The Lion and the Buffalo (or why economies may be forced to get back to work whether it’s safe or not)

“On the savanna, the lion may fear being gored by the buffalo, but she cannot stay home forever — eventually she must hunt, or the pride will starve. The buffalo may fear the crocodile, but he cannot stay away from the river forever — eventually, he must drink.”

That’s an old African proverb that’s neither old nor African — I made it up just now. Because I think it captures the dilemma everyone is now talking about in the world’s Coronavirus response: how do we balance the need to keep the most vulnerable of society safe, while making sure that there’s still a society to go back to once the crisis has passed?

President Trump ignited a firestorm of controversy the other week when he recently stated that he wants the US “opened up and just raring to go by Easter,” and that “the cure cannot be worse than the disease.” (He soon relented on this dangerous timeline, although is now again itching to reopen things). But while Trump was clearly wrong about timing, he’s (for once) not wrong on principle: a lockdown cannot last forever, and the economy must re-open at some point — and do so in the not too distant future. Because eventually people need to eat: even with the latest models estimating 60,000-100,000 deaths in the best-case scenario, people can lock down only so long before their families go hungry and they have to get out — as is becoming abundantly clear with more than 16 million people filing for unemployment benefits in the last 3 weeks alone.

Before going any further, I’ll be clear that I’m NOT going to tell people I think we should all go out and open things up immediately. On the contrary, the need to get people back to work as quickly as possible makes a 1–3 month lockdown even more important, at least according to all the experts I’ve read: the tighter the lockdown now, the sooner life can start getting back to normal. More on this later.

My points are more the following.

First, philosophically speaking — and contrary to accusations that “Republicans and corporations want to sacrifice lives to protect their profits,” or that “Democrats are overreacting to a minor threat to destroy the economy” — this issue is complex: there is not a black vs. white, right vs. wrong bright line between saving lives and saving the economy. There are tradeoffs on both sides of the equation, and nothing we do will be easy or without sacrifice.

Second, and practically speaking, the economy WILL reopen in a few months one way or another, because there will be no other choice: again, people need to eat. If push comes to shove, politicians — especially in developing countries where most people live hand to mouth and cannot work from home — may choose to get people back to work, even if it means, as morbid as this sounds, accepting the risk as a “cost of doing business.”

In a way this is hopeful: the economy will recover because it must. But it’s also scary, because when the economy DOES inevitably re-open, our choices now — and we probably only have a few days left — will largely determine the recovery’s SHAPE, and its COST in terms of lives and incomes lost.

I see three possible scenarios:

1. The Hammer: We lock down the country quickly and decisively and slow the spread of the virus long enough to scale up our health care system to prepare for the virus’s inevitable recurrences — and don’t let up too soon. Damage to the health care system and loss of life are minimized (relatively speaking), and the economy is up and running again in 6 months: a V-shaped recovery.
2. The Storm: We fail to lock things down, and the virus rips through the world and overwhelms the health care system. Lots of people die in a few horrible months. Within 6 months, 40–70% of humans have contracted the virus, most people are immune (“forced herd immunity), and the economy slowly starts to recover — but it takes much longer given the destruction society must recover from, and people’s deeper fears about going back out. This is a U-shaped recovery.
3. The Worst of Both Worlds: We implement half-hearted, loosely enforced lockdowns (one immunologist describes this as a “Swiss cheese” lockdown), so some people stay home while others flout the rules. The virus still spreads — more slowly than in the Storm, but not slowly enough to spare the health care system — but for a longer period of time. Hundreds of thousands lose their lives like in the Storm, but the damage to the economy drags on until we find a vaccine. This recovery has almost no shape, as the economy may not recover for many years.

#1 is clearly the best choice, but #3, I’d argue, is the worst (in the same way most people would prefer a few hours of deluge than a London-style days-long drizzle: it gets you just as wet as the storm, but lasts several times as long).

This post makes a few key points

1. Society makes tradeoffs between life and income all the time — there is no black and white
2. A lockdown cannot last forever — eventually people need to eat. If governments miss the window of opportunity to drop the hammer, they’ll have only bad options for reopening their economies: the Storm, or the Worst of Both Worlds. This is especially true in developing countries where most people live hand to mouth, and governments don’t have the finances to sustain people’s incomes for more than a month or two.
3. Ultimately it’s not a tradeoff between health and wealth: you need balance. If we open the economy too soon, the economy won’t recover: the virus will resurge and people will be too scared to get back to normal life. If on the other hand the economy suffers for too long, we’ll ultimately be left with less money to fund advanced health care, and replace deaths from Coronavirus with deaths of despair.

