Your money or your life? Coronavirus-era economics makes us ask grim questions about how to value each other

Global cumulative COVID-19 cases

and the Dow Jones Index

Global COVID-19 cases (thousands, left scale)

Dow Jones Index (thousands, right scale)

1,400

30

1,200

1,000

25

800

600

400

20

200

0

Jan. 26

2020

Feb. 9

23

Mar. 8

22

MURAT YÜKSELIR AND JOHN SOPINSKI /

THE GLOBE AND MAIL, SOURCE: JOHN HOPKINS

UNIVERSITY; YAHOO FINANCE

Global cumulative COVID-19 cases

and the Dow Jones Index

Global COVID-19 cases (thousands, left scale)

Dow Jones Index (thousands, right scale)

1,400

30

1,200

1,000

25

800

600

400

20

200

0

Jan. 26

2020

Feb. 9

23

Mar. 8

22

MURAT YÜKSELIR AND JOHN SOPINSKI / THE GLOBE AND MAIL

SOURCE: JOHN HOPKINS UNIVERSITY; YAHOO FINANCE

Global cumulative COVID-19 cases and the Dow Jones Index

Global COVID-19 cases (left scale)

Dow Jones Index (right scale)

1,400,000

30,000

1,200,000

1,000,000

25,000

800,000

600,000

400,000

20,000

200,000

0

Jan. 26

2020

Feb. 9

23

Mar. 8

22

MURAT YÜKSELIR AND JOHN SOPINSKI / THE GLOBE AND MAIL,

SOURCE: JOHN HOPKINS UNIVERSITY; YAHOO FINANCE

Global cumulative COVID-19 cases and the Dow Jones Index

Global COVID-19 cases

Dow Jones Index

1,400,000

30,000

1,200,000

1,000,000

25,000

800,000

600,000

400,000

20,000

200,000

0

Jan. 26

2020

Feb. 9

23

Mar. 8

22

MURAT YÜKSELIR AND JOHN SOPINSKI / THE GLOBE AND MAIL, SOURCE:

JOHN HOPKINS UNIVERSITY; YAHOO FINANCE

Global cumulative COVID-19 cases and the Dow Jones Index

Global COVID-19 cases

Dow Jones Index

1,400,000

30,000

1,200,000

1,000,000

25,000

800,000

600,000

400,000

20,000

200,000

0

Jan. 26

2020

Feb. 9

23

Mar. 8

22

MURAT YÜKSELIR AND JOHN SOPINSKI / THE GLOBE AND MAIL, SOURCE: JOHN HOPKINS UNIVERSITY; YAHOO FINANCE

One way to survive these long days of social isolation and disruption is to go deep on detail. There are, for instance, the compelling images of the spiky, Sputnik-like COVID-19 virus, looking like a lamp you bought and later regretted. You can spend a long time gazing at the little monster.

You can look up all the household objects people have turned into masks, now that we’ve been advised to wear them: bra cups, panty liners, underwear, T-shirts.

There’s the online festival of videos people have posted in their boredom: the hilarious assemblies of shut-ins (my favourite is the guy who pretends to play the trombone while his wife bangs her head in time with the sheet pan); the British sports announcer doing a play-by-play of his two Labradors wolfing their food; the mask-making, the hair-dyeing, the dance fests.

But there is another pair of artifacts you can stare at long enough to induce existential terror: the chart of the upward surge of global coronavirus cases, and the graph of the stock market’s harrowing plummet because of them.

Both curves are steep. The free-falling stock chart is a cliff you don’t want to stand too close to. The pitch of the rising COVID cases, on the other hand, is more like the upper slope of a glacier, if you have ever skied up one: It keeps going up, and up, and up, and even when you think you have the top in sight, you don’t. It never seems to level off.

Together, the two charts describe the world today and as far as anyone can see into the future, thanks to the COVID-19 pandemic, a one-of-a-kind event no human has ever experienced on this scale before.

