{"id":2322,"date":"2020-04-13T20:22:34","date_gmt":"2020-04-13T20:22:34","guid":{"rendered":"http:\/\/www.gronenonline.com\/_gronen1\/?p=2322"},"modified":"2020-04-13T20:22:34","modified_gmt":"2020-04-13T20:22:34","slug":"what-does-flattening-the-curve-mean-will-it-also-flatten-the-global-economy","status":"publish","type":"post","link":"http:\/\/www.gronenonline.com\/_gronen1\/2020\/04\/13\/what-does-flattening-the-curve-mean-will-it-also-flatten-the-global-economy\/","title":{"rendered":"What Does \u201cFlattening the Curve\u201d Mean? Will It Also Flatten the Global Economy?"},"content":{"rendered":"
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Guest Blogger<\/span><\/strong><\/p>\n

Farok J. Contractor, Rutgers Business School<\/strong><\/p>\n

Previously publisehd on Globalbusiness.blog:\u00a0https:\/\/globalbusiness.blog\/tag\/flattening-the-curve\/<\/a><\/strong><\/p>\n

The Excruciating Choice<\/strong><\/span><\/p>\n

Governments face an \u201cexcruciating choice\u201d between \u201cflattening the (coronavirus) curve\u201d by imposing quarantines and lockdowns and the huge, unprecedented economic impact on the world economy that is already in recession. The Health and Human Services Department of the US Federal Government is planning for the possibility of an 18-month medical and economic crisis (Bubl\u00e9, March 18, 2020).<\/span><\/p>\n

While pandemics have occurred in the past, the global scale of overnment response verges on the unimaginable. According to a\u00a0Pew Research Center<\/em>\u00a0report, as of March 31, 2020, 93 percent of the world\u2019s population lived in countries with at least some travel restrictions (Connor, April 1 2020). This means that much of the world economy is either hampered, delayed, or shut down entirely (Fernandes, March 22, 2020). In the worst scenario, if prolonged, this could lead to not just a global recession, but something worse.<\/span><\/p>\n

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Source<\/u>: Connor, P. (April 1, 2020). More than nine-in-ten people worldwide live in countries with travel restrictions amid COVID-19.\u00a0Pew Research Center<\/em>.\u00a0https:\/\/www.pewresearch.org\/fact-tank\/2020\/04\/01\/more-than-nine-in-ten-people-worldwide-live-in-countries-with-travel-restrictions-amid-covid-19\/<\/a>\u00a0<\/span><\/p>\n

Are the \u201cCopycat\u201d Government Responses Worldwide Appropriate or Excessive?<\/strong><\/span><\/p>\n

What is driving this \u201ccopycat\u201d behavior on the part of all nations? Is it an excessive reaction? What will be the consequence\u2013 returning to normalcy faster or plunging the world into a prolonged recession? Governments are closing businesses and imposing quarantines or travel restrictions with the idea of slowing the spread of the coronavirus. But will slowing its spread also prolong the economic anguish? Will it also reduce the number of persons eventually infected?<\/span><\/p>\n

For readers interested in the above questions, this piece is intended as another update to my earlier post (Contractor, March 20, 2020) with additional references from medical experts and economists. I also indicate below why there are no definitive answers yet (Knowledge@Wharton, March 24, 2020) and why the estimates in the scholarly epidemiological references below should be read with circumspection.<\/span><\/p>\n

What Does \u201cFlattening the Curve\u201d Mean?<\/strong><\/span><\/p>\n

The expression \u201cflattening the curve\u201d is already a popular clich\u00e9. What a government means by this \u2013 and it is an admission of unpreparedness \u2013 is that, unchecked, infections would grow at an exponential rate so as to exceed the capacity of hospitals to cope with the numbers of patients. For a graph and additional details, see my earlier post (Contractor, F., March 20, 2020).<\/span><\/p>\n

By forcing quarantines and social distancing, governments hope that the growth of the infections will slow to a rate that remains below the maximum capacity of hospital beds, equipment such as ventilators, and doctors and nurses available in their region or country. If not, the medical establishment will be overwhelmed. This is already happening in Italy, Spain, New Delhi, and New York (as of April 2, 2020). For a while, it happened in Wuhan and Hubei Province, whereupon the Chinese government introduced a severe lockdown on January 23, 2020.<\/span><\/p>\n

But What About the Severe Impact of Shutting Down Some or Much of the World Economy?<\/strong><\/span><\/p>\n

While restrictions are being gradually eased in Hubei, scant signs of an economic recovery there are evident as yet. As the diagram in my previous post (Contractor, March 20, 2020) schematically illustrates, \u201cflattening the curve\u201d also means prolonging the economic dislocation, precipitating mass unemployment (perhaps more than 60 million have been laid off worldwide in just the last two weeks), bankruptcies, and the mental and physical health effects of an extended downturn in the medium to long term.<\/span><\/p>\n

Are Governments Acting Appropriately or Over-Reacting?<\/strong><\/span><\/p>\n

Candidly, we have no definitive answers as yet. While economic papers (e.g., Bonaparte, 2020; Fernandes, 2020; Gourinchas, 2020) try to model the effects, all modeling is based on assumptions, and the current situation poses way too many unknowns or gaps in data (Stock, 2020). For example:\u00a0<\/span><\/p>\n