To save the economy and health we need a second lockdown

THE DEBATE

In an open letter from a group of professors in Bern: a generalized closure would not be a drama - Baron Adesi: ‘t’s an absurd reasoning’ - Suter: ‘Thesis that I don’t agree with because it doesn’t reflect reality’

To save the economy and health we need a second lockdown

To save the economy and health we need a second lockdown

THE DEBATE

‘We are a group of economists of different orientations, and operating in different fields of research (...). However, we all agree that unfortunately, and however painful this may be, Switzerland must introduce a second ‘lockdown’ (the extent and details of which will be defined in close coordination with experts from the medical community), with a robust support from a fiscal point of view’. This was the opening from an open letter addressed to the Federal Council signed on November 2 by about fifty professors from the main Swiss universities: among others Lausanne, Zurich, Basel, St. Gallen, Friborg, Neuchatel and also the Ticino-based USI.

A letter out of the chorus in the world of economics: with the arrival of the second wave of infections, there are in fact countless alarms already launched by trade associations and politicians to limit new closures as much as possible. There are fears of finding themselves with more deaths from the economic crisis than from coronavirus. ‘The thesis is simple - explains Giovanni Pica, professor of economics and one of the signatories: there are several studies that show how the recession occurred because of the health crisis not because of the closures, but because this has led people to seek social distancing and therefore to give up all services that require personal contacts (such as hairdressers, restaurants, & gyms). In fact, the drop in demand has not improved after the easing of the measures, precisely because the collapse was and is due to the fear of contagions. Furthermore, it is also demonstrated that it is not true that countries that close have a greater collapse of GDP which means there is no trade-off between our health and the health of the economy’. Since the lockdown is not making the economy feel bad, the letter reads, the real choice would therefore be between a recession and many deaths or a recession and fewer deaths’.

‘Obviously, a strong fiscal policy intervention must be added to the lockdown - adds the finance professor Francesco Franzoni, also a signatory. Switzerland is fortunate enough to be able to afford greater public debt. On the other hand, there is no real choice: Bern has just said that ICU places will be sold out in five days. With this, businesses and workers lose confidence in the ability to advance economies, and if people are afraid there is still a slowdown in the economy’.

The genesis of the letter is interesting: the signatories explained that it was essential from the initiative of two professors from Lausanne and the SwissFinanceInstitute, with the collaboration of the Task Force for COVID-19: for obvious reasons, however, the latter does not appear among the signatures. It has been sent now because the containment measures are considered too mild compared to the increasing infections.

Not everyone in the academic world agrees with the spirit of the letter. ‘It is clear that more serious measures will be needed, but services contribute to 70% of GDP, it is absurd to say that a second lockdown would not hurt the economy’ explains Giovanni Barone Adesi, professor of financial theory at the University of Italian Switzerland. ‘So much so that all governments are worried about the possible consequences. More serious containment measures are probably needed now, but speaking of a generalized lockdown does not reflect the different situations in Switzerland. Ticino has far fewer infections than Geneva and it would not make sense to close the borders or give up all services. The measures are taken in a timely manner, paying attention to the damage caused. Also because COVID-19 is a big public health problem but most people die for other reasons. Hospitals cannot forget this and society also needs functioning economic systems. Instead, I fully agree with the fact that this is not the time to save: the Confederation must give strong support to the economic fabric in this moment of crisis’.

Not even those who live the practical side of the economy every day are happy to hear about a second lockdown. Like catering, one of the services most affected by the closures in the spring. ‘I find it hard to agree with the thesis of the letter because it does not reflect reality - says Massimo Suter, president of GastroTicino -. In theory, it could be said that with the necessary aid, industries can survive a second lockdown. But it is forgotten that aid does not cover fixed costs such as rents, nor does it replace the induced necessary to make investments and renovations and then there is an emotional aspect linked to the services: if today I want to go to a restaurant and I can’t, it doesn’t necessarily mean I will have it tomorrow. Furthermore, habits change. For example, working from home has brought many advantages but it is a problem for merchants who base their turnover mainly on working with offices. Surely the intent to save lives is noble and must be a priority. But closing everything means changing the daily life of society and bringing entire sectors to their knees’.

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