The stock market lost a third of its value between Feb. 12 – the day the number of coronavirus deaths passed 1,000 in China – and March 23, when it finally hit bottom after a string of rolling losses. More than US$26-trillion evaporated from funds and retirement portfolios, years of savings swept away. (None of this has been predictable: Last week, with COVID-19 deaths in a rapid climb, the market had recovered a quarter of its losses).

The paralyzed economy isn’t faring any better. More than a million Canadians have lost their jobs so far, and 2.5 million more may join them by the end of April. (More than 16 million Americans are now unemployed.) Growth in Canada is expected to drop by 25 per cent in the next quarter alone. The culture of office work may never recover, for better or worse; the use of cash has dropped by half around the world.

China, the country where the pandemic began, is now trying to hide the fact by posing as the world’s medical saviour, eclipsing the economic leadership of the U.S., Canada’s major trading partner. Our travel economy, our retail economy, our eating-out economy, our information and education and service economies, have all been gutted.

But the chart of the coronavirus’s rise is even more frightening. There were 1.8 million confirmed cases of COVID-19 worldwide as of April 12 (23,736 in Canada), and 113,031 deaths (675 here). The number of infections is far higher: At least a quarter show no symptoms. Ontario alone anticipates between 3,000 and 15,000 fatalities. New York is the new global inferno of the disease, but Toronto’s time may be coming.

If Americans are exceptionally disciplined in their physical distancing – in a country where the President refuses to wear a mask and the governor of Florida wouldn’t ban packed religious services – they could suffer between 100,000 and 240,000 casualties. (That’s the White House’s estimate.)

Early widespread testing might have been effective in limiting the outbreak in Ontario and elsewhere, but there weren’t enough tests to go around; without data to guide us, we’re stuck with the same technique used to fight epidemics since the fourth century BC when the Athenians caught the flu during the Peloponnesian War (which they lost) – massive public quarantine. Schools, factories, offices, events – much of the world and most of the economy have been shuttered to reduce the number of severe infections that will nevertheless require more intensive-care beds and ventilators than most hospitals have. Catastrophe awaits.

Nevertheless, on March 22, President Donald Trump, against the advice of his medical advisers, repurposed the pandemic as a campaign tool and speculated that the United States would be back to normal by Easter. That would have been this past weekend. “WE CANNOT LET THE CURE BE WORSE THAN THE PROBLEM ITSELF," he tweeted. He then extended the national curfew to the end of April.

The spectre of medical overzealousness had been loosed, and the defenders of capitalism began to rally. The conservative American Enterprise Institute is just one think tank that has released back-to-work plans, even though the prospect of a vaccine is still at least a year away. Lord King of Lothbury, a former governor of the Bank of England, was quoted in the Times saying “Why on Earth is our future being put at stake to help prolong the life expectancy of older people?”

The pandemic is forcing us to ask these grave and unsentimental questions. This is something pandemics do: They foment unrest and radical thinking. Which is more important: our money, or our lives? How should we measure the damage the pandemic is doing? In economic terms? Or in human costs? Should one matter more than the other? Who knows better, the doctors or the economists? What is the economic cost and value of saving a human life?

To the surprise of many, that last question actually has an answer.

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A human life has an official government value: roughly US$10-million.

It’s known as the “value of a statistical life,” or VSL, and was figured out decades ago by economists trying to determine the value of saving a life – to know if new pollution standards or a drug therapy were actually worth the added cost of producing them. By now the calculation has been performed so many times it is roughly standardized.

A couple of days ago I called Kip Viscusi, an economist at Vanderbilt University and one of the world’s experts on VSLs.

The first thing I did was ask him how he and other economists came up with the US$10-million figure. Not to mention any names, but it seemed high.

