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Do we have to choose between health and the economy?

Throughout the pandemic, discussion of policy decisions has been framed as protecting lives or the economy. But the past year has taught us that good policy considers our health and the economy together rather than as competing interests.

During the epidemic, people have changed patterns of behaviour to protect themselves against the disease. Together with the restrictions imposed in an effort to reduce Covid cases, hospitalisations and deaths, this has caused significant damage to the economy.

An average of 48 shops, restaurants or similar venues have closed each day across England, Scotland and Wales in the past year. In total, over 17,500 retail or food outlets closed down in 2020, while only 7,655 chain stores were opened.

Many individuals have been left destitute, particularly those already vulnerable or in poverty, and rising numbers have had to borrow money just to get by.

This has led to the widespread view that policies which look after our health hurt our economy and vice versa – that there is a ‘health versus wealth’ trade-off. But of course, both matter: we value our physical and mental wellbeing, but we also need to pay the bills. Getting the balance right is central to successfully navigating this crisis.

Indeed, the prime minister claimed that ‘at every stage in this pandemic we have struck a delicate balance between saving lives by protecting our NHS and minimising the wider impact of our restrictions’. While weighing different considerations is evidently sensible, a complicating factor is that public health and the economy are both dynamic. Is it right to strike a balance between these moving targets ‘at every stage’?

Economic decisions are often forward-looking – for example, investments, hiring decisions and product launches are all based on expectations of what the future will bring. Similarly, the course of the pandemic depends on what we do to control it, so a failure to act decisively today may make it worse in the coming days and weeks. This, in turn, may feed back and hurt the economy, both today and tomorrow, as expectations of future problems are factored into current decisions.

The intertwined nature of the economy and the epidemic during this crisis means that restrictions to control the disease should not necessarily balance economicand health considerations at all times, but rather, to think ahead, taking a longer-term view. To see why, take a simple example: investment. When we invest resources, we forgo their immediate benefits in expectation of better outcomes in the future.

The same logic applies with a pandemic. Restrictions on mingling imposed to curb infections can be thought of as investments. By ensuring that infections remain under control now, we improve the chances that they will be manageable in the future. This not only ensures better health outcomes, it also makes economic sense because a functioning economy relies on the pandemic being under control.

So, while there are trade-offs aplenty, both in the short and long term, it is unhelpful to think about having health at the ‘expense’ of the economy. During a pandemic, both health and income will inevitably take a hit. The role of policy during these difficult times is to ensure that we can have as much as possible of both – now and into the future.

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Author: Flavio Toxvaerd
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