Coronavirus Covid 19: Nanogirl - Would economy have fared far better without lockdown?

The restaurant industry has been hit hard during the Covid-19 lockdown. Photo / Dean Purcell

COMMENT

Coming out of level 4 and into level 3 has given New Zealanders the space to take a breath and look at what has changed over the last four weeks. It's a privileged position that we are in, and it has come about because we stuck together as a country and played by the evidence-based rules set for our nation. Hindsight is a wonderful thing, and as we sit and watch other countries struggling to control community transmission of Covid-19, thoughts here are moving to the other casualty in the pandemic – the economy.

The debate is starting as to whether or not enforcing one of the world's strictest lockdowns was worth it. Rather than mourning the significant loss of lives in our population, we are instead mourning the loss of some of our businesses. With an economy driven by tourism and high streets focussed on retail stores, the long-term impact from a short-term lockdown is still being assessed. The economic toll of the crisis also carries health risks. Household financial stress can lead to increased substance abuse, domestic violence, and even suicide. All of these factors combined mean the balance between protecting public health and protecting our economy was never going to be an easy one.

Comparing different countries' levels of success by correlating their number of deaths to how many coffee shops were open is not the best way to analyse the data.

The variables are many and the analysis complex, but this week researchers from the University of Cambridge looked into what could have happened to the economy if we didn't enforce a lockdown. Their paper, titled Social Distancing and Supply Disruptions in a Pandemic, shows that things would have been much worse.

The research divided the working population into two categories. One category was core workers, which represented those in essential services including healthcare, food, sanitation and energy supply. The second category covered everyone else.

Using epidemiology models and data from the US Federal Reserve, the researchers ran simulations to see what might have happened if no action was taken compared to closing businesses down and social distancing for a few weeks.

They found that without a lockdown period, the transmission of the virus would have spread quickly making infection among core workers inevitable. With core workers taking time off to recover, the capacity of the core workforce would have been reduced and sectors of business that were essential for the economy to run would have been hit hard. This loss of production of essential supplies for the population would have impaired far more than losing other areas of the economy.

The researchers' model showed that without strict lockdown and social distancing rules the economy would have shrunk by 30 per cent or more.

Next, the researchers simulated a lockdown scenario where core workers still went to work, but everyone else stayed at home. Those who could work from home did so in order for some technology-enabled businesses to keep functioning. This was the path that New Zealand took and the results predicted a much lower economic output loss of only 15 per cent.

While the research used US economic and population data for its modelling, the researchers say their findings can be applied to most developed economies.

One thing that the model can't predict is what our economy will look like post-Covid. Already businesses are adapting and learning how to use technology to help them to harness new powers. Already car rental companies are becoming delivery providers for new online ordering systems and managers are seeing how flexible work hours can help employees. While models are good to see what could have been, pivoting businesses and innovative mindsets in New Zealand, one of the first countries to come out of lockdown, can now show the world what can be.

• Covid19.govt.nz: The Government's official Covid-19 advisory website