Society makes tradeoffs between life and income all the time

Many have framed this as a debate between money and life. Human life is priceless, and therefore we should be willing to accept any amount of economic pain to preserve any amount of human life. But we make these tradeoffs every day, as morbid as it sounds. Otherwise, no one would ever get into a car.

In 2019, 38,800 Americans died in auto accidents, which translates to a 0.0114% chance of dying each year in an auto accident. We could eliminate this risk by banning cars, but we obviously haven’t done this: we’ve decided that the tradeoff — of being able to move people and goods quickly in exchange for some risk of being killed in a car crash — is worth it.

This isn’t a perfect analogy — the latest models show Covid-19 poses a much graver risk to human life. But it illustrates a point: life is inherently risky, and the optimal level of risk is not zero. (I think this every time I watch a nature video and see a monkey or other tree-dwelling creature making a death-defying leap to another tree to find fruit — it seems so risky, and occasionally the animal does fall to its death, but clearly the need to eat justifies the leap).

This tradeoff is becoming starker by the day as 10 million Americans have lost their jobs in the last two weeks: not everyone can work from home. But as bad as this is in developed countries, in developing countries it’s life and death. In places like India, Uganda, Rwanda, or others, almost no one can work from home: most people are farmers, small traders, drivers, etc. — people who rely on physical movement and face-to-face contact to earn the money they need to eat. For them, avoiding exposure to the virus means not having food.

Here’s how people reacted to the order for a lockdown in Kampala, Uganda:

What you’re seeing here is government using tear gas to disperse small vendors and traders who had defied lockdowns. The person posting the video explains:

Just to put this into context: Getting the masses to comply with a lockdown isn’t easy here. Many people live hand to mouth so they won’t leave the streets unless forced to. The government is doing quite well despite the circumstances… Many people don’t have the economic ability to stay home so the only way to enact a lockdown is by force… There will be a lot of desperately hungry people in about three days. I expect a sharp increase in crime.

Again, if we act now to shut things down for 4–8 weeks, we can buy time to get the health care system up to speed and hopefully not need to make this choice. But we have to act now, because if forced to choose between starvation and taking some risk of catching the virus, most poor people will only have one option. Which brings us to the second point.

A lockdown cannot last forever: the economy will have to reopen in 2–3 months one way or another

The situation is similar across developing countries. India has recently imposed the world’s largest lockdown, but this has caused untold devastation for the country’s hundreds of millions of poor. “I fear that hunger may kill many like us before coronavirus,” said one laborer interviewed by the BBC.

In Rwanda the much more organized government has imposed a total lockdown for at least two weeks, in an impressive effort to nip the virus in the bud. It’s the right move — Western governments could learn a thing or two — but in the short-term, life has become even more difficult for those who were already living hand-to-mouth. Taarifa Rwanda reports:

Disturbing images have been circulating on social media showing people breaking into people’s homes and others being flogged after being caught stealing farm produce to feed themselves… drastic pleas by helpless Rwandans who are on the verge of starvation due to lack of supplies and the inability to fend for themselves amidst a tight curfew.”

Rwanda’s government is swiftly addressing this by distributing rations to families and suspending rent payments on a case-by-case basis — an admirable, subsistence stimulus. But how long can they keep it up? If businesses fail, who will pay the taxes that are currently funding the rations and the salaries of those handing them out?

Rich and poor in Kampala: when you live in a slum, staying home may not be the best way to social distance (credit: Arnold Mugisha, h/t Jeffrey Semakula)

And when the lockdown does end, what happens next? Rwanda has suspended all flights in and out of the country, buying the country time to trace contacts and contain the spread within its borders. But how long can that last in a country dependent on tourism and conference revenue? And when flights do resume — as they inevitably must — it’s only a matter of time until a traveler brings in the virus again. What happens then?

If developing countries cannot quickly stop the spread of the virus within their borders (and perhaps even if they can, given the inevitable need to reopen to international travel), I believe governments could be forced into lifting lockdowns after a maximum of 2–3 months. Otherwise their people will starve.

