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Coronavirus 2022: a health, social and economic inventory
As the world braces for the third year of coronavirus, the New Year offers a juncture to take an inventory of the inter-related health, social and economic costs over the past two years and prepare for what comes next.
Academics suggest we are near the ‘end of the beginning’ in a decade-long pandemic struggle. The initial phase will conclude, possibly by mid-2022, after the virus has swept throughout human populations worldwide until everyone has either been infected or inoculated by effective vaccines, according to Nicholas Christakis, the Sterling Professor of Social and Natural Science at Yale University.
The intermediate phase, according to Christakis, will be characterised by the health, social and economic fallout. Thereafter, once the aftershocks are absorbed, the post-pandemic period will begin, reflecting a return to normality, optimism and global celebration. But we are a long way off that hopeful third act.
The following Covid 2022 inventory provides context for the coming intermediate phase to help corporate Boards, investors, and financiers make sense of the risks ahead. It is a sobering picture. Many have yet to grasp the magnitude of what is still unfolding – and the costs still to pay.
Since the emergence of Covid-19 in late 2019, the global pandemic has resulted in more than 282 million confirmed cases and 5.4 million deaths in 220 countries worldwide (as of 4 January 2022), according to World Health Organization (WHO) data. In the UK, there were nearly 150,000 deaths. In the past 12 months, the pace of confirmed cases ballooned four-fold while the number of deaths more than tripled. The actual numbers are almost certainly higher, according to WHO.
In the final weeks of 2021, the global surge in the highly-transmissible Omicron variant makes more likely a scenario where everyone eventually develops immunity through natural infection or vaccination. This would align with the end of Christakis’ initial phase. Historically, respiratory pandemics come in waves, peaking during the winter. The next few months will see familiar pressures renewed across health and social infrastructure (e.g., NHS capacity, school and other public services). At the same time, increased working from home recommendations will heap more pain on pandemic-sensitive sectors (e.g., retail, hospitality and aviation). An optimistic scenario could see a rapid unwinding in new infections after the Omicron waves pass. Thereafter, a period of relative calm may follow, which should support the economic outlook. But we should prepare for another wave, and possibly another new variant, next winter.
The overall health toll is much broader than the infection rate, the hospitalisation rate and the number of deaths. Covid-19 is associated with an increased risk of neurological and psychiatric problems, with the severity of the virus correlated to more adverse outcomes, a separate academic study shows. The number of people who have developed health problems (e.g., pulmonary fibrosis, cardiac problems, renal and pancreatic insufficiency); and neurological and psychiatric disorders (e.g., mood and anxiety disorders, substance misuse, insomnia) is five-fold larger than the number of confirmed deaths, according to research cited by Yale University’s Nicholas Christakis. This implies that around 750,000 people in the UK are currently suffering from the above health problems. As infections continue to climb, so too do the number of people with such health problems, for which the data will be incomplete.
The NHS must be re-configured and resourced to handle the associated care requirements for these conditions, with demand likely to increase as the pandemic evolves. The challenge for the government is to find sufficiently qualified staff to meet the anticipated demand. If public services fail to meet rising demand, untreated health problems risk devolving into longer-term social and economic issues, widening inequalities.
The pandemic amplified pre-existing social inequalities. In education, school attendance and exams were both disrupted. Forced school closures transferred childcare responsibilities to parents (while adapting to working for home). The pandemic also exposed the fragility of the school exams system, affecting equality of opportunity between graduates of different cohorts in competition for employment.
Omicron adds to the headwinds that threaten the UK labour markets’ fragile recovery since the expiry of the furlough scheme last autumn. Covid loan schemes, loose insolvency laws, creditor protections, and accommodative monetary policy have either already expired or will soon reverse. Consequently, the number of distressed companies is expected to climb in 2022, threatening many of the jobs the furlough scheme has so far saved. The shakeout of unproductive companies is part of the natural cleansing of a healthy economy. Redundant workers may need to retrain to meet remaining supply shortages. However, social problems can become economic problems if redundant workers cannot retrain and re-enter the competitive labour market due to above mentioned covid-related health problems. Similarly, long-term covid-related health problems will affect ongoing employee productivity, posing challenges to employers.
