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Will Quarantine Kill Business and the Economy: Understanding the Spaniard Epidemic 100 Years ago

Most countries struggle with coronavirus through quarantine, despite the enormous damage to the economy. Others are in no hurry to enter the business into an artificial coma - they are afraid that the medicine will be more dangerous than the disease. Writes about it with the BBC.

Photo: Shutterstock

And even where the population obediently went home, and the shops and offices were closed, the voices of the dissatisfied sound louder: they say you can’t sit locked up forever waiting for the vaccine, so we all go around the world.

Who is right: who to save first of all - people or business

In search of an answer to this question, American scientists turned to events of a hundred years ago, painfully reminiscent of today. Big quarantine is not news: the world sat on it exactly one hundred years ago, when the deadly flu, known as the "Spaniard", was walking on the planet. He claimed 50 million lives; almost every third inhabitant of the planet fell ill, every tenth infected became dead.

As now, in 1918 self-isolation, masks, closed shops and factories became salvage. As now, someone entered quarantine earlier, someone waited.

Later it turned out: those who saved the population, and not the economy, won. At first everyone was equally ill, but the return to normal after the flu turned out to be faster in those places where quarantine was immediately imposed, physical contacts were limited and hygiene was tightened.

“In the cities where decisive and urgent measures were taken, the decline in business activity was no deeper than in others. But at the end of the pandemic, they grew faster, ”the economists of the American Central Bank (FRS, Federal Reserve System) and the Massachusetts Institute of Technology (MIT) shared the preliminary results of their research.

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“It turned out that quarantine measures not only reduce mortality. They also mitigate the adverse economic effects of the pandemic, ”says a study of the influence of the“ Spanish woman ”in the United States, where more than half a million people died from the flu 100 years ago.

Dying while standing or living on your knees

That pandemic developed according to a very similar scenario: from east to west, in waves. The first, spring, was scary. Second, winter - catastrophic.

Cities in the western United States, including Seattle and Los Angeles, were the last to hit. With an eye on the experience of the cities of the east coast, they took proactive measures similar to those that we are seeing now (with the exception of remote work, online commerce, and digital tracking of the population).

Just like now, they closed schools, theaters and churches, banned meetings, postponed funerals, restricted trade, stopped public transport, introduced self-isolation and physical distance. Promoted hand washing and other hygiene, forced to wear masks.

“Those who did not hesitate, the next year after the epidemic achieved a more significant increase in industrial production and banking assets than in other cities. The economic effect was significant, ”the study said.

Scientists found that a 10-day difference in the timing of quarantine measures resulted in an increase in industrial employment of about 5% in the post-epidemic period. And an additional 50 days of restrictions ensured an increase in jobs by 6,5%.

Similar lessons of the “Spanish woman” will give confidence to politicians in the West, for whom quarantine has become a drama with an ending not yet written. They only feel for a fragile balance, which will allow in a pandemic to save the population, and the health care system, and the economy. Most have opted for saving lives, and economists support it.

“The tasks of saving people and saving the economy in no way contradict each other at present. Taking measures to curb the epidemic and save lives, we are only accelerating the restoration of turbulent economic activity in the future, ”said a group of American heavyweights, which included former finance ministers and Fed leaders, businessmen, scientists,“ deeply concerned about the prospect of a long recession ”.

In the absence of a vaccine and a sufficient number of beds in intensive care, almost all the affected countries took the path of smoothing the peak - they tried to stretch the epidemic in time, for which they introduced severe restrictions on public and business life. First in Asia, where the epidemic began, from China to Singapore. Then in Europe - in Italy, France, Spain. Then - to the USA.

Others are in no hurry with quarantine. Among skeptics and business advocates was US President Donald Trump. He quickly changed his mind and now supports restrictions: he appears on the TV screen amid a frightening schedule, from which it follows that without quarantine the number of coronavirus victims in the United States can exceed 2 million people, and with it there is hope to stay within 240 thousand.

We are not convinced yet.

Brazilian President Jair Bolsonaru is so actively opposed to the recommendations of the World Health Organization that he will be banned by Twitter and Instagram. Iranian President Hassan Rouhani calls the virus an “enemy conspiracy” to intimidate Iranians and stop life in the country. He encourages people to go to work.

On the subject: WHO: mass wearing masks does not save from coronavirus and may even harm

But the Belarusian leader Alexander Lukashenko did not introduce and does not observe any measures of distance. He said that "it is better to die standing than to live on your knees," and prescribed the population his antiviral cocktail: vodka, bathhouse, sports and field work.

How quarantine harms and helps the economy

A complete halt to life in the country has serious consequences for the economy. Negatives appear immediately, but there are also favorable ones.

To start with the bad.

Active social life is the basis of consumption in the modern economy. People go to restaurants and gyms, gather in clubs and at a party, buy SUVs and dress smartly for one purpose - to chat, show themselves and see others.

By introducing quarantine and self-isolation, the authorities thus suppress demand. And with the same shot they kill the second hare - an offer. Since both labor force is reduced (people sit at home, get sick more often and, unfortunately, die more), so does the release of goods and services (meetings, trade, sports and transport are limited).

As a result, business ceases to invest in development, which undermines the creation of wealth in the future. In addition, the number of bankruptcies is growing, not only companies are ruined, but also people.

This already threatens the banking system: massive non-payments are fraught with financial crisis, bank losses, reduced liquidity and the availability of loans.

But quarantine also has its advantages.

Firstly, it reduces the scale of the epidemic - and consequently its consequences. Strong proactive measures make it possible to weaken quarantine more quickly and shorten its duration.

Secondly, compulsory quarantine allows avoiding more serious economic problems in the future also because it smooths out mortality peaks. If the health system fails, the terrible pictures of crowded hospitals and morgues frighten the population so much that it will take to their homes, not by force, but of good will.

In this case, it will be very difficult to get people to a restaurant, concert or office; money will be saved, not spent. Demand for goods and services not of prime necessity will collapse - from furniture and cars to tours to the beach and music lessons. Consumption will be suppressed for a long time, the economy will enter a peak.

No one can predict the depth of the impending fall. The 1918 Spanish epidemic reduced US industrial production by an average of 18%. But if it weren’t for quarantine then everything would have been much worse - such a conclusion was made by American scientists.

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“Pandemics are extremely harmful to the economy,” they write. - However, timely measures can reduce their scale and thereby mitigate the subsequent economic crisis. Thus, quarantine measures not only reduce mortality, but also bring economic benefits. ”

They recognize the difference between COVID-19 and the Spaniard, who mowed a young and healthy working population. And also the difference between the archaic economy of a century ago and the modern high-tech economy. However, they see more parallels than differences.

“Countries that immediately quarantined, in particular Taiwan and Singapore, not only limited the spread of infection. It seems that they managed to smooth out the most unpleasant economic consequences of the pandemic. Thus, quarantine measures cannot be considered as a source of serious economic damage during a pandemic, ”the researchers conclude.

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