Why not just tax the rich to pay everyone else to stay home?

Rich countries are more fortunate. Our governments have more resources (although are getting shown up by much poorer countries like Rwanda), and can borrow cheaply to finance stimulus measures and get cash to the unemployed. Yet despite oversimplifications by some on the left — “just raise taxes on the rich so the rest of us can stay home” — this also can’t last forever. Certainly more redistribution than we’re doing now is needed, but eventually you do run out of other people’s money.

It’s just math. The net worth of America’s top 400 richest people is $2.9 trillion. Add in another $1.5 billion each for the remaining 621 billionaires, for a total of $3.25 trillion. Assume you taxed all of that wealth at a 90% rate, divide by the 129 million American households, and you get $25,217 per household. US median household income is $59,039 per year. In other words, redistributing nearly every penny from every billionaire would last the average American family only about 5 months. (Note that this is wealth, not income, so once you burn through it, it’s gone — no more income support for American families.)

Imagine a society of hunter-gatherers. Some are old or sick and can’t go out to hunt or gather: they rely on the other members of the tribe to bring back food. This works, as long as most members of the tribe are productive and are finding food to bring back. But if the whole tribe stays home, where will it get food to feed itself?

The government needs tax revenue to pay for stimulus measures, and for that it needs an economy to tax.

Of course those on the right paint the same false choice, only in the other direction. Yes, lockdowns are painful. As the owner of a restaurant myself, I feel the economic pain acutely. Our revenues are down 72% from last month — delivery and takeout just can’t replace the lost revenues from dine-in. But the LAST thing I want is to re-open the economy too soon, for the obvious reason that customers can’t return if they don’t feel safe. I’m thankful that the adults in the Government of Rwanda stepped in to make everyone else follow the same rules we had already put in place voluntarily. The most important thing for business is for the government to “drop the hammer” and try to knock this virus out in a month or less. We can bear the financial pain for a couple of months if it means stopping this thing as quickly as possible.

Wealth is Health: you need an economy to pay for health care

There’s another reason the choice between economic growth and heath is a false one, which is that you can’t have strong public health without a strong economy. Developed countries take our health care systems for granted, but the only reason we’re able to invest in such advanced health care systems and cutting-edge research is because we have strong, highly productive economies that can pay for it.

No matter where you live, health care does need to be paid for by someone at some point — whether it’s the salaries of the doctors and nurses who put their lives at risk to care for us, the scientists and engineers racing to research new cures, or the manufacture of devices and medicines that keep us alive. A long-term depression means lower tax revenues, which ultimately means less money available to fund public health.

Moreover, long-term unemployment leads to disillusionment, addiction, and suicide. Before the crisis when unemployment was just above 3%, life expectancy in the US was declining largely due to such “deaths of despair”. How many lives will 30% unemployment cost?

It’s no wonder that there’s such a strong correlation between GDP per capita and life expectancy around the world. Things that make us poorer will also make our lives shorter and less healthy.

Life expectancy vs. GDP per capita

Again, this isn’t really anything new — we all know this intuitively. And it’s not to say that we should not be locking things down — we should. But it is to say that the people saying “health is important, but so is the economy” are not just evil, greedy plutocrats; the world is more complex than that. If the economy tanks, we will replace death from virus with other forms of death.

So we can’t open the economy too soon, as this would lead to a resurgence of the virus and people would still be forced to stay home— not because of government mandates, but because they’re scared of a life- threatening illness. But we also can’t let a lockdown drag on too long, because we’ll run out of the money we need to fund health care in the first place.

We need a thoughtful, science-based policy response that tries to find the balance between health and wealth, and establishes sophisticated testing, tracing, and targeted quarantining to allow people to get back to work while minimizing the spread of a resurgent virus. Does our current leadership in the US have the right temperament, skills, and trust in experts? I’ll let you answer that question yourself, but let’s just say I definitely DON’T lack faith in the Government of Rwanda right now to do the right thing as best it can.

(A version o this post also appears at https://afrikent.wordpress.com/2020/04/07/the-lion-and-the-buffalo-or-why-economies-may-be-forced-to-get-back-to-work-whether-its-safe-or-not/)