Catching Economic Influenza
How Our Response to COVID-19 May Exacerbate Human Suffering Well Beyond 2020
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In an ambitious attempt to suppress the rise of COVID-19, more than half of all U.S. governors have requested — or in some instances are requiring — all non-essential employees to stay home and all non-essential businesses to close for a period of no less than 14 days. A handful of other states including California, New York, and Illinois, have taken more drastic measures calling on residents to ‘shelter-in-home’ for the next two weeks and possibly longer, making exceptions only for essential activities. More than 100 million Americans are estimated to be impacted by these measures. Unfortunately, Non-Pharmaceutical Interventions (NPIs) like ‘social distancing’ have yet to sufficiently decelerate transmission of the virus and a pharmacological solution, like the development of a vaccine, is still months — if not years — away. With no immediate cure in sight, some, including myself, have begun to wonder about the potential side effects of a prolonged containment campaign.
While relatively ineffective at stopping the spread of COVID-19, NPIs have taken a swift and substantial toll on the economy. For the week ended March 21st, a record 3.28 million Americans filed for unemployment benefits. And while Americans across the country continue to display tremendous solidarity as they suspend their lives and their livelihoods in a united effort to stem the spread of COVID-19, we have yet to ask ourselves collectively, “What if we are unable to contain COVID-19 in 14 days?” Consideration of such a scenario generates important follow-on questions and policy implications that ought to be examined if we are to balance pandemic containment measures with their societal consequences.
In the spirit of this question, the following article seeks to: 1) educate the reader on the current state and virulence of the coronavirus disease; 2) review past pandemics and the lessons learned from them; 3) explain the use and indications for Non-Pharmaceutical Interventions (NPIs); 4) demonstrate the ‘indirect’ or ‘secondary’ costs associated with NPIs; 5) examine the efficacy of current NPIs; and 6) present a “both/and” approach to pandemic mitigation measures. The ultimate goal of this article, however, is to motivate the reader to consider the following question: “How might we, as a society, adopt a balanced approach to containment if current measures to stem the rise of COVID-19 continue to prove ineffective?”
STATE OF THE PANDEMIC
In his article documenting the lessons learned from the 2003 Severe Acute Respiratory Syndrome (SARS) outbreak — a pandemic we will review shortly — Dr. Richard Smith observes, that during an infectious disease outbreak individuals “typically makes decisions based on their perception of the risk, rather than the actual risk.” As such, it might be prudent to recap the latest statistics in our fight against COVID-19.
At the time of this publication, the death toll from COVID-19 stands at more than 20,000 people from among nearly half a million confirmed cases world-wide. Here in the United States, confirmed cases of SARS-CoV-2 as it is also known have grown dramatically, increasing from approximately 1,700 cases to roughly 60,000 in the span of less than two weeks. Of these cases, 860 have resulted in a fatality, bringing the US mortality rate across all demographics to 1.4%.
Upon reviewing the preceding statistics, it is important to note here that, while unquestionable deadly for some, for most individuals symptoms resulting from COVID-19 infection are relatively mild. In fact, the important risk factors associated with the disease are age and preexisting morbidities. For healthy individuals less than 60 years of age, the probability of mortality is less than 1%. Furthermore, when compared to other infectious diseases, COVID-19 is relatively mild. It’s mortality rate is significantly less than that of Ebola, MERS, or SARS and less infectious than chickenpox or measles. The data demonstrate that, for large segments of the population, COVID-19 is a relatively weak and benign form of infection. This is not to say that for other segments COVID-19 is not a serious life threat; it is. Instead, a careful appreciation of the data may provide us with insights and options as we prepare for a protracted fight against the disease.
A Retrospective on SARS, H1N1, and the Economic Consequences of Pandemic Overreaction
“What was unique about SARS was the disproportionate economic impact…While SARS posed some medical risk, it exerted a disproportionately large psychological impact on people in relation to its relatively low morbidity and mortality.” — Richard Smith, ‘Responding to Global Infectious Disease Outbreaks’
In early 2003, Severe Acute Respiratory Syndrome (SARS) began spreading rapidly across China, Hong Kong, and Taiwan. SARS eventually infected roughly 8,000 people, killing around 775 for a Case Fatality Rate (CFR) of approximately 9.5%. What was unique about SARS, as described by Dr. Richard Smith, was the disproportionate economic shock that SARS inflicted upon on its 37 host countries. Doctor Smith cites two principle reasons for this effect: 1) scientific uncertainty about the nature of the pathogen and 2) considerable uncertainty as to the effectiveness of interventions and measures to reduce the likelihood and consequences of infection. These conditions created “widespread public anxiety that then translated into a severe economic impact.”
