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Opening Up the World’s Economies: How Soon is Too Soon?

Over the past few months, countries around the world have begun to feel the economic strain from lockdowns necessitated by the COVID-19 pandemic. Industries and consumer activity has ground to a halt. Because of this, some governments are considering or already have begun lifting travel restrictions and lockdowns put in place.

There is no doubt that projections for world economies look bleak. In the United States alone, 47 million people are expected to lose their jobs due to the coronavirus, according to an estimate by the Federal Reserve’s St. Louis branch. That amounts to a 32% unemployment rate. For the week of April 18, Goldman Sachs’ US Industrial Tracker ws down 19% year-over-year, while its US Consumer Activity Tracker was down 73% year-over-year. Around the world, similar patterns are being observed.

In the US, some governors are already lifting restrictions that were put in place to slow the spread of the virus. On April 24, certain businesses in Georgia, including salons and gyms, were allowed to reopen. The move by Governor Brian Kemp comes amid increasing infections in Georgia. President Donald Trump, who himself has voiced support for anti-shutdown protests across the country, expressed his opinion that the moves came too soon. In Oklahoma, certain businesses were allowed to reopen as well, given that they followed strict social distancing and sanitation guidelines.

Several countries worldwide who have so far had more success than the US in containing the pandemic are preparing to or have already begun opening up. Austria was one of the earliest countries to reopen businesses. In South Korea, some restaurants and shopping malls have restarted business. In Germany, where small retailers in some states were allowed to reopen, Chancellor Angela Merkel said “We must not be careless or irresponsible, even for a moment.”

However, most governments remain wary of lifting restrictions. An example of what could go wrong if restrictions are lifted too early were made clear in Hokkaido, Japan’s northernmost main island. The prefecture’s governor acted quickly in instituting a three-week lockdown which successfully contained the outbreak. By mid-march, as new cases slowed to the single digits and on some days even zero, restrictions were lifted. Residents spilled into the street to celebrate the end of the lockdown, and the ending of the emergency declaration also encouraged people to travel to Hokkaido. This sowed the seeds for a larger, second wave that forced a second lockdown. On April 14, a new declaration of emergency was declared in Hokkaido ahead of a nationwide emergency declaration by Prime Minister Shinzo Abe on the 16th. Hundreds of new cases were being reported in Hokkaido.

The lessons from Hokkaido show clearly the risks that countries are taking by opening up their economies. Whether or not a country is ready to open up is dependent on several factors. Countries such as South Korea have put rigorous testing systems in place, capable of quickly quarantining people who have come into contact with those who have tested positive. In the United States, it is clearly too soon to open up, as the country still lags behind in testing. If more states push ahead with plans to reopen businesses and ease social restrictions, the result could be the unnecessary loss of thousands of additional lives.

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