The economic inheritances of COVID-19

Published in El Pais, 9 November 2020.

For nearly everyone, the Coronavirus has been quite close. Perhaps you were infected or someone very close to you. It is one of these rare events where every person in the world knows what you are talking about, we are all suffering the effects in one way or another. The priorities seem simple when there is an epidemic. First, we save lives and then you will see the economy. This was the logic during the first wave. Sure, the damage to economies was recognized, but it was probably worth it to save the population knowing that the death toll is much lower than having done nothing. But little by little we also realized that we have to keep economies running. So locking people up was not desirable, if not impossible. People had to work for income, but in more secure ways, reducing the costs of lost productivity.

But what exactly are the direct costs of this epidemic? First the health costs, the cost of hospitalization, ICU, medications, etc. There are also costs because sick people cannot work, these are costs for companies, insurances, or individuals. And there are costs related to the measures. Several people who could not work due to the quarantine, theaters, cinemas, stores lost sales and income because the consumer was forced to stay at home. The last thing that is being taken into account are the costs of vaccination. Most countries will offer it for free, but it is still a cost.

Now that governments are looking further, there are two more costs that appear. The economy in many countries is in crisis, and normally governments have to invest to repair it. An expensive and difficult task if we take into account that COVID-19 already cost the government a lot. The governments are facing the difficult decision if they lower taxes, increase investments, so that they can start the economy, but at the same time they get more debt. Or limit investments, stop subsidies, lay off people to work more efficiently and fix the external debt that already rose a lot during the COVID-19 crisis. Obviously, people prefer the first option, but the consequence of high debt can be serious as well. On the other hand, how many lives can we save if we guarantee work?

In general I am in favor of a crisis from time to time, that it puts us all with our feet on the ground and we work more seriously. But this time it is a complex crisis that requires the same dedication from people as when we tried to control COVID-19.