“Well,” he said, “let’s take a group of 10,000 workers. Let’s say they face a risk of one chance in 10,000 – that, on average, one member of this group is going to die from a job injury. And suppose these workers are willing to do this job in return for an extra thousand dollars pay per year. For the group of 10,000 workers, the extra thousand dollars pay would add up to 10 million dollars. And that’s the amount of means they require in terms of compensation for the one expected death for their group.”

Prof. Viscusi paused. “It's valuable in figuring out the benefits of social distancing,” he said.

“Have you done those calculations?” I asked.

“Well,” he said – he had what sounded like a Southern drawl – ”I haven’t done both sides of the analysis. But if you’re really going to save the United States a million lives” – a conservative guess at the number of lives that will be spared by physical distancing, using the White House’s calculations – ”at $10-million each, that’s $10-trillion. And that dwarfs any estimate that I’ve seen, in terms of the net economic costs of the shutdown.” The Americans are spending US$2-trillion on their economic rescue plan, and another US$2.3-trillion in lending programs from the Federal Reserve.

“Huh,” I said.

“I’ve also calculated the value of a Canadian life,” Prof. Viscusi added. “The value of preventing an expected death in Canada would be, according to my analysis, $7.6-million. That’d be American dollars. The U.K. and other countries are even lower. So Canadians fare pretty well.” The difference is due to different income levels in the respective countries.

In other words, if physical distancing saves 140,000 Canadian lives over the course of the pandemic – another conservative estimate – that’s worth $1.5-trillion. That’s more than seven times the projected $200-billion cost of the Trudeau-Morneau bailout. Physical distancing may be an economic nightmare, but it’s also a solid rebuke to bottom-line assessments of the value of human existence.

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Historically, pandemics are an economic mixed bag. A recent Federal Reserve Bank of San Francisco survey of the past 12 pandemics in which more than 100,000 people died (starting with the Black Death in the 14th century) found that pandemics depressed the economy and the natural rate of interest for an average of 40 years. Forty years! But there was good news, too: Wages doubled, and depressed interest rates created “welcome fiscal space for governments to mitigate the consequences of the pandemic.” Paying off the rescue package might be cheaper than we think.

Another new study of the 1918 Spanish flu pandemic from the Federal Reserve Bank of New York and MIT comes to a similar conclusion – that pandemics lead “to a sharp and persistent fall in real economic activity,” especially in manufacturing. But the sooner and more enthusiastically a city adopts “non-pharmaceutical health interventions” – hand-washing, physical distancing, sheltering in place – the faster the city’s economy bounces back. They can "reduce mortality while at the same time being economically beneficial,” the authors conclude.

This, hopefully, is where the economists and the doctors see eye to eye.

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Armed with their statistical values for human life, economists tend to be dispassionate philosophers. But COVID-19’s effect on the economy has been so harsh, even their famous flintiness has been hard to find.

Colin Busby, for instance, is a research director at Montreal’s Institute for Research on Public Policy. He is nothing if not a realist. But he disapproved of Mr. Trump’s attempt to end national quarantine early, to get the economy going at the expense of the vulnerable. “Trying to square the circle of public health measures and trying to have a discussion about economic measures at the same time?” he asked. I could hear his eyebrows going up even over the telephone.

The immediate challenge, Mr. Busby believes, is to survive the economic downturn until a vaccine or herd immunity can protect us. The problem with that plan is that the average Canadian household and small business has enough cash to survive for no more than a month. Then what?

“For a lot of people,” Mr. Busby said, “the economic consequences of not being able to go back to work might make the risks of dealing with COVID seem less severe.” Let’s say a month without pay goes by and you can no longer feed your children. Are you going to stay at home? Of course not. You are going to risk your health and the health of others to find work. And if the authorities try to stop you, you are going to demonstrate or riot or loot, or possibly all of the above. That would be disastrous epidemiologically, at the very least.

