The Covid-19 pandemic is probably turning endemic, with long-lasting negative effects on the economy. The severity of the economic damage depends on the course of the disease in society as well as our response to the disease. The most likely path is for mild reductions in inflation-adjusted GDP, small enough to be hardly noticeable to most people. But the range of possibilities is wide and the future highly uncertain.
A disease is endemic if it persists in the community. Contrast this concept with a disease that is eradicated, as polio has been in most of the world, and with a disease that has run through the susceptible population to the extent that no one is left to be infected. Covid-19 seems likely to become endemic, though the epidemiologists are cautious about their predictions. The scientific basis for Covid-19 becoming endemic includes diminishing immunity over time, potential virus mutation, seasonality and our interventions. Forbes contributor William A. Haseltine also notes potential transmission from pets and livestock, which makes our human vaccines and social distancing less effective in eradicating the disease.
Endemic Covid-19 does not necessarily mean mild disease. Lethality could remain high. And it could also mean sharp spikes in cases, hospitalizations and deaths, especially if seasonality proves to be a critical factor or we see periodic mutations.
Economic impacts of Covid-19, whether endemic or temporary, come from direct damage, regulatory damage and voluntary damage, as I described earlier on the idea of omicron being good for the economy.
Direct damage from endemic Covid-19 begins with the loss of lives and the suffering of the ill and their loved ones. The direct economic damage includes loss of work hours from those who are ill and those caring for the sick. Work is also lost from isolation by people healthy enough to work but avoiding infecting others. Medical care needs would be permanently higher with any endemic disease, leaving few resources for investment and non=medical consumption.
Regulatory damage would be much lower if government policy-makers accepted that the disease could not be eradicated. Countries such as Australia and China are currently aiming for zero-covid, restricting productive activity as well as preferred non-work activity, such as socializing, exercising and traveling. Skeptics note that any international travel is risky to a country’s zero-covid goal, not to mention failure to isolate livestock and pets. For people to continue to have food, water, electricity and sanitation, some people will have to leave their homes, which will mean the disease will continue to find new hosts who will infect others. Eradication within a country is theoretically possible but very difficult for a disease with Covid-19’s infectiousness.
Other countries generally are abandoning extreme lockdowns and transitioning, in fits and starts, to mostly voluntary limitations on social interactions. Eventually all policymakers will ease their restrictions to the point that the economy is not affected.
Voluntary damage to the economy would continue to a small extent in an endemic Covid-19. People who are personally concerned about the disease, either because they are at high risk or are highly risk averse, will avoid crowded settings, including restaurants, concerts and travel by airplane or cruise ship. However, they are likely to spend their income in other ways, such as the shift from services to goods (bicycles and home furnishings, for example) that we saw in 2020. Some people will retire earlier than they otherwise would have, which reduces productive capacity in the country. Others will continue working but in a job less suited to their talents. For example, a restaurant server might shift to a home-based clerical job.
All in all, these changes to the economy will probably total to a fairly small negative impact. Life, and business, will go on.
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