The ASI’s latest paper, written by ASI Director Eamonn Butler and Head of Research Matthew Lesh, explains the urgent need for the Government to plan an exit from the economic lockdown:
The economy is not a machine that can be simply turned “on” and “off”. It is a complex system, dependent on billions of relationships that are falling apart.
The outbreak of a deadly pandemic has necessitated the forced closure of one-third of the economy – causing a sizeable immediate decline in incomes and rise in unemployment.
The short-term damage has been universally acknowledged. However, many analysts and politicians are substantially underestimating the damage being done and the challenge of reanimating the economy after the lockdown.
The impact of closures spreads through an economy in the same networked fashion as the virus itself spreads between humans: each business’s problems affect several others.
The longer the lockdown, the more businesses will run out of cash, lose hope, and shut down. This will cause substantial unemployment – the extent of which may currently be hidden by the ability to furlough employees.
The impact of the lockdown grows deeper and faster over time. Each business that closes causes problems for its staff, suppliers and customers, and their problems in turn knock on to others and on and on.
While the Government’s policies are logical and necessary, escalating economic hardship is inevitable. It is necessary to stem the damage as quickly as possible to prevent massive economic collapse.
‘Lives versus livelihoods’ is a false dichotomy — a strong economy is what keeps people fed, housed, and ensures we can afford quality health services. Economic contractions are not only associated with lower quality of life, but also worse health outcomes and loss of life.
The UK is falling behind other European countries — including Austria, Czech Republic, Denmark, France, Germany, Italy, Norway, and Spain — who have developed and are beginning to execute strategies to reopen their economies.
If the Government wants to safeguard the people’s lives and livelihoods they must:
(1) develop, and release, a phased plan for lifting the lockdown to provide greater confidence for businesses and citizens:
following the best possible public health research and latest evidence;
explicitly aiming to prevent subsequent mass outbreaks and loss of life;
including a strategy for decentralised mass testing, and isolation and tracing of cases while protecting privacy;
encouraging physical distancing, maintaining limits on mass gatherings and special measures for at-risk groups in early stages;
allowing as many businesses as possible, as quickly as possible, to reopen their operations;
(2) scale back the state’s extensive role in the economy after the crisis to avoid crowding out the rebooting of the private sector; and
(3) introduce policies, both permanent and temporary, that will enable the economy to bounce back after the crisis, including cutting excessive red tape and taxes that discourage investment.