Mr. Busby believes the federal government’s rescue package – estimated at $200-billion, including interest-free bank loans, benefits of $500 a week for 16 weeks and wage subsidies – is designed precisely to avoid that dilemma, and the social strife it would cause. “The point of the package is to ensure that the most economically vulnerable, sacrificing for the common good, are rewarded for their sacrifice, and are compensated. And it has to be timely, and it has to be kept up for a sufficient amount of time.”

Is that the sound of a new, softer, more humanized, postpandemic economics?

Mark Zelmer, Ottawa’s former deputy superintendent of financial institutions and now a fellow at the C.D. Howe Institute, has been pushing the government to offer credit and loan guarantees for the same reasons. The aim is “to put large parts of the economy into a medical coma.” We have to stall and move money around until a cure is found.

The trick, once the pandemic is under control – and that’s a big once – will be waking the economy up before permanent brain damage sets in. Canadians will have to find within themselves two traits that have been in short supply in recent years: faith in government (“to get people to accept and confirm the government’s need to have everybody’s back") and financial patience, in the form of long-term, low-interest, government-guaranteed credit and loans (coronabonds!) that will in turn limit bankruptcies and other forms of irreversible capital destruction.

“The analogy I would use would be wartime financing,” Dr. Zelmer said. There will be casualties. Canada’s ratio of debt to GDP is still one of the healthiest in the G7, but Ottawa also plans to back bonds for the more deeply indebted provinces.

The restraint and taxation and cost-cutting required to pay for these stopgaps will be fodder for many federal elections. The usual suspects – the Canadian Federation of Independent Business, Conservative MP Pierre Poilievre, the Remnant Known As Andrew Scheer – have pushed back against some of the rescue proposals, but Canadian business’s traditional culture of complaint seems to have gone into momentary hiding.

Dr. Zelmer, like Mr. Busby and others, has been impressed with the gravity of the country’s politicians. “I’m struck by how Canadian policy makers managed to come together to deal with this. In the U.S., people have been less compliant. Here, people go beyond what the government asks of us.”

Even traders, the sharks of the financial aquarium, have been tenderized by the ferocity of the pandemic.

Jason Mann, chief investment officer at EHP Fund, managed to steer its investments to the low side of the risk curve early in the rout. He thinks the federal government stepped up commendably: His question is whether the rest of us have enough discipline to stay inside and ride out the pandemic with patience.

Going back to work too early – asking the elderly to risk death for the sake of their grandchildren and the economy, as Trump pal Dan Patrick, the lieutenant-governor of Texas, recently did – displays, Mr. Mann says, “a pretty cavalier attitude in terms of putting a price on life. We all know people who are in the vulnerable population.”

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This is new: In every economic crisis in the past, we listened to economists, usually men and often scolding, as they told us how to protect the flow of holy capital. In the COVID-19 pandemic, the shots are being called by public health doctors, many of them women, trained to value human life and collective physical well-being. Their advice tends to be practical. This new chain of command feels different, more earthbound and compelling, even kind of radical.

Rosalind Eggo is an epidemiologist and medical mathematical modeller at the London School of Hygiene and Tropical Medicine – the band of brainiacs that helped estimate how many hundreds and perhaps thousands of unreported COVID-19 cases each confirmed infection represents.

That was the first of several shocks to public understanding of the disease, upsetting because so many more people were possibly infected, but reassuring because a larger denominator meant the fatality rate might be lower than we thought.

As daunting as the virus is – ”this isn’t influenza, and it has become really clear that this is much more dangerous than the flu” – Dr. Eggo sees evidence that physical distancing is already bending Britain’s curve. Quarantine is a medieval way to fight such a modern enemy, she acknowledges, but “there has been a huge amount of progress in the way we react to epidemics.” In 1996, it took 167 days to find the first case in an epidemic; by 2009, it took 23 days. COVID-19’s genome has been isolated and prototype vaccines are already in development. “That would not have happened that quickly 10 years ago,” Dr. Eggo says. (Microsoft’s Bill Gates is building six factories for six vaccine candidates in the hope that two might work.)

