Since the onset of the COVID-19 pandemic, responses to the dual health and economic crisis have often been framed as trade-offs between lives and livelihoods.
Public health interventions reduce avoidable deaths but constrain economic activity. Job and GDP losses resulting from initial lockdowns shocked many governments into ‘returns to normal’ before infection spread had been contained and sustainable mitigations implemented.
Governments are instinctively short-sighted and the pandemic context has worsened myopic policymaking. Health-versus-economy misconceptions are an unhelpful manifestation.
Even a cursory examination of headline data fails to support this framing, as countries with higher fatality rates have generally experienced larger GDP contractions. A fairer comparison of economic losses alongside the costs of premature deaths further discredits zero-sum characterisations.
Government agencies assign a value of a statistical life (VSL) to quantify the cost of premature deaths when evaluating policies involving mortality like road safety or medicine subsidies. There is no international standard VSL and it is primarily deployed in high-income countries where costs — and therefore values attributed to living — are higher. To provide a simple and fair cross-country comparison, US government agency VSLs were adjusted for income differences (GDP per capita PPP) and used to convert COVID-19 deaths into percentage of GDP terms.
Comparing OECD and East/Southeast Asian economies in the first half of 2020 provides a sobering assessment of developed country performance. Apart from Singapore, economies that avoided mass casualties have performed better in traditional growth and combined GDP plus VSL terms. Western European countries hit hardest by pandemic fatalities have effectively lost another 10–15 per cent of GDP in VSL. Accounting for lives lost in Sweden and Belgium doubles the economic damage. Even the large and populous United States lost 6 per cent of GDP from COVID-19 deaths in the first half of 2020 and is on course to exceed that in the second half of the year.
East and Southeast Asia, Oceania and parts of Northern and Eastern Europe have fared better. Five of the top six economies in combined loss terms are from East/Southeast Asia. Overall, the region (including Japan and South Korea) has lost 4.2 per cent of GDP in the first half of the year compared to 20.1 per cent in the rest of the OECD.
Peru is one of the worst affected countries in age-adjusted deaths per population terms. Using it as a counterfactual mortality rate to estimate the VSL for lives saved, East/Southeast Asia saved lives worth 24.2 per cent of GDP compared to 13 per cent for the rest of the OECD. The counterfactual VSL saved for the OECD is around double its VSL lost — that is, things could have been three times worse. The ratio is over 115 times for East/Southeast Asia.
Policy responses in East/Southeast Asia are increasingly providing inspiration for effective pandemic handling, having more successfully utilised learned experience from endemic diseases and previous virus outbreaks. Countries like Vietnam, China, Thailand, Malaysia and South Korea have very different characteristics, challenges and resources available to them but have achieved relative success. They remain an underappreciated and secondary reference point for numerous developed countries looking to each other for best practice.
According to a leading metric on pandemic preparedness, these countries success appears wholly unexpected. Comparing Global Health Security index scores against VSL lost and saved, many of the best COVID-19 responses have come from those rated worst prepared. Vietnam, China and the Slovakia are lowly ranked yet have mounted far more effective responses than the better-equipped United States, United Kingdom and the Netherlands. Latvia, Malaysia and Belgium have similar scores, yet their outcomes have differed tremendously.
The index does a poor job of predicting pandemic handling efficacy. Strictly speaking, it measures resources available to economies — not whether political leaders have the sense or foresight to use them.
East/Southeast Asia has not only fared better in combined GDP plus VSL terms but has done so on a lesser budget. Without the deep pockets of OECD economies, developing Asia is relying on sustainable public health interventions to avoid further harsh lockdowns and associated costs.
The purpose-built COVID-19 Economic Stimulus Index combines announced fiscal, monetary and balance of payments policy measures into a single stimulus metric up to 25 August. Except for two rich East/Southeast Asian economies (Japan and Singapore), the region has deployed relatively modest stimulus responses. The regional average is slightly lower (9.9 per cent of GDP) than the rest of the OECD (10.7 per cent). The figure is less than half (5.2 per cent) if Japan and Singapore are excluded.
That the index is based on announced stimulus not implementation suggests the gap could be wider still, as institutional constraints in developing economies limit stimulus delivery.
What’s remarkable from these outcomes is that even short-term trade-offs between health and economy defy zero-sum framing. Over the long term, sustained virus containment should further promote a stronger economic recovery.
Successful economies acted quickly and firmly to contain outbreaks and developed safeguards for a cautious reopening. They have since moved to shorter and geographically targeted lockdowns, extensive testing and compulsory tracing/registration systems. They have also implemented mandatory personal protective measures such as social distancing guides, masks, temperature checks and sanitiser stations, and persistent public health messaging to maintain vigilance.
All are public health interventions with minor imposts and major benefits in avoiding significant outbreaks and associated disruptions that imperil business and consumer confidence. And while some measures involve freedom and privacy concerns that needn’t be as easily dismissed in Western democracies, judicious design and public messaging can largely mitigate these.
Few economies have explicitly committed to maintaining ‘new normal’ measures indefinitely. They would be well advised to do so. Countries should ditch the counterproductive health-versus-economy framing and look to Asia for approaches fostering healthy economies.
Stewart Nixon is a Research Scholar at the Crawford School of Public Policy, The Australian National University. He is currently a research visitor at the University of Malaya.
This article is part of an EAF special feature series on the novel coronavirus crisis and its impact.
This article first appeared on East Asia Forum.