By: Aidan Levi-Minzi
As the Coronavirus becomes an ever increasing threat to the world, many countries are preparing for the worse by shutting down their nations’ economies. The cutoff between human life and a strong economy shows just how important money really is.
On the first day of an introductory philosophy class, students are often given this simple scenario: There is a runaway train moving down a track, and down the line are five men tied down and unable to move. You are standing next to a lever and have the option to pull it and divert the train to another direction, but there is someone else standing on that track. You have two options: stand by and watch the five people being killed, or pull the lever and directly take part in the death of one single person. Hence, a moral dilemma.
Choosing between saving a person’s life or saving the economy seems to have a much more obvious answer. Money and lives cannot be compared on the same scale. Yet, throughout history, this kind of impediment has not led business ventures and political aspirations alike to take a back seat despite the human cost. Boris Johnson told his nation to “take it on the chin” regarding the COVID-19 pandemic in early March. This wasn’t a lighthearted way of telling the British to embrace trying times, but rather his way of explaining their approach to the pandemic. By allowing the virus to run unchecked, Johnson and the NHS hoped that the population would gain “herd immunity” more quickly, and therefore be less taxing on its economy. About a week later, the Imperial College proposed a model showing that around 260,000 people would have to die, which pressured Mr. Johnson to finally change his course of action. Is there a specific death toll in which Mr. Johnson would have deemed the economic implication more important? Where (and when) is the line drawn?
Donald Trump has called for the shutdown of most economic activity across the United States, and many have obliged. With businesses unable to maintain a steady flow of income, some have no other choice than to lay off workers. This will no doubt increase unemployment, a situation the US has been familiar with throughout its financial history. However, it is the way in which unemployment rises that makes this crisis unparalleled. Keynesian economics argues that firms practice labor hoarding during dips in revenue, meaning that they refrain from laying off workers even when business is slow. This is due, in part, to the fact that firing someone usually comes with a price, usually in the form of a severance package, which can reach 50% of the worker’s previous income in the US, and sometimes much more in European countries. Firms will refrain from hiring as long as they can in order to avoid these unnecessary costs.
The unemployment rate is measured in two variables: the separation rate (percentage of workers separated from jobs), and the finding rate (percentage of unemployed who find a job). In June 2009, the United States Bureau of Labor Statistics announced that the finding rate was 31.4%, and the separation rate was 3.3%, meaning the United States had a peak unemployment rate of 9.5% after the financial crisis of 2008. In February of 2019, the finding rate was 93.3%, and the separation rate was 3.7%, for an unemployment rate of 3.8%. The rate at which people lost their jobs was higher in 2019, but overall unemployment was lowered because of the nearly three-fold increase in the finding rate. During recessions, the government is supposed to entice firms to hire and support the finding rate, but the current state of economic affairs is not doing its job. Firms can no longer afford to pay to keep their workers. The world is on pause, and some people can’t afford to sit around and wait. Steven Hilton, advisor to former UK Prime Minister Dave Cameron, put it plainly, “You think it’s just the coronavirus that kills people? This total economic shutdown will kill people”.
For all of the scientific prowess that 2020 has to offer, some of its tools against an unknown disease are similar to 14th Century tactics. The Bubonic Plague that ravaged through Europe in the 1340s may provide some forewarnings. Incoming trade ships to the port city of Venice were told to disembark for 40 days – quaranta – and it actually made a significant difference. The Florentines established health magistrates endowed with special legal powers to fight the plague – a sort of medieval department of health. There were also “sanitary cordons”, where cities were surrounded by armed soldiers who didn’t allow anyone in or out. The Black Death, with its mass scale of human execution that sparked a fear of biblical proportions, provides a unique (grisly) natural experiment in how factor quantities affect factor prices. It reduced the European population by nearly one-third, and because the marginal product of labor increases as the supply of labor falls, real wages nearly doubled during plague years. The peasants who were fortunate enough to survive the plague therefore enjoyed economic prosperity.
According to recent studies from the WHO, as well as information coming from Italy, those over the age of 60 account for nearly 80% of mortality. In addition, deaths were highest among people “who had heart disease, diabetes or chronic lung diseases” before being tested positive for COVID-19. Taking these numbers into consideration, there is now another side to the coin. The question remains: who’s going to take the hit? Some have gone so far to say that COVID-19 might even prove economically beneficial in the long run. The Telegraph’s financial correspondent Jeremy Warner writes (rather cold heartedly) that the Coronavirus “will disproportionately cull elderly dependants”. Someone is going to come out on top.
The virus demands a blood sacrifice, and it’s either the old and infirmed, or the economically unfit. There is much economic and political uncertainty in the world right now. People would be forgiven if, in these moments, they are unable to see the faces behind the statistics. But they are there. The current death rate of the virus, according to Johns Hopkins University, is around 4.6%. And World leaders are standing at the lever; it is up to them to decide whether the runaway trolley will hit the hospital, or the bank.
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