And while economists seldom venture medical opinions, the virologists are willing to talk about the economy. Dr. Eggo is especially concerned about the consequences of outbreaks in low-income countries that are the engine of high-income economic growth. London’s Imperial College has estimated that high-income countries will need seven times as many critical-care beds as they have. In low-income countries, the ratio is 25 to 1. That means carnage.

But how quickly can global trade resume, if the virus bounces back to Europe and North America after it ravages Africa? “We do need to carefully think about what’s going to happen when the restrictions are lifted,” Dr. Eggo said. In the event of a large scale reinfection, she added, “then we need to be ready to respond quickly.”

Economists, our old masters, work at altitude, making plans based on what they see far ahead and far below. The newcomer epidemiologists live on the ground, where people live and die right in front of them, which in turn makes them seem like more responsive leaders.

Natasha Crowcroft is a Cambridge-trained public health doctor specializing in infectious diseases at the Dalla Lana School of Public Health at the University of Toronto. She cares about the economy, but she wants to cure the sickness first.

“I think the analogy between the pandemic curve and the stock market is really interesting,” she said to me one morning recently. “What the virus is going to do is much more predictable than the market. What is like the stock market, though, is how we’re going to respond to social distancing.”

She is not convinced we – the public who make up the economy – are rational enough to shelter at home for as long as we need to. “Toronto is nowhere near where New York is now,” she says. “But that’s not to say we won’t be in a week or two.” Only time will tell, of course, whether we will follow the advice of the doctors, and stay inside for as long as necessary, or whether we will be forced to sacrifice a cadre of vulnerable people to protect the livelihoods of the majority who survive the pandemic.

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In Hamburg in 1892, a cholera epidemic killed 10,000 people in six weeks. By then, scientists in Europe knew cholera was caused by bacteria. But the leaders of Hamburg – a deeply conservative, class-riven city run by an oligarchy of rich patriarchs – had just installed a shiny new (but flawed) sewer system, and refused to acknowledge the new germ theory. They preferred the discredited but more convenient belief that cholera (and even chlamydia) were caused by bad air, “night” currents known as miasmas. Once the epidemic was brought under control, the oligarchs were thrown out. Disease had broken their grip on power.

Pandemics have a way of refocusing societies. They make citizens ask questions.

North America has lost nearly 20 million jobs in about three weeks, mostly women and young people in the gig economy. What kind of jobs were they? Not well-protected ones, evidently.

Why are there nowhere near enough gowns or masks or ventilators or beds in our hospitals? Maybe the so-called just-in-time economy – the global framework of logistics that maximizes profitability by manufacturing goods only as we need them – doesn’t provide enough security in an eight-billion-person world that occupies a state of emergency and contagion more often than we like to admit. Now that entire countries are withholding critical supplies from each other, maybe globalization and trade theory and nationalism will get a rethink.

Canada’s one of the wealthiest countries on the planet: Why, then, are so many Canadians living month-to-month? Maybe a guaranteed annual income is in the works. Perhaps the market-rocking, office-dwelling, prepandemic system we all think we miss wasn’t as healthy as we thought.

“Whenever you have an infectious outbreak,” Dr. Crowcroft said, “it brings out the inequalities of the way we live. I mean, we’ve had so many complex issues to deal with, like climate change. But the thing that got the airplanes out of the sky was an epidemic.” The pandemic is costing the economy trillions by forcing people to stay at home, but the reward of being at home, Dr. Crowcroft said, may be that “we will all travel less, connect more, look out for others more.” Who knows? Maybe we will even think more.

“It’s just a virus,” Dr. Crowcroft added, shortly before she hung up. “But infectious diseases are social diseases. And what the virus has been able to do has been enabled by the way we live.” Accumulating wealth and maintaining capitalism’s health at the expense of other goals have dominated public discourse for nearly four decades. Maybe we’re sick and tired enough now to think about something else.

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