To V or not to V by John Springford
The debate over the shape of the economic recovery continues. But recent medical advances should tilt governments towards continued support for workers and companies, because the pandemic may be over sooner than they had feared. In a much-discussed – and much-criticised – speech on June 30th, Bank of England chief economist Andy Haldane argued that Britain’s post-pandemic recovery had been V-shaped so far. Quoting data from Google, the Open Table restaurant bookings platform and online payments, he argued that the recovery in spending had been faster than the Bank had previously forecast. Haldane had been the only member of the UK’s Monetary Policy Committee to vote against further quantitative easing in its June meeting. Yet data from other countries, such as South Korea and New Zealand, which are further along into their recovery than the UK, suggest that spending on bars, restaurants and public transport has not bounced back completely, even with the virus largely under control. If governments withdraw support for workers and firms too quickly, a wave of bankruptcies and unemployment will follow. The shape of the recovery will be largely determined by medical and epidemiological progress, so it is difficult for economists to forecast it. Improved testing and contact tracing,
alongside social distancing measures, have allowed European countries to ease lockdown measures without significant increases in coronavirus cases. But to achieve a complete recovery, airlines, shops, theatres, cinemas, bars and restaurants will need to reopen fully, which will require a vaccine and improved treatment for the disease. There are some hopeful signs that vaccines will be available next year, with candidates in China, Germany, the UK and US all generating antibodies in the first stages of human trials (though they have not yet been shown to prevent infection). New treatments have been discovered: an anti-viral drug, remdesivir, has been shown to speed recovery; interferon beta inhalers have been found to reduce the need for hospitalised patients to be ventilated; and dexamethosone, a steroid, cuts the share of patients on ventilators who die by a third. Yet these treatments do not stop COVID-19 from being a highly contagious and potentially deadly disease. Social distancing measures will have to continue until a vaccine is developed and administered to the majority of the population. With luck, that might happen next year, at least in richer countries.