the work of medical scientists affiliated with the university's world renowned medical school. Not so the recently published study led by economists associated with the university drafted by three economists with the unaffiliated Krieger School of Arts and Sciences.

That study indicated that lockdowns were largely inefficient, costly and just barely effective in preventing COVID deaths by a marginal 0.2 percent. A conclusion viewed by some scientists as utterly outrageous; tinged with political ideology. The University of Oxford's lead author on a 2020 study, Seth Flaxman, points out, that study estimated lockdowns to have succeeded in saving up to three million lives across Europe.

The paper in question, a preprint meta-analysis of 34 previous studies focusing on examining the link between lockdowns and COVID mortality has led to the charge that the study downplayed the role of lockdowns in society's efforts to control infection by the coronavirus. A Thursday post published by the Science Media Centre, a non-profit located in the United Kingdom that functions as a conduit between scientists and the media, saw four prominent public health researchers agreed in their criticism of the 'flawed' study.

 

 

In engaging in their study the economists, led by Jonas Herby of Denmark, sought data on COVID     mortality exclusively, ignoring effects of pandemic strictures on other factors like hospitalizations or overall case rates. Any study based on forecasts to account for lives saved was excluded. A primary criticism of the Johns Hopkins latest study was that of defining 'lockdown' with a broad brush when it identified the term as "the imposition of at least one compulsory, non-pharmaceutical intervention".

A metric that painted any country whose only COVID stricture would be a five-day mandatory quarantine as being no different than a country deciding to utilize curfews and blanket closures on public venues. Another criticism was that the meta-analysis failed to account for lockdowns that may have arrested the rate of increase of deaths, if not the raw number of deaths, at all. 

"Many countries locked down before seeing exponential growth and therefore saw no reduction in deaths", noted Samir Bhatt, a statistician with Imperial College London, directly involved with the COVID-19 response in New York State. All three authors of the Johns Hopkins paper were reported in Forbes to reflect the "free market" inclination; one of whom, the lead author, works for the Center for Political Studies, in Copenhagen.

It has been so far only news outlets considered to be right-leaning, such as the Daily Mail, Fox News and the National Review that have to date cited the study, with mainstream media giving it no attention. Which led Professor of surgery Martin Makary, to accuse Johns Hopkins University, which employs him, of deliberately downplaying the study and its conclusions.

A mostly deserted street in Montreal during a Quebec-wide COVID lockdown, January 10, 2021. Photo by Graham Hughes/The Canadian Press/File