The economic consequences of the COVID-19 lockdowns are well-chronicled.
These are daunting figures and serious problems. But in some ways, they are not the worst part of the story. The United States, after all, is an incredibly wealthy nation. The vast majority of the poorest among us are still relatively well off from a material perspective, with access to shelter, running water, food, and other amenities and forms of assistance. It’s a fact often unspoken that the poorest counties in the US struggle with obesity.
Obesity is a serious matter, but many parts of the world struggle with a more severe form of malnutrition: hunger. Sadly, many of the most economically depressed parts of the world stand to see tens of millions of more people slip into extreme poverty, a new World Bank study says.
“Poverty projections suggest that the social and economic impacts of the crisis are likely to be quite significant,” the report states. “Estimates based on growth projections from the June 2020 Global Economic Prospects report show that, when compared with pre-crisis forecasts, COVID-19 could push 71 million people into extreme poverty in 2020 under the baseline scenario and 100 million under the downside scenario.”
Most of the increase will occur in places already suffering from high poverty and hunger. Projections show that roughly half of the individuals falling into extreme poverty—which the World Bank defines as “living on $1.25 or less a day”—live in South Asia, while more than a third come from Sub-Saharan Africa.
South Asia and Sub-Saharan Africa already are the poorest regions in the world. In fact, a separate World Bank report shows that the five most populous countries in these regions—India, Nigeria, the Democratic Republic of Congo, Ethiopia, and Bangladesh—account for half of the world's extreme poor.
The new figures are even worse than a previous World Bank analysis, published in April, that projected the COVID-19 crisis would push about 50 million people into extreme poverty.
Whether the total ends up being 50 million or 100 million, the surge in extreme global poverty would be the first increase since 1998.
Some might argue 100 million people pushed into extreme poverty is simply collateral damage in the greater war against COVID-19. Pandemics are not wars, however. They can’t be defeated, only endured and, at best, mitigated.
The World Bank is careful to say the economic fallout stems from the “COVID crisis,” but that’s a bit euphemistic. The economic fallout stems primarily from the global reaction to COVID—mass economic lockdowns—not the virus itself.
We know this because we can compare the economic carnage to past pandemics. Via Ryan McMaken at Mises Wire:
Specifically, we can look to the pandemic of 1957–58, which was more deadly than the COVID-19 pandemic has been so far. We can also look to the 1918–19 pandemic. Yet we will see that neither produced economic damage on a scale we now see as a result of the government-mandated lockdowns.
This thoroughly undermines the claims that the lockdowns are only a minor factor in economic destruction, and that the virus itself is the real culprit.
The CDC estimates that as of May 18 this year approximately ninety thousand Americans have died of COVID-19. Adjusted for population size, that comes out to a mortality rate of 272 per million. This is (so far) less than half the mortality rate for the 1957–58 flu pandemic. In that pandemic, it is estimated that as many as 116,000 Americans died. Yet, the US population was much smaller then, totaling only 175 million. Adjusted for population size, mortality as a result of the "Asian flu" pandemic of 1957–58 was more than 660 per million.
That's the equivalent of 220,000 deaths in the United States today.
Yet, Americans in 1957 did not respond by shutting down commerce, forcing people into "lockdown," or driving unemployment up to Depression-era levels. In fact, reports show that Americans took little action beyond the usual measures involved in trying to slow the spread of disease: hand washing, staying home when ill, etc.
The 1957 pandemic was even more deadly than the 2020 coronavirus, but its economic impact appears to have been mild. Via D.A. Henderson et al. in "Public Health and Medical Responses to the 1957–58 Influenza Pandemic:
Despite the large numbers of cases, the 1957 outbreak did not appear to have a significant impact on the U.S. economy. For example, a Congressional Budget Office estimate found that a pandemic the scale of which occurred in 1957 would reduce real GDP by approximately 1% ‘but probably would not cause a recession and might not be distinguishable from the normal variation in economic activity.’
The Spanish Flu offers a similar scenario. The deadliest pandemic of the 20th century “left almost no discernible mark on the aggregate US economy,” write economists Efraim Benmelech and Carola Frydman. “According to some estimates, real gross national product actually grew in 1919.”
The economic costs of the lockdowns are relevant considering there is widespread discussion as to whether the US should once again close its economy in light of recent increases COVID cases, even though deaths continue to decline and evidence suggests COVID-19 is weakening.
Proponents of lockdowns say they are motivated by protecting lives, which no doubt is true. Yet evidence suggests lockdowns are not particularly effective at curbing the spread of COVID-19. Indeed, in the US the states with the strictest lockdowns have the highest fatality rates.
There is certainly room to debate the effectiveness of lockdowns, but while doing so we should not ignore lockdown costs—economic and psychological, both of which carry severe ramifications for human beings.
“One of the great mistakes is to judge policies and programs by their intentions rather than their results,” the economist Milton Friedman famously said.
If the first round of lockdowns ends up thrusting 100 million people into extreme poverty, that is a cost too severe to ignore—whatever the intentions of those enforcing them.