Shaking Hands Despite COVID-19: Simple Solutions For Reopening the Economy under Conditions of Multiple Peak Uncertainty

Despite the difficulty in predicting the spread of COVID-19, the Institute for Health Metrics and Evaluation and Columbia University have created models – which often include multiple scenarios based on containment measures – for predicting the rate of spreading of coronavirus. The Wall Street Journal, Food and Drug Administration, and the Mayor of Washington D.C. are just a few who have used these models to declare a range of dates and locations for when the virus will peak and then flatten. Even the popular online Q&A forum Quora is seeing predictions.

Asking when the virus will peak naturally leads to asking when, and how, regional economies will reopen for business. Reports of decreasing death rates in places like Italy, France, and the U.S., have prompted White House advisor Dr. Fauci, U.S. Treasury Secretary Mnuchin, the U.S. Center for Disease Control Director Redfield, U.S. President Trump, and New York Governor Cuomo (now in coalition with nine other states) to all cautiously declare victory over ‘the peak’ in the U.S. and posit partial economic reopening (“rolling reentry”) as early as May, despite warnings from Harvard and the World Health Organization. Some countries, like Iran, Spain, Germany, and Austria, have already begun dipping their toes in partial reopenings, convinced that the virus’ spread has peaked, passed, and flattened.

Yet, the question of when the virus will peak ignores the questions of if there will be a peak. For months, experts have already been warning of the possibility of a Spanish Flu like second wave this upcoming Autumn. More worrisome, many Asian regions, including China, which previously exemplified the most effective containment, are now experiencing second waves with second peaks. Singapore’s second wave is especially concerning: “if Singapore can have more than 200 new infections in a single day at this [warm of a] temperature, we should give up any illusion that the summer heat will kill off the virus,” said University of Hong Kong microbiologist Dr. Ho Pak-leaung. French scientists confirmed this when their experiments found that only near-boiling temperatures could fully eliminate COVID-19.

Throughout March, the International Monetary Fund, U.S. Federal Reserve Chairman Powell, and former Chairman Bernanke all predicted overly optimistic V-shaped economic recoveries and maintained that this “won’t [be] anything like the extended downturn we saw… in the Great Recession [and] much less the Great Depression.” Practically all COVID-19 related economic predictions – the above made implausible within just weeks – have assumed one virus peak that would correspond inversely to the bottom of the V-shaped economic model for global growth. That also includes less optimistic models and multiple scenario models (assuming one peak per scenario). Even now when the IMF is predicting that “the Great Lockdown” will overshadow the 2008/9 recession, it still implicitly alluded to a 2020 first-half virus peak and explicitly forecasted a 2021 global rebound of 5.8 percent. Despite a recent transition from “V” to “U” shaped predictions, the forthcoming reality is that new spikes in cases may cause W-shaped economic growth outcomes; or even, in a worst case scenario, a rocky, downhill slope.

With national economies almost all collectively experiencing the quadruple battering of demand-side consumption decreases, supply-chain disruptions, financial shocks, and century-high unemployment rates, and top economists consistently forecasting a bounceback that keeps getting pushed further and further back, how should policymakers hoping to reopen the economy respond to the uncertainty of not even knowing how many peaks may pass?

This outbreak is a public health crisis with economic ramifications, not an economic crisis in it of itself. The uncertain complexity of COVID-19 demands simple, health focused solutions. Its ability to spread without regard to borders also demands that leaders prioritize global cooperation on these solutions. Although simple solutions fail to grab headlines, their widespread implementation would most effectively prevent further virus peaks and economic valleys. 

Simple Solutions

“To eliminate the virus, community transmission must be prevented.” Expedient testing and contact tracing are the single most effective public health precaution for containing COVID-19, especially when integrated with well-managed information and communication technologies. In Wuhan, China, for example, compulsory widespread testing takes just a few minutes and returns results, via app or text message, within just two days. Without consistent and accurate testing, even reasonable proposals for partial reopenings become worthless.

The widespread wearing of face masks when in public, something that people of most Western countries have still yet to take seriously compared to many Eastern regions, should be compulsory, as it is in Singapore and (finally) New York. Hong Kong residents, 99% of whom have been wearing masks when out in public, kept their first wave of rates down to 100 total infections; Western expatriates who returned to Hong Kong but chose not to wear masks as often likely caused Hong Kong’s second wave of infections (now over 1000). This phenomenon appears on a national scale, too. It took the U.S. 24 days, after the country reported 1000 confirmed cases, to issue an official recommendation for wearing masks; China did so in just 2 days.

