If we thought we had seen it all during the 2007-2008 financial crisis, the COVID-19 pandemic proved us wrong. Although not nearly as deadly as the Spanish flu one century ago, time has practically stopped all around the world for more than a year.
It will take years, if not decades, to calculate the monetary and non-monetary costs of the pandemic. The even greater challenge will be to determine which policies worked, which caused more harm than good, and how much. If the pandemic has taught us anything it is that we live in a world of trade-offs. Slowly but surely, we are relearning, as Milton Friedman has often quipped, that “there is no such thing as a free lunch.”
A trip down memory lane will show us that it all started with “two weeks to flatten the curve” in an attempt to “protect the health care system.” Those two weeks soon became a month and now we are in the second year of this great endeavor. Almost immediately businesses were forced to close, and even with all the “help” from the government, many shut down for good. Of course, as with any government policy, some businesses (and industries) won, and others lost. This cascading effect touched every facet of society and soon the monetary costs spread to the non-monetary realm.
The Economic Costs
It didn’t take long for the family budgets to feel the impact of the ensuing crisis. The formula is pretty simple: if businesses aren’t allowed to work there is no work to be done and with that no wage to be earned. Since we don’t live in a “post-scarcity economy” and rely on interconnectivity, a global pandemic’s economic downturn was bound to cross borders internationally. Thus, the only difference of the effects was not in scope, but in scale.
In Europe, for example, it was estimated that 55% of the small-and-medium-sized enterprises feared bankruptcy by September 2021 – before a second wave of lockdowns even came along in fall 2020. Tens of millions lost their jobs or were relegated into short-term work schemes. Governments have passed massive stimulus programs that future generations will have to repay. The U.S. budget deficit for 2020 reached a record-breaking number of $3.1 trillion, amounting to 15.2% of GDP, the largest in peacetime history. Europe was no different. On the monetary side, in 2020, the Federal Reserve has created 39% of all the dollars since its creation in 1913. Looking at it from a different angle, in 2020 the Federal Reserve has created more money in the last twelve months than in almost the first hundred years of its inception. Lastly, let’s not forget that the poor paid the higher costs of the pandemic, as they had much more trouble paying their bills.
These are the poor in the rich and developed countries. But the destitute living in abject poverty around the world had an even worse time. The disruption to international trade due to lockdowns has put up to 135 million people close to starvation.
The Social Costs
Meanwhile, humans are social animals, but the pandemic and the cure in the name of lockdowns have made socializing almost non-existent. This way we have either created or exacerbated already worrying problems. People became even lonelier. The loneliest groups in the U.S. have been young people and mothers with young children, from which two in five indicated that their loneliness had increased since lockdowns have started. Some, not being able to cope anymore, went a step further and took their own lives. Most countries’ suicide data suffer from a time lag, but early results in Japan show a shocking increase of 49% of the suicide rate among children and adolescents. People dying from drug overdose rose by 17% in the last twelve months. Because the data suffers a time lag, this only includes reported cases until May 31, 2020. What’s more striking is that almost all of the increase occurred between February and May 2020.
Because we tried to avoid overrunning the health care system, many procedures and check-ups were postponed. Only time will tell how many cancer patients will be killed by the “under further notice” approach, but it is estimated that in the twelve months following October 2020 due to severe COVID-related disruptions in health care services, more than 200.000 additional stillbirths could occur. The global lockdowns are estimated to result in an additional 1.4 million excess deaths of tuberculosis, 500.000 from illness related to HIV, and up to 385.000 from malaria annually.
It is hard to find anything good that came with the COVID-19 pandemic. At least there is a light at the end of the tunnel: as the world population is slowly but surely getting vaccinated, we are getting closer to the end of the “new normal.”
This does not mean that everything in the garden is rosy. As we have shown in this series of articles, many of the COVID-19 related problems have been created or made more serious than they should have been by governments all around the world. We must also acknowledge that the inability and lack of response to the government’s draconian, despotic measures by citizens and civil society at large played a role in what has unfolded. Rarely were questions asked in this year whether lockdowns are actually the right way to go. Very little were the side effects on all other areas of life, not having to do with the pandemic itself, considered. As we have tried to depict here, the costs have been massive – and it is only the beginning. The full consequences will only bear out in the coming years and decades.
Looking ahead, we need a new vision. That is why we at the Austrian Economics Center in cooperation with over 100 leading think-tanks and universities across Europe and the Caucasus, are proud to return with this year´s Free Market Road Show (FMRS), dedicated to COVID-19 pandemic and the possible solutions moving forward. In contrast to the inability in 2020 to adequately discuss whether lockdown politics is right or wrong, the FMRS 2021 wants to debate different views and encourages discussion on the spirit of freedom and innovation that leads to progress and prosperity. We don’t have all the answers but it is our duty to find as many as possible. We owe it to ourselves and everybody around us not to let the cure be worse than the disease. That is why we invite you to join us in this year’s FMRS. Together let´s find the “Way Out of the Gridlock!”
More Statistics in Our Costs of Coronavirus Lockdowns Series:
Children Hurt Not by Corona – But by Lockdowns: children’s mental-health-related visits to the emergency departments in the U.S. increased by approximately 24% and 31% for children aged 5-11 and 12-17, respectively, compared to the same period in 2019. (CDC)
Record-Breaking Budget Deficit in the U.S.: the U.S. government spent $3.1 trillion more than it collected in 2020. Who is supposed to ever pay back all this money has not been answered yet. (U.S. Department of the Treasury)
Drug Addiction Intensifies: the number of people dying from drug overdose in the U.S.rose by 17% in the last twelve months. This only includes reported cases until May 31, 2020. (CDC)
Governments Grow in Size: in Austria, Germany, France, and Italy government spending has risen dramatically in 2020. (European Commission, Statista, and Handelsblatt)
Stillbirths on the Rise: more than 200.000 additional stillbirths could occur just in the next 12 months, concentrated in low- and middle-income countries. (UNICEF)
The Poor Pay the Higher Lockdowns Price: lockdowns and restrictions have proven to be something that disproportionally affects those already poor, whereas those wealthier are less hurt. (PEW Research Center)
How Women Are More Hurt by Lockdowns Than Men: between the first and second quarter of 2020, on average, women suffered a 6.9 % decline in wages, compared to the 4.7% decline suffered by their male counterparts. (International Labor Organization)
No Work in Europe Thanks to Lockdowns: The sharp decline in labor market participation and the 32 million people under the short-term work schemes hide the real numbers of the unemployed in the European Union, which most likely averaged a two-digit number. (ECB & Eurostat)
Printing Money in Times of Corona: Monetary policy effectiveness has its boundaries. As the Fed has created 39% of all the “dollars” in the economy in 2020, those boundaries might have been reached. (Trading Economics)
Simon Sarevski is a research assistant at the Austrian Economics Center. He holds a Bachelor’s degree in financial management from Ss. Cyril and Methodius, Skopje and is involved with European Students for Liberty.
The AEC’s fundamental goal is to promote a free, responsible and prosperous society. Through education and improving public understanding of key economic questions, the AEC promotes the idea of a free market economy and the ideal of a free society.