Much like what is known about COVID-19, SARS (also known as SARS-CoV-1) transmitted primarily through respiratory droplets and in settings involving close, person-to-person contact. And, like COVID-19, there was widespread concern that the outbreak could parallel the 1918 influenza pandemic which killed around 40 million people worldwide. Also like COVID-19, SARS had a Basic Reproductive Rate (R) ranging from 2 to 4. Stemming the spread of SARS surprisingly did not include the use of a vaccine, but rather traditional, non-medical infection control measures, namely:
- Promptly isolating suspected/confirmed cases,
- Quarantining close contacts of isolated individuals, and
- Introducing and enforcing proper infection control and hygiene measures
In combating the spread of SARS, “traditional public health measures, such as tracing and isolating cases, [proved most] effective,” in containing the virus. What remains remarkable, however, is how the uncertainty, fear, and anxiety surrounding SARS increased the public’s perception of risk, escalating the costs of a relatively tame epidemic.
Compared to SARS, the H1N1 pandemic afflicted many more people when it emerged in 2009. The CDC estimates that 43 to 89 million people in the United States were infected with H1N1, resulting in approximately 12,000 deaths. However, in contrast with SARS, H1N1 primarily affected children, young adults, and pregnant women. Like SARS, on the other hand, traditional NPIs — like hand hygiene and social distancing measures — significantly reduced the transmission of the virus until a vaccine could be developed. Similar to the outsized cost of combating SARS, a U.S. Community Preventative Services Task Force found insufficient evidence to conclude that the public health benefits of NPIs enacted during the H1N1 pandemic outweighed or corresponded to their economic and societal costs.
Addressing the incidental costs of fighting an infectious disease, Doctor Olga Jonas, a pandemic researcher at Harvard, reveals in a 2013 report to The World Bank that “much of the economic impacts of a pandemic are not directly due to death and illness…even when up to 30–40 percent of the population [becomes infected].” Conversely, “most of the impact [stems from] people’s reactions and avoidance behaviors [which are] aggravated by likely confusion triggered by incomplete or inaccurate information and other inadequacies in individual subjective risk assessments.”
The magnitude of such an impact, according to Dr. Jonas, is that approximately 60% of the total costs of a pandemic would be “due to demand and supply shifts driven by people’s avoidance reactions.” Adding, “a drop in aggregate demand due to loss of consumer and business confidence could be massive and relatively sudden because fear may travel faster than the pathogen itself. [Our interconnected, modern economic system makes us] more vulnerable to pandemic impacts because of dependence on long supply chains [and] just-in-time deliveries…[such that] a failure of a weak link in such an interconnected system can create a gap with serious repercussions for households and firms.” Noting, additionally, that “uncertainty, fear, and rumors will worsen economic impacts.”
In both of the aforementioned pandemics — SARS and H1N1— each disease inflicted a direct, appreciable toll on society. Often this toll is realized in the form of lives lost and resources expended for medical care and infection control. Nevertheless, one of the important lessons learned from these events is that — due to the mass uncertainty, anxiety, and fear surrounding a novel disease—our response is often associated with an overreaction of one degree or another. And such overreactions are the cause of unnecessary and burdensome interventions which serve only to compound the effects of the virus and confound our society’s ability to effectively and efficiently combat the outbreak.
NATIONAL RESPONSE: “FLATTEN THE CURVE!”
