Essay: The Relevance of Economics During a Pandemic: Prioritizing People Over Profit

A year ago, many of us would never have considered the implications of living through a pandemic, and the many issues that such can bring to a society. Even when we were entering the first lockdown, I doubt that many people expected us to be going into our third lockdown in 2021.
The UK economy has suffered deeply from the coronavirus pandemic, with a negative 20.2% growth rate in the second quarter of 2020, and a slightly less worrying negative 8.6% growth rate in the third quarter. With many businesses going bust, and the unemployment rate is expected to peak at around 7.7% in April to June of 2021 it is clear that economics is very relevant during a pandemic. However, it shouldn’t be viewed as more relevant than people’s safety and personal well-being, but many people believe that most government’s current policies put the economy over its citizens.
In this essay, I will be looking at the relevance of economics on a macro and micro level during a pandemic, focusing on what has been happening in the United Kingdom, and how economics can improve people’s well-being and reduce government debt, in a similar way that they have done in China, which has had a V-shaped recovery.
The government is responsible for deciding how the country is run and managing things on a daily basis. Their role includes deciding economic policies and what a country does when they are in a crisis. If we look at some of the UK government’s decisions during the pandemic, from going into lockdown later than scientists and doctors recommended to reducing laws too early even when they have been told it could lead to another spike, and then having to go back and reinstate harsh rules that people may no longer wish to follow. To some this comes across that the government is trying to help the economy more than its citizens. For many people, the economy is extremely relevant during a pandemic as they would like job security and a similar income to what they had last year, but their lives and the lives of people they know come first, and they wouldn’t put the economy over the livelihood of the people that they care about. Many people have been frustrated by the way that the government has been focusing on economics, especially because in many cases they have just postponed the inevitable, as furlough will inevitably have to end, and savings will be run down to the point of depletion. Additionally, with taxes soon having to increase due to government debt reaching 100% of Gross Domestic Product (GDP) in July 2020, which is the first time this has happened since the 1960 to 1961 financial year. Clearly, their economic policies are not working efficiently enough.
Another way that our government is prioritising helping the economy over its citizens is with the allocation of the vaccine. They first announced that they would give both doses of the vaccine to over 80s, key workers, and people with weakened immune systems with the recommended period of time between each dose. However, they recently made another U-turn with their policies and announced that everyone gets the first dose before anyone can get the second. Even though this may not be what’s best for people, it is what’s best for the economy as more people can go back to work when they have partial immunity from having one dose of the vaccine than when they have no immunity and have to stay home. A similar thing is occurring in Indonesia where they are targeting giving the vaccine to younger working people aged 18 to 59 to help boost the economy, instead of giving it to elderly people first.
If we look at this on a micro-level, as we entered into our third lockdown many people’s quality of life and standard of living decreased massively in the space of just one year. This is due to the economic shock that was caused by the pandemic. People didn’t expect demand to suddenly fall as they had to save more as their job stability decreased and so consumer and business confidence also plummeted leading to a shift left in aggregate demand. There was also a supply-side shock, as resources became scarcer and businesses had to decrease their quantity and costs of production, so the economy is currently working under full capacity. This led to the increase in prices of goods and services, and so people are no longer able to afford normal goods and will switch from these to inferior or economy goods. This part of economics is extremely relevant during a pandemic as currently in Malaysia, 37% of inner-city families struggle to purchase food and 70% have difficulty meeting basic living expenses.
Increasing quality of life and standard of living should be our government’s number one priority, which could come from boosting the economy, making economics increasingly relevant. However, as they are currently failing to successfully do so, the focus should be on keeping people safe while they wait to be vaccinated and increasing the number of available jobs that can be done online so that people will not feel useless in this time which can improve their quality of life and their standard of living, as they will have a more secure flow of income.
During the 2009 swine flu pandemic, the then UK Labour government had a similar response to the current Conservative one, of handing out stocks of stockpiled anti-flu drugs and increasing investment into vaccine production. However, this strain of the flu turned out to be rather mild and had a low death rate, so things soon got back to normal and people thought that maybe everyone had overreacted, and it had been unnecessary costs especially as they were just starting to properly deal with the losses from the global financial crisis of 2008. In this pandemic, it is clear that economics was only truly relevant after everything was cleared up. However, this could have been because the economy was already in a recession, and people had already been saving more as consumer and business confidence were low with unemployment already up, so the effects of this pandemic on the economy wouldn’t have seemed that dire.
All this being said the government could focus their economic policies on reducing the rich-poor divide because as many as two million households in England could have experienced destitution during the pandemic with an estimated 14% of British children (1.7 million) having faced persistent hunger during the pandemic. Helping these people should be one of the government’s top priorities as it is essential that children don’t go hungry especially during a pandemic. Also, many students can’t join in with school as they may not have the resources to do so, so the government should enforce policies to help with this. The introduction of government policies to reflect this are just some of the ways that economics can make things better during the pandemic.
Another way that economics can improve things during a pandemic is, after most people have been vaccinated there could be more schemes that help to reduce unemployment and increase consumer and business confidence. In the UK, the government could try a scheme similar to ‘Eat Out to Help Out’, which saw many people going to restaurants and helped to rebuild the hospitality sector. It also encouraged more people to go on the High Street, which had almost been made redundant in the first lockdown with most things going online. If we managed to increase investment then, because of the multiplier effect this would reflect positively on the economy as investment is a leakage and this will lead to the multiplier having an upward effect and the final impact on GDP will be greater than the original size of the leakage. However, with each additional round of spending, national income will be increasing by decreasing amounts as not all of real GDP is spent, until injections and leakages are equal again. Additionally, John Keynes theorized that a government should increase its borrowing and spending on capital expenditure to increase demand, and to essentially spend its way out of a recession.
China is one of the only countries in the world whose economy had a V-shaped recovery. A strict lockdown, successful mass testing, efficient contact tracing and mask use in the first few months of 2020 helped to allow for economic growth of 3.2% in the second quarter of 2020 and another increase of 4.9% in the third quarter of the year. This is close to pre-COVID levels of at least 6% per quarter, and as the economy only dropped by 6.8% it is currently experiencing positive economic growth and China’s global GDP is expected to have risen by 1.1 percentage points, which is more than triple the share it gained in 2019. As China is a more manufacturing-based economy, the same policies that they used would not work in the UK as efficiently, but the UK government can adapt some of these policies to be more service-based so that the UK can also see steady economic growth which would help to improve the current situation as many European economies and the US will see their shares in the global economy dipping slightly.
To conclude, I believe that economics is relevant during a pandemic, but only up to a certain extent as it clearly has a major effect on people’s lives with many people now living in poverty. However, it should never be considered as more important than people’s safety and their wellbeing. If the economics in question is about improving government economic policies and therefore improving standards of living and quality of life, then this is extremely important during a pandemic as morale is quite low. Moreover, I believe that there are many ways that economics can make things better, with the introduction of better, more efficient policies which can cause unemployment to decrease and business and consumer confidence to increase. We can also take inspiration from China who successfully managed to have positive economic growth and countries like New Zealand who are covid free when trying to decide what we can do economically to help improve the current situation.