Could Ohio, U.S. shutdowns to combat coronavirus also help economy recover more quickly?

CLEVELAND — As government officials and experts debate whether the U.S. should prioritize its economy over protecting people from the coronavirus, a new study suggests public-health interventions could both limit deaths and lead to a faster economic recovery once the outbreak is contained. Economic data from the years after the 1918 Spanish flu pandemic suggests the U.S. does not need to make a stark choice between public health and maintaining its economy. American cities that implemented stricter social distancing measures in 1918 limited deaths and experienced faster economic recovery, according to a study by Massachusetts Institute of Technology and Federal Reserve economists. "We find that cities that intervened earlier and more aggressively do not perform worse and, if anything, grow faster after the pandemic is over," the study says. The findings are detailed in the study "Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu." It was co-authored Emil Verner, an economist and assistant professor at the Massachusetts Institute of Technology's Sloan School of Management; Sergio Correia, a U.S. Federal Reserve economist; and Stephen Luck, a Federal Reserve Bank of New York economist. The study comes as some government officials have argued the U.S. may need to reopen businesses sooner than public health experts recommend to limit the economic fallout of the COVID-19 outbreak. President Donald Trump suggested he wanted to see the U.S. open for business by Easter before he reversed course Sunday and extended his administration's social distancing guidelines to April 30. Several economists told cleveland.com they are skeptical of comparing the recovery from the 1918 pandemic to the potential economic fallout of the coronavirus shutdowns. Today's economy is more global and is less dependent on manufacturing and agriculture. "It's very hard to draw inference from things in 1918," said Scott Shane, an economics and entrepreneurship professor at Case Western Reserve University's Weatherhead School of Management. "In 1918, the economy was largely manufacturing-driven, and many people still lived on farms." Economists agreed a short-term closing of businesses is necessary to protect the public. Still, an extended shutdown could damage the U.S. economy to an extent not seen since the Great Depression. "I do think we will reach a stage where we'll have to balance the public health with the economy," said Mark Partridge, an economics professor at Ohio State University. Public health interventions can mitigate economic damage, study says In 1918, most U.S. cities implemented various measures similar to the steps taken to combat the coronavirus. They included social distancing; closing schools, churches and theaters; banning large public gatherings; and an increased focus on personal hygiene. Even still, the 1918 pandemic killed about 675,000 in the U.S. and roughly 50 million worldwide. By comparison, The White House coronavirus task force has estimated that COVID-19 could lead to 100,000 to 240,000 deaths in the U.S. The 1918 pandemic depressed the economy on both the supply and demand sides, the study says. The production of goods decreased, as did the buying of those goods. Banking assets also suffered because households and businesses defaulted on loans amid the pandemic. The 1918 pandemic caused an 18-percent decrease in U.S. manufacturing output through 1923, the study says. But cities that acted quickly to limit the spread of that virus, such as Omaha, Nebraska and Oakland, California, performed better in the years after the outbreak was contained. Cities that did not act quickly, such as Philadelphia, struggled during those years. Cities that aggressively implemented social distancing and other public health measures saw a 5-percent increase in manufacturing employment over cities that acted 10 days later and a 6.5 percent increase over cities that acted 50 days later, the study says. "Altogether, our evidence implies that pandemics are highly disruptive for economic activity," the study says. "However, timely measures that can mitigate the severity of the pandemic can reduce the severity of the persistent economic downturn." Ohio economists skeptical of comparing 2020 to 1918 The study includes several caveats about the 1918 findings. Modern global supply chains, broader service industry and advancements in technology are hard to gauge in the analysis, for example. Partridge was skeptical of comparing today's economy to 1918 for those very reasons. "It's really hard to extrapolate from a very local supply chain of that era. Everything was done locally," he said. Since the coronavirus is affecting parts of the U.S. and the world at different times, it could disrupt the global supply chain, Shane said. American consumers living under stay-at-home orders may not be in a position to buy goods produced in China. "The economy is not a light switch that you turn off, and then you turn it back on after an hour, and it's just the same," Shane said. Lack of available date from the period also makes it difficult to judge the economic health of individuals in the wake of the 1918 pandemic. Gauging the recovery from the coronavirus shutdowns will involve more focus on statistics that convey whether people are better off, such as unemployment rate, Partridge said. Americans may someday face a choice between health and economy, economists say Economists told cleveland.com that if the shutdown persists, Americans might face a difficult choice between protecting the public and mitigating the economic damage. Partridge called reopening businesses soon "insanity," but said it might need to be considered closer to the summer. An extended shutdown could create long-term economic anxiety among consumers, who may be less willing to buy a new car or go on a vacation for fear of another economic downtown, Shane said. He also suggested an extended shutdown could have an adverse public-health effect. It could lead to depression and an increase in suicides, or a rise in drug or alcohol abuse, he said. "My personal take on it, having looked at some of the numbers, is that there is a trade-off, and you can't get around that fact," Shane said. ——— ©2020 Advance Ohio Media, Cleveland Visit Advance Ohio Media, Cleveland at www.cleveland.com Distributed by Tribune Content Agency, LLC.