In a commentary published this month in response to the developing pandemic, Doctors Anderson, Heesterbeek, Klinkenberg, and Hollingsworth define the main objectives of pandemic mitigation to be:
- Minimizing morbidity and associated mortality,
- Avoiding an epidemic peak that overwhelms health-care services,
- Keeping the effects on the economy within manageable levels, and
- Flattening the epidemic curve to wait for vaccine and anti-viral drug development
To achieve these objectives, the Centers for Disease Control & Prevention and the U.S. Department of Health & Human Services created a ‘Community Strategy for Pandemic Influenza Mitigation’ in 2007, which was then updated in 2017. In the event of an infectious disease outbreak, the CDC recommends the “early, targeted, and layered” use of Non-Pharmaceutical Interventions (NPIs) — infectious disease containment measures deployed in the days, weeks, and months prior to the development and availability of a viable vaccine. NPIs represent “actions that persons and communities can take to help slow the spread of respiratory virus infections.” The CDC defines three broad categories of NPIs:
- Personal (for everyday use) — voluntary home isolation of ill persons; respiratory etiquette; hand hygiene
- Personal (for pandemic use only) — voluntary home quarantine of exposed household members; use of face masks in community settings when ill
- Community (for pandemic use only)— school closures & dismissals; social distancing in workplaces; postponing or cancelling mass gatherings
- Environmental (for everyday use) — routine cleaning of frequently touched surfaces
It is important to note here that the CDC cites NPIs as being a first defense against the spread of infectious diseases because, “Given current vaccine technology, a pandemic vaccine might not be available for up to 6 months.” In their commentary on COVID-19, Doctor Roy Anderson and his colleagues espouse a more pessimistic timeline, contending “We are probably at least 1 year to 18 months away from substantial vaccine production.” Given that the first case of COVID-19 was identified on December 1st, 2019 and barring an unprecedented medical breakthrough, we are — at a minimum — still 2 months away from the development of an efficacious vaccine. Such a prognosis implies 2–14 more months — best and worst case scenarios respectively — of pandemic-level NPI protocols.
At this point, I kindly request you return your gaze to the ‘Flatten the Curve’ graph preceding this paragraph. Do you notice anything missing? How about in any of the other graphs you’ve seen circulated on the news or in social media? Have you noticed yet that the values on the x-axis are suspiciously absent? In these popular iterations of the ‘Flatten the Curve’ graph, the only information the careful observer is provided is the title of the x-axis which reads: “Time since first case”. So let me proffer this question to you now: How long do you perceive the x-axis to be? Specifically, how long do you believe it will take to withstand the ‘unmitigated’ peak outbreak period? Please take a moment to reflect on your answer to this question before proceeding.
Below this paragraph you will find something rare on the internet; a ‘Flatten the Curve’ graph with accompanying values on the x-axis. This figure—included in Dr. Anderson’s commentary — illustrates the scale of time estimated to achieve a “flattening of the curve”—the time medical professionals believe it will take to decelerate and dampen the spread of COVID-19. The striking and potentially alarming characteristic of this graph is the mere fact that ‘time’ as it’s presented here is in months, not days or weeks as I initially, albeit naively assumed. And I’m conjecturing that you probably assumed it as well.
The implication of these values on the x-axis is immediately recognizable. In our fight against COVID-19, we shouldn’t be contemplating interventions that last a few days or weeks. Rather, we ought to be anticipating months of protracted containment measures. Such a shift, at least in my mind, represents a dramatic increase from the 14 days we’ve been led to believe will be sufficient to ‘flatten the curve.’ If this is to be the case, the next logical question then is, what does this timeline imply for our strategic options to combat the virus?
NPIs — Good Intentions, Unintended Side-Effects
Currently, COVID-19 has an R value of roughly 2.5, meaning that on average for every person infected 2.5 additional persons will become infected. Pandemic expansion is indicated by any R value greater than 1, while pandemic contraction is indicated by an R value less than 1. Without mitigation, Dr. Anderson and colleagues predict approximately 60% of the population will become infected. Pandemics cease when either: A) control measures reduce R to a number less than unity [or] B) the supply of individuals susceptible to the infection is exhausted.
Given that pandemics are perpetuated by sustained human-to-human transmission, effective — that is to say the timely, targeted, & layered— application of NPIs in the early stage of a pandemic can decelerate viral transmissibility rates (R), dampen demands on health care-related infrastructure, and minimize overall population mortality. Vital to this endeavor is the isolation of infected persons, quarantining vulnerable populations, and the enactment of social distancing measures. Noting that CFRs typically increase substantially with age and preexisting morbidities, Dr. Anderson advises that “targeted social distancing for these groups could be the most effective way to reduce morbidity and concomitant mortality.”
One NPI that is absent from the literature is the use of ‘Mass Population Quarantine’ — i.e., the quarantining of entire towns, cities, and states. Which begs the question, “When did social distancing come to include mass quarantine?” There is no mention in the 2007 or 2017 CDC Community Pandemic Guidelines, nor in the academic literature, of ‘mass population quarantine’ akin to what’s being experienced across our country currently. In fact, the CDC stresses that when a pandemic emerges “Public health authorities should: 1) recommend rapid action to reduce virus transmission; 2) protect populations at high risk for complications; and 3) minimize societal disruption.”
