The secret to reopening the economy: It’s all in the lockdown

It is increasingly evident that economic activity will resume fully only after lockdown restrictions have been given time to work. Otherwise, Covid-19 will continue to spread, making a sustained and rapid economic recovery all but impossible until the arrival of effective, widely available vaccines.

When the coronavirus first began to spread beyond China, triggering an immediate, sharp reduction in the level of economic activity and employment where lockdowns were imposed, epidemiologists tried to educate the public (and the authorities, in many cases) about what would come next. 

They warned that the virus would not be sufficiently contained until its R number – the average number of people infected by a sick person – is less than one. At exactly one, each sick person infects one other, and the number of Covid-19 cases remains constant over time. An R number below one, scientists explained, could be achieved much faster with tighter restrictions, and effective testing and contact tracing, to isolate positive cases.

In locations where shelter-in-place orders and other measures have been all-encompassing, outbreaks have been stabilised and the R number has dropped within just two or three weeks. In some places, Covid-19 cases surged exponentially early on, leading to self-quarantine being more common. And because a high percentage of people in hotspots complied with the lockdown recommendations and tracing and testing (likely out of fear), the epidemic curve was quickly dampened.

By contrast, in locations where lockdown restrictions were initially mild or nonexistent, fewer people took steps to avoid contact or prevent transmission of the virus, or were more casual about such precautions, and cases duly increased. 

To be sure, additional location-specific factors have influenced the spread of Covid-19. But the clear takeaway from around the world is that the scope of lockdown restrictions, and the degree to which they are followed, is the single most important factor in weathering and then recovering from the pandemic.

Unfortunately, in the United States, in particular, popular resistance to restrictions mounted just when continued public compliance was needed. 

Some politicians and commentators insisted that the economic costs of saving a life were too high, relative to the costs inflicted on those suffering a loss of income or medical care for other conditions. This burst of public pressure won the day. Despite epidemiologists’ warnings, the initial lockdown restrictions were relaxed too soon in many US states.

Even worse, as soon as these reopenings began, many people returned immediately to their old habits, ignoring recommendations for social distancing, avoiding crowds (especially indoors), wearing a mask, hand washing, and other preventive measures. 

Factories reopened, and many retail establishments and other services resumed operations, albeit at reduced capacity. For a short time, output and consumer spending rose significantly, and the unemployment rate started falling (though it remained high). But in most cases, these reopenings started with an R number close to or above one, which guaranteed that as soon as people started relaxing precautionary measures, the number of infections would begin to rise again.

The twin goals of defeating the virus and reviving the economy are not contradictory, but rather one and the same. The virus will dictate the pace at which we can safely resume economic activity.