Pandemic Economics

210 Pages·2021·6.293 MB·English

by  Peter A.G. van Bergeijk

Pandemic Economics
To Andrew Cuomo who made me plan ahead of the curve
M
Pandemic Economics
Peter A.G. van Bergeijk
Professor of International Economics and Macroeconomics,
International Institute a/Social Studies at Erasmus University
Rotterdam, The Hague, the Netherlands
IE"E"" I"
Edward Elgar
PUBLISHING
Cheltenham, UK· Northampton, MA, USA
Peter A.G. van Bergeijk 2021
©
Cover image: Peeter Burgeik
All rights reserved. No part ofthis publication may be reproduced, stored in a
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Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.
William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library of Congress Control Nmnber: 2020952724
This book is available electronically in the Elgaronline
Economics subject collection
http://dx.doi.orglI0.4337/9781800379978
ISBN 978 I 80037996 I (cased)
ISBN 978 I 80037 997 8 (eBook)
Contents
Preface vii
Acknowledgements ix
1. Introduction
PART I THE PAST
2. Prepared, but not Equipped IS
3. The Outbreak of Pandonomics 43
Appendix A3.1 Overview of Forecasts for Global Growth in
2020 64
PART II THE PRESENT
4. Flying Blind 69
5. Reliable Tools 95
PART III THE FUTURE
6. Many Futures 121
7. Five Ps for the Next Pandemic 147
References 169
Index 193
v

Preface
Tuesday March 10, 2020 was my last 'normal day' in The Hague. I remember
teaching my 'Global Economy' course on a pressure-cooking Tuesday in
which I had stuffed as many individual meetings as possible. On Wednesday I
finished field research with the last interviews in Rotterdam. Erasmus
University came to a standstill on Thursday, when lectures and meetings with
students were forbidden.
Staff and students adapted to the new situation overnight and during the next
week classes were already over the internet. Research also picked up quickly
and within a few weeks we Ie-started capacity building projects, were writing
and peer-reviewing and organized virtual research seminars. So academic
work continued in a new format but with similar, if not more, intensity as
before the outbreak. In these weeks the idea for this book emerged as an
afterthought in an email exchange with Caroline Kracunas at Edward Elgar on
April I, 2020. I started writing April 10. Writing was not 'normal'. Over the
past decade I have written nine books while commuting and on international
trips. I learned to appreciate airports, train stations and hotel rooms as places
to write. Planes and trains and their delays became opportunities. It turns out
that the lock-do\Vll also has its merits: this book was written at home.
To most people it would seem to be very unwise to write a book on one of
the largest economic crises since the Second World War while we are still amid
the storm. It is indeed difficult and exhaustive to analyse a moving target.
There is an information overkill and new and challenging perspectives are
developed on a daily if not hourly basis. For a pure scientist it would probably
make a lot of sense to wait until all the data are in so that theories and
hypotheses can be tested.
It is, however, necessary to write this book, because humanity for the first
time in history has been able to deeply hurt the economy by its o\Vll response
to a pandemic. These costs have stimulated a debate between those that give
priority to the economy and those that give priority to health. This antithesis at
the same time is both correct and, to a large extent, false, depending on the
epidemiologic features and pathogenicity of a new virus. It is correct because
health protection obviously comes at an economic cost. It is wrong because a
high-mortality-high-contagion pandemic would mean economic disaster and
the economy, indeed, could only survive if health was protected vigorously.
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viii Pandemic Economics
The COVID-19 pandemic as such is, of course, serious, but certainly not
without historical precedent and not exceptionally severe in terms of mortality.
It appears that, unlike other pandemics such as the Spanish Flu and HIV IA IDS,
the death toll is not among children and young adults. The response to the
pandemic, however, has been exceptionally costly for the world economy and
has hurt the poor and those that had just escaped from poverty in the past
decade. Since pandemics occur with a frequency of roughly seven to eight
events per century, it is vital to look beyond the apex of the COVID-19
pandemic and the trough of the ensuing recession, and to investigate how
prevention and mitigation can become more cost effective. The only way to
beat the future contagious diseases -that will without any doubt emerge -is
to plan in a rational way for the Big One.
We have witnessed responses that were induced by neglect, ignorance and
fear. This triumvirate has led to the worst possible outcome for the world, an
outcome that is not sustainable if only because killing the economy is neither
helpful for the necessary investments in health care systems (diagnosis and
monitoring) nor for the Research and Development that is necessary for curing
and preventing the next pandemic.
So, our response to the next pandemic must be better, more efficient and
especially more rational. I live in the Netherlands, four meters below sealevel,
and when you think about this it is a much stranger and riskier way of living
than the new normal of the COVID-19 world. The Netherlands has managed
to protect its way of living by means of the Delta Works, a massive and long­
term engineering project that started in 1953 and is supported by law from the
vagaries of short-termism of politics. If the water comes, the policy is that I
should not flee. I must evacuate vertically as my attic is sufficiently high, and
horizontal evacuation (to get out of the risk area) would be dangerous because
of the congestion. The Delta Works and the Dutch vertical evacuation policy
offer a real-world example of how we can use planning to construct rational
protection at acceptable levels, and also against pandemics.
The Dutch, incidentally, needed a disaster, the North Sea Flood of 1953, to
start preparing. Most important perhaps, while they were willing to invest in
protection against the sea, the Dutch did not act on warnings that the Dutch
Intensive Care capacity was too low in the case of a pandemic (ANY, 2016).
Nobody has the perfect recipe and neither do I, but I do hope that this book
can be of help by offering building blocks and a framework to think about the
challenges of pandemic economics.
De Koog, August 1, 2020
Acknowledgements
I am not an expert; nobody is yet an expert in the new field of pandemic
economics. I may, however, have been a bit more mentally prepared than most
economists.
I had to think about pandemics while COVID-19 was still beyond the
horizon, when I was a member of ANY Netherlands Network of Safety and
Security Analysts. Most of that work by its nature has been in Dutch, but an
English translation of the major all-hazard report in which severe pandemic
scenarios also feature has appeared as ANY (2016). This book, as my other
work on disasters, has benefitted from comments by people that I have worked
with in ANV, in particular, Peter Scheepstal and Leendert Gooijer.
My thinking, pre COVID-19, had also been stimulated because I work at a
development studies institute. The major recent almost-pandemics (or
'international epidemics', in WHO speak) have been in Africa, namely Ebola
and HIV/AIDS. Development economists cannot avoid the impact of
contagious diseases on the economy: one of my students had been in lockdO\vn
quite recently during the outbreak ofEbola. As always, I learned a lot from the
institute community, also -during the outbreak -about the daily experiences
oflockdowns in Barcelona, Tel-Aviv and Dar-es-Salaam.
The economics of natural disasters was not a new topic either. I have worked
on natural disasters for quite some time and produced one of the first meta­
analyses on the economic impact of natural disasters in developing countries
(Lazzaroni and van Bergeijk 2014). The key finding of the meta is that
disasters are not by definition bad for the economy and may actually stimulate
productivity. Later work on trade and disasters (Li and van Bergeijk 2019)
revealed that the trade impact of disasters is not as negative as is often assumed
and may sometimes stimulate trade. I do, of course, not claim that these
findings on natural disasters such as floods, earthquakes and droughts are valid
for the COVID-19 pandemic, because such a generalization would be both 'out
of sample' and an example of the Fallacy of Hasty Generalization. Still I have
benefitted from this research experience because it has forced me to keep an
open eye for unexpected and counterintuitive developments during the
pandemic.
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