Indeed, fiscal and monetary remedies must complement the bedrock of these simple, public health measures. Analysts should, again, utilize simplicity when diagnosing the economy and proposing economic remedies. Unemployment insurance claims data will provide more pertinent insights regarding labor and the economy than unpredictably volatile market fluctuations. Simple and direct payment transfers – such as those passed in Hong Kong and the U.S. – as well as partial payroll coverage – as has been done in some European countries and has been suggested by UC Berkeley economists Zucman and Saez – could both serve as direct means of addressing widespread labor disruptions.

Put plainly, no magnitude of rate cuts will incentivize people to go out to the mall and spend their emergency savings as they fear for their health and their job security. Simple and widespread face-covering mandates and virus testing will save the economy more directly than basis point cuts or open market operations. Once these solutions actually ‘flatten’ outbreaks, global leaders should follow the example set in South Korea where, despite recently lowered case rates, precautions for social distancing and virus testing still persist. 

Global Cooperation

Straightforward public health solutions only partially succeed when implemented only partially around the world. With the virus spreading without regards to borders – and causing sudden job losses throughout industries – global cooperation on basic health and labor measures will impact the direction and public perception of globalization. Many of the aforementioned Asian countries that contained the virus often experienced second peaks from partial reopenings. If countries reopen borders and relax health precautions individually and sporadically, recent events suggest that the lack of coordination will bring forth not one or two peaks, but an ever-expanding mountain-range of virus outbreaks (and valley-range of growth downturns) around the world. This would shatter trust in global and political institutions while failing to minimize the preventable deaths of thousands. 

It is difficult to imagine a coordinated global response after the escalation of U.S.-China trade tensions and the increase in populist reactions to globalization around the world. Individual bilateral bright spots are still overshadowed by a lack of a global response and U.S.-China power competition which is recently playing out – not just via blame games – but also via military tensions off the coasts of Vietnam, Taiwan, and Malaysia, and even possibly underground.

U.S. President Donald Trump seems to be the least inclined of all towards coordination of any kind. Within his own country, his debates over authority have sidelined consensus building, prompting Governor Grisham to (correctly) respond that “[if] we had better national strategies and universal testing… we could figure out when opening makes sense.” Grisham’s call for state-to-state coordination also makes sense for nation-to-nation coordination; but President Trump seems even less inclined towards this. Within the same 24-hour period, the ASEAN virtual summit jointly declared a (promising) “whole-of-ASEAN community approach” while President Trump seemed to overblow reasonable criticism towards the WHO by halting U.S. funding to the multilateral organization, prompting immediate criticism from China, the American Medical Association, and leaders around the world. This is no surprise, however, as just a month before, his administration’s insistence on mislabelling COVID-19 resulted in fractured post-G7 statements.

The April 15th G20 Communiqué’s debt relief for hard hit low-income countries and commitment “to individuals [whose] income levels are negatively affected” offers promise for multilateral coordination. If the U.S. and China can move past suspicions and lamentations and cooperate as global leaders, their joint momentum would prove instrumental.

Just imagine if that G20 meeting had concluded with a different topline: “All G20 countries are coordinating lockstep implementation of mandatory face covering policies and free, universal testing to contain the virus globally. And while many of the world’s workers sacrifice wages to practice social distancing, countries will do ‘whatever it takes’ to partially relieve temporary salary cuts.” A message of global solidarity through temporary isolation, as simple as it may seem, would most effectively and immediately bring the world through the COVID-19 mountain range and into a reopened economy. Through directly addressing issues most relevant to common people, leaders would reaffirm institutional trust. The costs of a proactively executed temporary halt to the global economy would pale in comparison to the costs – from healthcare, the aforementioned quadruple economic shocks, and the hard-to-measure loss in public trust – of allowing the virus to build its own range of peaks all around the world. There is no guarantee, either, that reopening businesses will also “reopen” the economy; especially if loosening social distance measures invites additional virus peaks. One increasingly possible reality is that the choice is not between a slow recovery and a standstill, but a standstill and a freefall.

COVID-19 is testing how effectively global leaders and globalized systems protect citizens’ health and secure workers’ vocations. Countries like Israel, South Korea, and Germany have already proven how years of proactively investing in modern health care systems and technologies are the best way to respond to this test. But for now, as the virus spreads to all nations regardless of their public health preparedness, predictions and policies alike should recognize the danger in wrongly assuming virus peaks and economic “Vs.” Instead, global leaders should hope for the best and prepare for the worst by virtually shaking hands, or tapping feet, on simple and widespread public health and labor focused solutions.

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The author would like to conclude this commentary by expressing his sincerest condolences to the countless families affected by the global tragedy that is the COVID-19 outbreak.

Stephen Dwyer works with the Simon Chair in Political Economy at the Center for Strategic and International Studies. The commentary reflects the sole opinion of its author and does not represent the views of ICAS, CSIS or the Simon Chair.