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The end of the beginning?

While the number of UK Covid-19 cases remains worryingly high, particularly in the light of reports that the NHS could be weeks from becoming overwhelmed, by some measures there have been improvements. But while the vaccine may quell the pandemic, its economic effects will remain for years to come. Is this the end of the beginning?

Newsletter from 15 January 2021

Welcome to the first Economics Observatory newsletter to be published on our new website. Please take a look and, if you haven’t already, ask us a question. The Observatory exists to respond to your questions, so do keep sending them in.

One of the major improvements to the site is our presentation of charts. Back in November, in response to a report on public scepticism about economics and economic statistics, we committed to modernising our approach.

Using open-source software developed by the Interactive Data Lab, we are working on a solution. To the right of each chart, you’ll now see a small button. Many users may wish to ignore this, but those that want to know more, check our work or access our data can click the button and get access to the source code and raw data. This step makes ECO charts transparent, verifiable and sharable. There is a long way to go to build trust in this area, but we hope this is a good first step.

A pair of Covid-19 charts I have been tracking recently can be seen below. While the number of cases and death rates remain worryingly high in the UK, thankfully we have seen some improvements since last week with both the case positivity rate and confirmed cases falling. With vaccination rates picking up quickly by international standards, I hope that in due course we will look back on January 2021 as the beginning of the end of the pandemic. 

More likely, we’ll come to see it as the end of the beginning. The pandemic will be with us for years, if not decades. One simple reason is the debt – government, corporate and household – taken on to get through the lockdowns is not going away. Rising indebtedness and what to do about it is something our readers have asked for information on, so look out for pieces in coming weeks.

Another problem that will linger is inequality. On so many fault lines – age, gender, income, region, occupation – the pandemic has hit some harder than others. Here, a fascinating new piece by Guido Alfani looks at inequality and pandemics through a historical lens, comparing the Black Death (1347-52), two other plagues in 1630 and 1647, and the influenza epidemic of 1918-19, known as the ‘Spanish flu’. The causes were different – plagues are caused by a bacterium, the flu by a virus – but each were so deadly that they reshaped society and economies in their aftermath.

Some research shows that such disasters tamp down both poverty and inequality. Two mechanisms seem to be at play. First, the rising status of low-paid workers. Pandemics (and wars) lead to tragic numbers of deaths, decimating the workforce. This reduction in the supply of labour can go on to generate a rise in real wages, lifting those that survive out of poverty.

Second, pandemics lead to the fragmentation of family groups. This means wealthy dynasties are less able to hold on to their wealth and transfer it between generations. As a result, the Black Death saw one of the only periods of falling inequality for 500 or so years (see chart below).

Guido’s piece cautions relying too much on this example. Later plagues did not have the same effect and although the Spanish flu was incredibly virulent, infecting perhaps a third of the global population, it was less deadly. Instead, by making people unwell and unable to work, the flu tended to hold back wages of the lowest paid, raising inequality.

Thankfully, by comparison, the current pandemic is far less severe. But history is useful as it clarifies the important mechanisms – the way income and inheritance are altered by shocks – that will surely become a focus of both analysis and policy in coming months and years.

Backyard wildlife

Has anything good come from the pandemic? An uplifting and novel piece by Mike Brock, Jacqueline Doremus, and Liqing Li suggests so. The authors track how the pandemic has reconnected us with nature, and the positive knock-on effects this may have had.

The piece is in part an exercise in using unconventional data sets – in this case data from Project FeederWatch, a project from Cornell’s Lab of Ornithology which tracks how much time people spend gazing at feathered creatures. The article indicates that those who had previously ignored the birds in their gardens started spending time looking at them, and committed twitchers engaged in their hobby even more – some for up to eight hours a week.

This shift in focus may have led to economic impacts, as consumption patterns change. Data on people’s use of Google bears this out, with searches for  ‘bird bath’, ‘bird feeder’ and ‘bird seed’ jumping as people sought to invest in their backyard wildlife. On top of this, a third data set shows a spike in purchases of apps that help people to identify birds. Ordered to stay at home, people took on a new hobby and started investing in it.

The authors review the evidence indicating that this may have boosted wellbeing. Studies show that engaging with local nature can create so-called ‘warden-style’ feelings: a sense of responsibility, a new routine when old ones have been undermined, and a new project. All of this can bring a sense of achievement when it goes well.

My own experience, interviewing both Syrian refugees and the survivors of the 2004 tsunami living in Aceh, backs up the idea floated by these three authors. When life is turned upside down, seemingly small routines and responsibilities come to matter hugely. One of the most popular shops I found in the Zaatari refugee camp, where people had rebuilt their lives from nothing, was one selling pet birds.

Observatory news

We are hiring. We have a spot for a part time assistant to help us deliver an ambitious agenda including policy meetings, a new publication, and a conference in November. If you are interested in joining the team, please take a look at the advert and get in touch.

Richard Davies, Director

Photo from Pixabay
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