Last week I suggested that the key to ending the pandemic would be the willingness of younger people to be vaccinated. This week I want to go further and suggest that some priority should be given to people with children under 18 and who cannot work from home (including, of course, teachers, nurses, doctors, care and other essential workers but also those providing commercial services). A list of vaccines could be drawn up on purely economic grounds to complement those who are more vulnerable to the virus and have been isolated for long enough already. Nevertheless, as COVID-19 refuses to behave like ‘ordinary’ ‘flu’ and keeps flaring up even in Asia (Figure 1), different approaches and more flexible priorities should be considered. This may even become necessary if the vaccines bring infection rates down quickly or not enough older people agree to be vaccinated. As Aristotle might have said, ‘oikonomia begins at home!’

In order to assess which countries have the best prospects in both public health and economic activity, Bloomberg has created a Covid Resilience Ranking, which ‘scores 53 major economies on 10 metrics, from infection levels and fatalities to people’s mobility and access to front-runner vaccines…..a higher score means a better outcome’. No doubt, both the component factors and overall rankings are open to objective as well as subjective debate, but Figure 2 seems a very useful summary of what we know so far.

More controversial is the bold categorisation in Figure 3 from the Institute for New Economic Thinking of the trade-offs chosen by different governments. It does not cover all of Bloomberg’s 53 countries, but there is a match between those above the green line that are deemed not to have ‘sacrificed’ either lives or livelihood and those with the highest rankings from Bloomberg. For those of us who have been stressing the importance of effective public health, a striking comparison can be made for those countries in Figure 3 that are deemed to have made both of the ‘sacrifices’ (and mistakes?) and their Bloomberg ranking: Peru (51), Belgium (50), Spain (41), Italy (40), UK (28) and US (18). Together Figures 2 and 3 suggest that there is a way to assess which economies have been most damaged by the pandemic and which will take the longest to recover from it.

Damage, destruction reports
The most recent batch of economic data consists mainly of softer surveys that overshadow the bounce back in Q3 GDP numbers. China (circa +2%) and Vietnam (circa +3%) are still the only major economies to be sure of growth in 2020 as a whole but Bangladesh is expected to manage 5% and Taiwan 4%. South Korea will have to wait until next year, but Consumer Confidence is continuing to build there. Meanwhile, China’s imposition of the 200 % tariff on Australian wine imports may be intended to intimidate, but anyone familiar with cricket, rugby and tennis will wonder if it will turn out to be counter-productive with an instinctive response from bloody-minded, never-say die Australians encouraging others to speak out too.

In the Euro Area, the November flash PMIs and other Business and Consumer Confidence surveys are falling, although, understandably, Manufacturing is holding up much better than Services. Job vacancies have dropped sharply and Unemployment is expected to rise in Q4 and into next year. All 5 of the major economies are languishing and Spain has just reported another dismal month of Retail Sales. With inflation as subdued as ever, the ECB seems to be steeling itself for another round of monetary stimulus just as Poland and Hungary are boxing themselves into a corner by vetoing the €750bn fiscal stimulus eagerly awaited by the other 25 EU member countries.

The poker game that Brexit has become is reaching its climax just as the plight of the UK economy and its public finances are being laid bare. The independent Office for Budget Responsibility has rubbed salt in the wounds by volunteering a forecast of a 2% hit to GDP over the next 5 years from a ‘no-deal’ Brexit in addition to the 4% hit it had previously forecast even if a deal was reached. This chimes with the Bank of England’s view that Brexit will over time inflict more economic damage than the pandemic. As a result and in the face of surging public debt, Chancellor Sunak’s latest plans for recovery seem rather incomplete when compared to Germany’s latest €180bn increase to next year’s planned investment. However, fiscal rectitude is apparently no longer a priority among Tory MPs, many of whom are already plotting two separate rebellions over COVID-19 restrictions (over
which Labour will prop up the Government) and over cutting Overseas Aid (on which Labour will gladly help to defeat the Government). With friends like these, Mr Johnson has no option but to fold in the Brexit poker game and take whatever spin the EU lets him get away with and, of course, that could spark yet another Tory rebellion.

The US economy is still sending contrasting signals via higher Jobless Claims and deteriorating Consumer Confidence but also very solid PMI Surveys for both Manufacturing and Services Sectors and the new COVID-19 waves spreading around the country point to a poor Q4.

President Trump appears to be more reconciled to defeat, but may be plotting a retreat of ‘scorched earth’ executive decisions that could hinder the Biden Administration. In particular, the Fed is not happy with the abrupt unilateral withdrawal of $450bn in stand-by funding facilities but the latest FOMC Minutes suggest less anxiety about the US economy than the ECB has about Europe’s and the prospect of their former boss Janet Yellen taking over as Treasury Secretary will be very welcome. However, so
much more needs to be done to speed recovery from the virus. In Figure 4. Harvard economists, David Cutler and Larry Summers, have attempted to compile the overall cost of the pandemic, including premature death and health impairment, in an approach similar to that of the Institute of New Economic Thinking in Figure 3. They estimate the total damage at a calamitous $16tn (dark blue column), which is more than double the likely hit to nominal GDP (left pale blue column) and some 70% of the projected US GDP in 2020 (red column). Extra costs will be in the form of lost and lower earnings eventually hitting Consumption. Such damage would  account to four times that of the 2008 Financial Crisis.