Arndt-Corden Department of Economics

Different countries face different choices in their responses to COVID-19, and there is no one size fits all approach to managing the virus, Quentin Grafton and Tom Kompas write.

With COVID-19 providing a continuous newsfeed of information, it is hard to separate the ‘wheat from the chaff’, but it is certainly possible to review the responses of different countries. In this, our third instalment on COVID-19, we explain how to minimise the health and economic costs of the pandemic.

COVID-19 originated in China sometime in December 2019, most likely in Wuhan, and then rapidly spread, aided and abetted by the travel of tens of millions during Chinese New Year celebrations. By the time Chinese authorities imposed a lockdown, it had already infected tens of thousands. Since then, it appears that China has been successful at suppressing the virus, but it has not been eliminated.

Hong Kong, Taiwan, and Singapore all have close ties to mainland China, and were next on the virus ‘hit list’. Each responded quickly with various forms of quarantine, testing and tracing, and social distancing, and with considerable success. Singapore, however, revised its strategy and imposed a lockdown on 7 April, extended to 1 June, to suppress a second outbreak of the virus.

South Korea too, was hit early, with a cluster in the city of Daegu. With some physical distancing controls, quarantine, and a lot testing, it has, like China, successfully suppressed – but has not yet eliminated – the virus. Japan was also affected early and suppressed the virus, but inadequate testing and insufficient physical distancing measures have contributed to a new outbreak and the reimposition of a state of emergency in Hokkaido.

Europe (including the United Kingdom) was slow to impose quarantine measures and travel restrictions, despite regular warnings of the infections by the World Health Organization from late January. The extent of the pandemic did not become apparent in Europe until early March, when some hospitals began filling up with COVID-19 patients. Infections in Europe have subsequently overwhelmed the health care system in some cities while Italy, Spain, and France have each officially recorded more than 20,000 premature deaths from the virus noting that this number underestimates total virus deaths.

For most of Europe, including the United Kingdom, the resulting spread of the virus appears to have determined government responses.

Governments were forced to act as hospitals overflowed and people demanded it. Some governments did act sooner. Germany, for instance, initiated comprehensive testing and tracing that reduced its growth in infections.

Norway and Finland also went ‘hard and early’ imposing physical distancing controls and travel restrictions while their neighbour, Sweden, took a much more relaxed approach. Sweden now has, on a per capita basis, 10 times more premature deaths than these two Nordic neighbours.

For countries with ‘porous’ borders, elimination of the virus, at least in foreseeable future, is probably infeasible without a vaccine. Even in countries that have suffered the most, such as Italy, and where there have been a high rates of infection at about 10 per cent of the population, there is still no herd immunity, which requires more than 50 per cent of population to be immune. Thus, as happened in Singapore, and Japan, further outbreaks (such as in Southern Italy) are possible as distancing controls are relaxed.

The European strategy appears to be suppression-relaxation-suppression to keep the numbers of infected people beneath a ‘manageable’ public health threshold. Because of the economic costs of lockdown some European countries have just now begun to relax some controls, but their citizens have been warned that restrictions may return with a renewed outbreak.

Canada responded in March with physical distancing controls, as did Australia and New Zealand. The ANZACs, however, were much quicker to impose travel restrictions. Canada eventually ‘closed’ it travel border with the United States on 18 March, but by that point over a million Canadians had already returned from their March holiday break to the US and became a major source of infection.

The United States has had the virus since January, but physical distancing controls only effectively began, and then only in some states, in early March.

Initial failures in testing for the virus, an inconsistent national strategy and mixed messages have inhibited an effective response.

Economic disparities have also resulted in a Tale of Two Americas in terms of infection rates. The poor suffer from inferior health care and are more exposed because they frequent public transport more, dominate as frontline workers, and live in more crowded housing.

Only with a new social contract that shares the burdens of physical distancing by supporting the poor and vulnerable will suppression be successful. Without the willing support of most people physical distancing will simply not work. Demands to prematurely relax or remove physical distancing controls will also grow in the absence of adequate government financial support for those who suffer the biggest economic costs from lockdowns.

The American statistics, as of 22 April, are shocking: over 825,000 confirmed cases, with many more cases undetected, and more than 45,000 premature deaths. These numbers, on a per capita basis, mean that the US has a 10 times higher number of confirmed cases and about 50 times higher number of deaths than Australia. If Australia had copied the United States, based on these numbers, there would already be some 3,500 premature deaths due to the virus, instead of the 75 to date.

The various strategies followed by different countries have led to mixed outcomes. Countries that acted early and went hard in terms of quarantine, physical distancing, testing, and tracing have done the best in terms of public health, and their economies are also the better for it. Our own modelling for Australia estimates that the percentage losses in GDP without any controls, or with the scythe strategy, would have been at least three times larger, assuming the controls currently in place are gradually and sensibly relaxed after 15 May.

Some countries, such as Australia and New Zealand, may even eliminate domestic transmission in less than 60 days giving them a unique social and economic advantage. Hopefully, they can use this advantage to help their neighbours, starting first with Pacific Islands, to prevent or eliminate the virus.

For many poor countries, and where billions of people live, the default strategy, in the absence of outside aid, will be the scythe, because they lack sufficient domestic resources to do anything else. Unlike in Australia, poor country governments alone cannot support their poor in an extended lockdown that will also impede or stop responses to other health emergencies. In this worst of all possible worlds for the poor, the scythe will be a global health, social and economic disaster.

An alternative, at least for richer countries, is the suppression-relaxation-suppression strategy, that stops hospitals from being overwhelmed and keeps levels of infection at a ‘manageable’ level. This strategy also imposes very large health and economic costs but is better than the scythe.

There are no truly good outcomes of COVID-19, but some are much worse than others. We now know enough to say that going early and hard, if countries are rich enough to give adequate support to their poor and vulnerable, is the preferred response. This strategy may even eliminate domestic transmission of the virus if there is strict quarantine of all arrivals. For richer countries, if the infection really takes hold and borders are porous, the next best option is likely to be suppression-relaxation-suppression. For most of the poor in poorer countries, unless the rich world helps, they will be left with the worst outcome of all, the scythe.