So what are the CDC’s written recommendations? If we return to the CDC’s NPI categories — Personal, Community, and Environmental — we see that there are just a handful of conditions that require social isolation:
- Voluntary Home Isolation (Personal) — indicated for anyone experiencing flu-like symptoms i.e., fever or signs of a fever (chills, sweating, and feeling warm or flushed), cough, muscle or body aches, headache, and/or fatigue.
- Voluntary Home Quarantine (Personal)—indicated for individuals who have been exposed to the influenza virus or symptomatic persons. Exposed persons should stay home for up to 3 days after initial contact with an ill subject.
- Social Distancing Measures for Schools, Workplaces, & Mass Gatherings (Community) — indicated for communities attempting to reduce the frequency and duration of social contact among all persons. Such measures include: 1) efforts to maintain at least 3 feet of distance between persons; 2) offering telecommuting and videoconferencing options in the workplace; and 3) modifying, postponing, or cancelling mass gatherings.
Notably absent here is any call for a ‘mass quarantining’ of the broader population. In fact, the CDC stresses: “In each locality, the goal should be to implement NPIs early enough and long enough to maximize effectiveness while minimizing economic and social costs to ensure that NPIs are commensurate with pandemic severity.”
So how then did the practice of quarantining entire populations — aka ‘sheltering-in-home’—come to be recognized and included as a viable method of response to the COVID-19 pandemic? I don’t have an answer to that question. However, the answer to “How is ‘sheltering-in-home’ impacting our society and our economy,” is becoming quite clear. And the results are pretty devastating.
#StayHome, Social Misconceptions, & The Unintended [Economic] Consequences Of Mass Quarantine
“Once human effort to stop the contagion early has proven inadequate and a pandemic starts, much of the disaster [will] arise from human behaviors that disrupt interconnected economic and social systems. This could entail massive international damage.” — Dr. Olga Jonas, ‘Pandemic Risk’
Misinformation and misconceptions pervade our daily lives in the fight against COVID-19, leading to confusing and often conflicting recommendations. A herd mentality has taken root around the socially acceptable and proper measures for risk reduction and with it, an emphasis on collective withdrawal and indiscriminate, individual isolation. The most concerning of these campaigns has been the #StayHome movement wherein individuals are encouraged to stay at home and minimize to the fullest extent possible any unnecessary social contact. The development of this exceedingly stringent attitude among community members and policy-makers alike has resulted in dramatic consequences for our economy — the brunt of which we are only just starting to experience.
“Getting infected with the virus is not as much of an existential threat to my life as not having money for rent and food.” — Ali Tahir (Austin, TX)
As reported by Goldman Sachs, the economy is beginning to show significant signs of strain from the rapid application of such containment measures, prompting their economists to comment:
“Social distancing measures have shut down normal life in much of the US [and] news reports point to a sudden surge in layoffs and a collapse in spending, both historic in size and speed.”
As a result of COVID-19 and the NPIs utilized to contain its spread, economists at Goldman Sachs expect:
- An 85% decline in sports and entertainment spending, a 75% decline in transportation spending, and a 65% decline in hotel and restaurant spending.
- Immediate layoffs resulting in an unemployment rate increase from 3.5% (current) to 9%, with disproportionate effects in labor-intensive industries and among low-wage occupations prone to temporary layoffs.
- A 24% reduction in GDP for the second quarter (Q2) of 2020. To put the magnitude of this number in perspective, a 24% reduction in Q2 GDP will, when compared to 2019 Q4 GDP, equate to $5.2 trillion in lost value. If these predictions hold true, it would not only be the largest quarterly decline in GDP in the history of modern GDP statistics, it would also be 2.5 times the size of the current largest decline of -10% in Q1 of 1958.
Upwards of two-thirds of our economy is driven by consumer spending. However, a consequence of ‘mass population quarantine’ is that consumer spending around the country — and around the world — is grinding to an unprecedentedly swift halt. And with it, the revenue vital to so many small and medium-sized businesses. Roughly half of all Americans — 60 million — are employed by a small business, a figure typically idolized by politicians, but one which now provides a glimpse at the vulnerability of our economy when subjected to such life-altering measures.