In social discourse, the pandemic has exploited years of pent-up distrust in elites and experts – from the government, to the media, academics, employers and scientists. This distrust has manifested in anti-science scepticism and vaccine hesitancy. Almost one in five (18%) participants in a recent UK household study were vaccine-hesitant. Ethnic minorities were most vaccine-hesitant, which could further widen existing health inequalities. If left unchecked, these inequalities could worsen the UK’s ethnic minority labour participation rate.
The unequivocal scientific consensus says covid vaccines dramatically reduce the probability of death and severe illness. However, we do not yet have sterilizing vaccines that prevent people from catching the virus. The Omicron variant has served to expose this weakness in the current generation of vaccines. There is some reduction in probability of infection, but it is not very significant. But this is not evidence that the vaccines do not work, as some detractors claim.
Vaccines are an essential weapon against the virus. They protect public health across the world against worse outcomes in deaths and hospitalisations, reducing the pressure on overburdened healthcare systems. Unfortunately, data showing the counterfactual scenario – where we have no vaccines – logically will never exist. This theoretical data would reveal an enormous amount of prevented human suffering – in debilitating time-limited illness, to life-long physiological, neurological and psychiatric health problems and, ultimately, in prevented deaths. “We are not engaging in public policy debates in a rational way,” says to Yale University’s Nicholas Christakis, “and many hundreds of thousands of people around the world will probably have died needlessly through inadequate covid protection, as a result.”
Tedros Adhanom, the WHO director-general, struck a similar chord in a New Year’s message: “Misinformation and disinformation, often spread by a small number of people, have been a constant distraction, undermining science and trust in lifesaving health tools. In the huge waves of cases currently seen in Europe and many countries around the world, misinformation – which has driven vaccine hesitancy – is now translating to the unvaccinated disproportionally dying.”
Health and social problems eventually become economic costs to governments – in fiscal and policy support businesses, public services and households – and in financial costs to employers. Across the world, governments borrowed hundreds of billions against the future to soften the blow during the teeth of the health crisis.
The coronavirus pandemic prompted the deepest recession for 300 years in the UK. While the government stimulus-led recovery was strong – the UK GDP is forecast to return to pre-pandemic levels in the first quarter – the borrowing to achieve this was enormous. In the 2020/21 financial year, the UK’s budget deficit reached £317 billion – a peacetime record. This total includes £70 billion to finance the furlough scheme, £52.8 billion in extra spending on public services and direct help for business through covid loans and grants. The total cost to date of all covid loan schemes (beyond the 2020/21 financial year) was £80.37 billion as of 25 October 2021.
In addition, welfare spending increased by £24.5 billion, while tax revenues slumped by £105.7 billion in the fiscal year, pushing up government borrowing by a further £125 billion. In total, the protective arm of the UK government absorbed nearly two-thirds (64.5%) of the pandemic’s hit to the private sector, according to an estimate by the Institute for Government. As a result of all this extraordinary fiscal support, the UK’s government debt to GDP spiked from around 80% pre-pandemic to 95% of GDP.
Government stimulus was a huge bridge to tomorrow and must all be paid back. The stimulative effects of government policies over the past two years are already reversing. Chancellor Rishi Sunak has already trailed future tax rises, which will bring future deficits down. However, the timing and final composition of any eventual tax increases will be influenced by the pandemic’s evolution, the economic recovery, consumer and business behaviour, and the politics of tax increases near to the next General Election.
In summary, the pandemic has worsened and amplified pre-existing inequalities. Unchecked health problems risk deteriorating into longer-term social issues, compounding the economic cost to the government, which will trickle down to liabilities and costs for employers and investors. Consequently, business planning will require a much broader assessment of the risk environment for the years ahead.