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COVID-19: The Cost of Action Versus Inaction

March 13, 2020

Enacting a country-wide quarantine versus taking no action at all - what is the right step to take as COVID-19 continues to spread around the globe? And how will these actions (or inactions) impact the global economy?

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ITR Economics Divider

Transcript by Rev

Connor Lokar:
Hello everyone. I'm Connor Lokar checking in for this latest edition of TrendsTalk. Today, perhaps not surprisingly, we're going to be talking about coronavirus, specifically the costs of action against the cost of inaction and how global governments are really struggling with this trade off as the crisis is developing. Now ITR CEO Brian Beaulieu, checked in on a TrendsTalk to discuss coronavirus a couple of weeks ago and since then we've had some good things happening, some not so good things developed. On the encouraging side of the ledger, we have seen some containment success in some areas in terms of slowing new case growth in some areas, rising recoveries, particularly in areas like China and South Korea, but on the negative side of things, we've also seem to be witnessing a westward shift of the epicenter of coronavirus or Covid-19 emanating somewhat away from Southeast Asia and China towards Europe with a notable uptick in cases becoming problematic there in particular in Italy and also in the United States we're also seeing climbing cases as well as testing capacity is catching up to the existing caseload.

Now yesterday, Italy made the most draconian move to date or at least the most extreme move that we have seen so far in the Western world adopting a full lockdown of the country that for now is set to extend until April 3rd and this is, in the Western world that's an extreme move. Italy's policymakers, they check the scales and they made the determination that the cost of acting in this severe manner were outweighed by the costs of inaction. Italy's rationale here was that in the absence of these measures, Covid-19 would advance at such a rate that the critical caseload would exceed the available capacity of care in their health systems. Now I promise you more global policy makers are going to be plagued by this dilemma and this cost of action versus inaction analysis in the weeks and months to come.

And I truly do not envy the position that they are in. I just hope that the world is paying attention because it's here. I want to remind you again, a plague has not been set loose on the United States or the globe, not here, not in Italy. I could make any number of contextual comparisons from the annual death tallies of car accidents or the common flu or heart disease or anything else, but the mortality statistics speak for themselves in this regard. The elderly are most at risk, but mortality rates for those really below the age of 70, assuming no comorbidities, anything else going on, are negligible and our healthcare system here in the U.S. while much maligned in politics is robust and I am not by any means trying to discount the very real loss of life that is occurring around the globe and in the U.S. It will get worse before it gets better to be sure.

But commentary and as reading around the situation surrounding Italy in particular indicates that the early warning signs were not heeded. As cases were ticking up, it was a failure to adhere to things like washing your hands, social distancing, canceling some social gatherings or whatever else it is or at least avoiding some of that social contact where it appears in the case of South Korea, effective and coordinated early action has proven more effective and staved off the need for such extreme measures like a countrywide shutdown like we saw in Italy. Because that countrywide shutdown unfortunately for your businesses, that is the cost of action by governments across the globe and that is likely to be more impactful. Fear and the irrational response and the associated economic carnage from things like a countrywide shutdown is the threat posed to your businesses, not the disease itself ironically enough.

These mitigation measures enacted by policymakers across the globe are designed to slow the spread of the virus but are actually compounding financial market volatility and generating shocks to consumers and producers alike. The more draconian the measures adopted, the more likely they are to dampen prevailing industrial and consumer activity in those regions and disrupt supply chains and incite fear. Now our job is to keep you updated on what all this means for the macro economy and we'll continue to do so. Your job is to keep a calm head and capitalize on the fear-based missteps made by others while avoiding them yourself. Thanks for checking in. I'm Connor Lokar.

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