To put the fragility of our economy and its workforce into perspective, a 2019 Federal Reserve survey revealed that approximately 40% of Americans don’t have enough cash on hand to cover an unexpected expense of $400, a precarious position given how much our economy relies on the health of consumer spending. Employees, however, are not the only stakeholders vulnerable to the consequences of such unanticipated events. A 2019 report authored by JPMorgan Chase found that upwards of half of all small businesses had less than two weeks of operating funds on hand and roughly 30% of community businesses were operating in the red. Abrupt shocks to business revenue over the course of the past few weeks has presented an unprecedented challenge to business owners nationwide, particularly those in the services industry. Reports are already trickling in of small businesses being forced to layoff 80–90% of their workforce following reductions in revenue of up to 90% .
“You’re going to see a massive increase in layoffs.” — David Kelly, Chief Global Strategist at JPMorgan Chase & Co.
From consumers to small businesses and from small businesses to employees, these containment measures will have ripple effects all across our modern, interconnected economy. Much like the spread of the coronavirus, as companies around the country draw down their reserve funds and credit lines, thus inching ever closer to insolvency, the dissolution — i.e., bankruptcy — of just a handful of small businesses has the potential to infect broader markets and institutions, creating a sort of ‘economic epidemic.’ An epidemic which, once started, might be similarly difficult to contain and extinguish.
“One big fear is that the widespread shutdown of businesses across the U.S. for potentially weeks, if not months, could lead to the collapse of many companies and then a vicious cycle of rising unemployment, falling consumer spending, and more industry strain.” — WSJ
Our government is in an equally precarious position to respond to this crisis. The U.S. budget deficit, following yesterday’s announcement of a $2 trillion stimulus package, is on track to surpass $3 trillion by the end of the current fiscal year. This would not generally be concerning if it weren’t for the fact that, at the end of 2019, federal debt equated to roughly 80% of Gross Domestic Product (GDP). In other words, imagine you add up all your outstanding credit card balances and realize you owe 80% of what you earn in income on an annual basis. At some point it gets difficult just to make the interest payments, let alone pay down the principal. Even before the pandemic, the ‘debt-to-GDP’ ratio was projected to exceed 100% around the year 2030. Such an unbalanced balance sheet is unsustainable, which is why the Congressional Budget Office has called it a “significant risk” to the long-term health and vitality of the U.S. economy.
Whether it’s consumers, small businesses, or the U.S. Government, all signs tend to paint a precarious economic picture highlighted by systemic fragility and wide-spread interdependence to the degree that a failure in one domain can lead to a devastating domino effect across all of them. In light of this evidence, the question now becomes, how can we minimize both health and economic suffering in our fight against COVID-19?
A “Both/And” Approach to COVID-19 Mitigation
“A pandemic may appear to be primarily a health concern, but this is misleading. Focusing on health impacts alone leads people and governments to underestimate the total risk and to neglect policies, prevention, and preparedness actions to increase resilience and enable business and household continuity.” — Olga Jonas, ‘Pandemic Risk’
The current approach to containing COVID-19 largely ignores the indirect consequences associated with combating the virus. City and state-wide quarantines, like the ones we’ve experienced over the last week and a half, are likely only to increase the total costs associated with fighting the pandemic and confound our efforts to effectively eradicate the disease. It is becoming increasingly evident that NPIs in excess of what is called for by CDC guidelines and medical researchers — i.e., ‘mass population quarantines’ — are unsustainable. Such stringent measures are unproven and incredibly disruptive to economic life. If we are to learn from past pandemics and our subsequent, often over-reactive responses to them, we must strike a balance between maintaining public health and maintaining our economic vitality. If we are unable to strike this balance, we risk infecting our otherwise healthy economy with a figurative form of economic influenza.
To this end, a degree of pragmatism — even creativity — will be required if we are to realize the benefits of infectious disease mitigation measures while simultaneously minimizing their economic and social consequences. Traditional methods of containment — i.e., isolating infected persons, quarantining high-risk populations, and implementing social distancing protocols — proved effective for mitigating the spread of the SARS and H1N1 pandemics. Given that COVID-19 mortality rates are low and a vaccine still several months away, we ought to give further consideration to existing, evidence-based methods of infectious disease control that have historically proven to be effective.
It is vital that we — in the midst of all the chaos and uncertainty— maintain a calm, balanced perspective to ensure the methods associated with COVID-19’s containment are commensurate with the pandemic’s severity and do not exacerbate human suffering. In this light I ask the reader to reflect on the aforementioned question — a question we should all be asking ourselves at the moment: “How might we adopt a balanced approach to containment if current measures to stem the rise of COVID-19 continue to prove ineffective?”
*Special thanks to Craig Brimhall and Andrew Newton for their invaluable feedback and guidance.
