COVID-19 - damage to the economy

[HildegardeCrowe]

Is anyone else concerned about the economy and how lockdown can’t be extended indefinitely, not least because of the catastrophic affect it would have on people’s finances? I feel so badly for the ones whose businesses have gone under or are staring into the abyss.

We’re likely to see a drastic 13% reduction in GDP, which is the worst figure since the depression in 1921 which was 21%. The chancellor appears to be at loggerheads with Matt Hancock over how we come out of lockdown. Is a potential extended lockdown worth it when one considers the impact on society because it would ravage the economy? Any economists out there for an expert opinion?

@ChipotleBlessing on 27 March Neil Ferguson said the figures in their report (500k death rate with no measures) remained true. This was based on updated data from various countries. I haven’t seen any suggestion since they have altered their figures because of concerns about the data coming from China.

Lockdown is not leading to depression

The virus is causing the depression

There was no lockdown for Spanish flu and look what happened after that

I totally agree with you OP- I wrote a post about this a few days ago and got screamed at by people who didn’t want to hear it!

@littleblackdress04 and many of these will be the same voices screaming when we go into a recession and they lose jobs, prices go up and repossessions happen.

There are no easy answers to this crisis, but we can’t look at it without considering the ramifications on the economy. That’s not because anyone thinks money is more important between lives, but because there is a correlation between life expectancy and health and GDP.

It’s open to interpretation isn’t it, underneaththeash?
You only need wealth of about £700k to classify as top 1%. That’s really not very much but accounts for 21% of U.K. wealth.

Many earning or owning far, far more pay much less tax through tax avoidance. At over £35bn, the government’s official estimate of tax losses is now the highest it has ever been in cash terms since figures were first published in 2008.
That is £673m a week if you wanted to paint it on the side of a big red bus - almost 3 times the police budget which stands at £12.3bn. Worryingly these estimates have been increasing sharply in recent years. The tax gap has increased by 17 per cent since 2016 when the figure was £

Perhaps if the government wanted to recoup some of the avoided tax, by changing the myriad loopholes, and spread the load more evenly instead of penalising PAYE employees, there might just be a fairer and happier society.

It would shock people to know we could claim a weekend in the West Country as a legitimate business expense for a ‘Directors meeting’ and business class fares to Asia for a ‘meeting’ with a potential client. We don’t feel too bad about it as we are both high earning public sector employees with forty years PAYE under our belts.

Plenty of our friends and neighbours achieve incredible tax avoidance including their holiday homes being company assets and university fees being directors training costs.

Rees-Mogg is going to profit hugely from C1, as is Dyson (because he’s a crony). Not everyone is suffering.

Once again on Mumsnet a discussion about a massive recession has diverted to talking about the effect on most wealthy. So many people seem to rub their hands with glee at the idea of it.

Recession, and this one will be massive, means higher unemployment and benefits claims, and lower profits and taxes.

The effect on this is decreased government revenue which means more public sector wage freezes. Less investment in school and hospitals.

This depression will effect everyone. Private sector and public sector. Rich and poor.

But as ever it will be the most vulnerable that suffer the most.

I think the government as part of their next measures should be to keep lockdown but actively encourage online shopping and factory production as long as it can be safely carried out.

This wishy washy online shopping is good for the economy/don't shop as it puts delivery drivers at risk is crap

And I mean actively encourage it with tax breaks/ Rishi Sunak saying we want people to start buying online and getting diy stuff/plants/furniture delivered

This weeks Economist magazine has something to say on the subject, aimed at the US, but I guess it will apply similarly to the UK and other wealthy countries. The cost of lock-down will be huge, but once you offset that with the savings from giving a monetary value to lives saved, the lock-down will on average leave US households 60K better off than they would have been without it.

I think they go on to say that although the lock-down makes economic sense in rich countries, it may not in poorer ones, like India.

... recession/ depression will come, I think corona just accelerates the process. Many high street chains won't come out the other end as they were struggling before. No government pay out will save these jobs.

There was some good analysis in this article from the same guy who pulled together lots of argument for social distancing a couple of weeks ago:

medium.com/@tomaspueyo/coronavirus-out-of-many-one-36b886af37e9

The couple of charts that I found most interesting were these. One is the economic impact of previous pandemics.

The other is harder to read but looks at the economic outcome of states with different lockdown strategies in 1918. Basically shows that long term the states which locked down quicker and for longer had better economic outcomes than the others. I know 1918 flu was different as it impacted young and healthy more but still thought it was interesting.

Sorry LBD didn’t realise you’d already posted about this but interesting that there’s not much screaming going on here. There seems to be a realisation that a recession will be worst for the less privileged and that the government needs to achieve a balance.

This weeks Economist magazine has something to say on the subject, aimed at the US, but I guess it will apply similarly to the UK and other wealthy countries. The cost of lock-down will be huge, but once you offset that with the savings from giving a monetary value to lives saved, the lock-down will on average leave US households 60K better off than they would have been without it.

I read this article. What they actually said was the that intervention was 'worth' 60K per household which is not quite the same as 60K better off. Their calculations were conspicuously absent.

I'd like to know- is it earnings-based? Or is it based on the average American's risk-aversion is, i.e. how much they'd be willing to pay to avoid reduce their risk of dying of covid19? If so, how did they calculate the risk?

To put a fine point on things, covid19 economics are pretty straightforward - a disease that kills a relatively small fraction of old and sick people is a net economic gain. We won't have lots of children and highly productive people dying so the idea of a mental health or productivity crisis are pretty overblown.

This is a moral conundrum more so than anything else; how much of their lives are the 98% willing to forfeit for the 2%. I suggest 3 weeks is a probably enough.

I saw the study comparing covid19 to the Spanish flu (see chart above my post) and if anything, the economic effects of covid19 should probably be the inverse. The Spanish Flu attacked mostly working class young men, i.e. the workhorses of the nation. Coronvirus is precisely the opposite.

That's a very good post marginalgain!!

In the loveliest way possible... I hope you are all wrong and that this is a temporary blip! (I know it's not actually a temporary blip!) x