Data that came out last week illustrated three developments that underscore the need for the U.S. to resume healthy reopenings: worrisome Covid-19 infections, hospitalizations and deaths in a growing number of states; the clear and present risk of significant recurring damage to the economy; and the considerable upside of reversing both trends quickly.
What is desirable is also feasible, although the window to avoid even more significant short and longer-term damage could well be closing in the absence of quick government relief and reform measures and — critically — changes in behavior by citizens.
With some states setting records for the number of daily deaths, a growing number of Americans are losing their lives to a virus that continues to spread nationally. Moreover, the data show that families from the most disadvantaged segments of the population, already facing precarious income situations or vulnerability to social injustices or both, are accounting for an ever growing portion of the pain and suffering. And with the virus still on the move geographically, impacting some states that were relatively spared until now and others that had impressively overcome an initial wave, there is increasing doubt as to the ability to effectively insulate and protect the least affected parts of the country.
The economic devastation was also clear last week. On an annualized basis, the country’s gross domestic product contracted by an astounding one-third in the second quarter. Meanwhile, the much-hoped-for V-shaped recovery seems to be stalling given rising weekly initial jobless claims, worsening continuing claims and the leveling off or decline in what has now become a widely followed set of specific indicators of daily economic activity.
Yet not all of the numbers released last week were flashing yellow and red. The June consumer spending data in particular pointed to the U.S. economy’s potential to bounce back rapidly under a healthy reopening — that is, simultaneous progress in getting the virus under control and increasing economic interactions pending some combination of an effective vaccine and community immunity. This process would halt an increasingly damaging and unstable dynamic in which the pendulum swings between premature reopenings that prove to be both unhealthy and unsustainable on one end and restrictions on economic activity on the other that, while reducing the risk of Covid infection, risk inflicting on more people both economic devastation and an even bigger threat of “deaths of despair,” as documented by economists Anne Case and Angus Deaton.
The bad news is that the longer the pendulum swings in this manner, the greater the damage to lives and livelihoods in both the short and longer terms. In the short term, this would be reflected in too many hospitalizations, deaths, bankruptcies and evictions, as well as a growing risk of alcoholism, domestic violence, drug abuse and suicide. Over the longer term, what would be most at risk would be the ability of a growing number of Americans to live a healthy life and the likelihood that enough of them would be able to improve their families’ standard of living in this generation or the next one.
The good news is that, acting collaboratively and consistently, the U.S. government, households and companies can reconcile better both health and economic objectives, albeit not perfectly, at least for now.
As noted in my last two articles for Bloomberg Opinion, Congress has an urgent role to play in better safeguarding economic livelihoods and improving the country’s ability to control the virus until a sufficient form of community immunity is established, preferably through the quick dissemination of a vaccine.
Although government action is necessary, it will not prove sufficient unless the private sector does a better job at reducing our collective vulnerability to the infection. Too many people are still ignoring simple changes in behavior that can reduce the risk of infection such as wearing masks consistently, social distancing and washing hands frequently. More effective, reliable and steady messaging from companies and all levels of government would help, as would the greater engagement of influencers.
There is also an urgent need for individuals to better recognize how their behavior impacts society at large. This has become evident as younger Americans become infected in larger numbers, with some passing on the virus to older ones, particularly in multiple generation households. This may well involve difficult choices in what is reopened in the short term, favoring schools over bars and restaurants, for example.
None of this would translate quickly into a Covid-free America with restored normal economic interactions. It is highly likely that outbreaks would still occur, especially given what we are learning daily from the experience of some countries in Asia and Europe. But these outbreaks could be contained more swiftly with economic- and health-consistent solutions through a quick combination of virus containment and eradication, as well as sufficient hospital capacity to treat the infected back to health.
It’s not too late to make significant progress in controlling the virus, enabling greater economic interactions and securing longer-term economic well-being and sustainability, but it will require a better buy-in at all levels, and the clock is ticking.
Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include 'The Only Game in Town' and 'When Markets Collide.'
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