Market Overview

9 April 2020

Social Restraint is Our Best Solution

Much has been said about whether closing the economy as a consequence of the measures taken in order to achieve social restraint is the right way to go. The inevitable recession and even the possible deaths that could arise from it, end up being some of the arguments of the people who tend to favor another more flexible form of containment.

The reality is that the presence of these measures, which we see being implemented all over the world, promotes an abrupt and painful recession for everyone. However, the issue here is that the contraction of the economy becomes greater as more existing containment measures are put in place.

In a study published last week, dubbed Macroeconomics of Epidemics (2020), it was concluded that there is indeed a trade-off between a deeper recession in the short term and the consequences for human health, in particular, for the number of deaths caused by the epidemic. It is estimated that in the absence of containment policies, less than half a million people could be saved in the United States and also that the recession would be less pronounced in the short term. However, the most interesting economic point of view is that in the long-term, it would probably be more difficult to get out of this crisis (not so deep in the beginning, but a longer lasting crisis) and this could have a more negative impact on the country product when compared to a situation in which social containment measures would exist for a period of one year.

Interestingly, another empirical study came out last week that proves the model used in the above investigation. In Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu (2020) - which is based on the Spanish Pneumonic, which spread throughout the world in 1918 - it was discovered that the cities that intervened earlier and more aggressively did not have a worse development than the others and that they grew even faster after the pandemic had passed. It is possible to read that "this study indicates that non-pharmaceutical interventions (eg quarantine, school closures, etc) not only significantly decrease mortality, but also mitigate possible adverse economic consequences resulting from the pandemic". Basically, the high mortality present in regions where the containment measures were less hostile removed labor from the labor market as well as causing a reduction in consumption. Finally,

This concludes that perhaps there is no dilemma here and that our best solution to this problem is to adopt and respect all these measures of social restraint. It is possibly the best measure for public health and the health of our economy. Putting the economy aside as well, if all of this is done for the sake of human life, we must not put that value aside today so that others can live less well tomorrow. If our values ​​have shelf life, then they are not values ​​at all.


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Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade. Indiscriminate reliance on illustrative or informational materials may lead to losses.

Frederico Aragao Morais
Market Focus

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

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