Looking Ahead: Easing Out of Crisis and Recession, Part 2

Stephen DeAngelis

April 21, 2020

Politicians, economists, and business leaders are scrambling for strategies to guide the U.S. and global economies out of the pandemic and the recession it has fostered. Sam Baker (@sam_baker), health care editor at Axios, notes, “Even as the number of illnesses and deaths in the U.S. start to fall, and we start to think about leaving the house again, the way forward will likely be slow and uneven. This may feel like it all happened suddenly, but it won’t end that way.”[1] Nevertheless, it will end. Gabriel Leung (@gmleunghku), an epidemiologist and dean of medicine at the University of Hong Kong, correctly states, “Lockdown can’t last forever.”[2] He sums up what many people are saying when he writes, “Lockdowns, quarantines and extreme forms of physical distancing work: They are curbing the spread of Covid-19. But they cannot last indefinitely, at least not without causing enormous damage to economies and compromising peoples’ good will and emotional well-being. … A formal framework is needed, with an explicit rationale grounded in science, for determining when and how and based on what factors to relax restrictions — and how to reapply some or all of them should another epidemic wave hit again.” In the first part of this article, I discussed some of the pressures leaders are experiencing as they look for a way forward. Below I discuss recommendations from numerous experts about how to move ahead safely.

The Way Ahead

Bruce Mehlman (@bpmehlman), founder of Mehlman Castagnetti Rosen & Thomas, writes there will be a “great re-opening debate coming soon.”[3] In fact, the great debate has already begun. The debate focuses on mid-term and long-term decisions. According to Emily Bazelon (@emilybazelon), the most important question being asked right now is this: “When can we ethically bring people back to work and school and begin to resume the usual rhythms of American life?”[4] She notes, “Many Americans have responded by rejecting as monstrous the whole idea of any trade-off between saving lives and saving the economy. … In the longer run, though, it’s important to acknowledge that a trade-off will emerge — and become more urgent in the coming months, as the economy slides deeper into recession.”[5] Although the best tool now in use to stem the spread of Covid-19 is social distancing, Scott Gottlieb (@ScottGottliebMD), a Resident Fellow at the American Enterprise Institute, and his AEI colleagues, Caitlin Rivers, Mark McClellan, Lauren Silvis, and Crystal Watson, believe we need to move beyond that singular strategy. They explain: “To gradually move away from a reliance on physical distancing as our primary tool for controlling future spread, we need: Better data to identify areas of spread and the rate of exposure and immunity in the population; improvements in state and local health care system capabilities, public-health infrastructure for early outbreak identification, case containment, and adequate medical supplies; and therapeutic, prophylactic, and preventive treatments and better-informed medical interventions that give us the tools to protect the most vulnerable people and help rescue those who may become very sick.”[6]

Mehlman asserts, in the near-term (Phase I), politicians need to focus on stabilizing the situation. In the mid-term (Phases II & III), they need to focus on recovery. In the long-term (Phase IV), they need to focus on reform so the country is better prepared for the next pandemic. Kevin Sneader and Shubham Singhal, partners at McKinsey & Company, assert there are five stages, leading from the crisis of today to the next normal.[4] Those stages are: Resolve, Resilience, Return, Reimagination, and Reform. We are currently in Phase I, the near-term state (which includes resolve and resilience), however, we are approaching the mid-term state (which includes return and reimagination).

Mid-term Decisions

Leung recommends a “suppress and lift” strategy. He explains, “Trying to see our way through the pandemic with this ‘suppress and lift’ approach is much like driving a car on a long and tortuous road. One needs to hit the brakes and release them, again and again, to keep moving forward without crashing, all with an eye toward safely reaching one’s final destination.” Bioethicist Zeke Emanuel appears to agree with this approach. He told Bazelon, “Restarting the economy has to be done in stages, and it does have to start with more physical distancing at a work site that allows people who are at lower risk to come back. Certain kinds of construction, or manufacturing or offices, in which you can maintain six-foot distances are more reasonable to start sooner.” Sneader and Singhal add, “Most industries will need to reactivate their entire supply chain, even as the differential scale and timing of the impact of coronavirus mean that global supply chains face disruption in multiple geographies. The weakest point in the chain will determine the success or otherwise of a return to rehiring, training, and attaining previous levels of workforce productivity. Leaders must therefore reassess their entire business system and plan for contingent actions in order to return their business to effective production at pace and at scale.” Almost every expert agrees activities involving large gatherings of people need to remain on hold.

Gottlieb and his colleagues believe the decision to return to normal must be made on state and local levels. They explain, “Individual states can move to Phase II when they are able to safely diagnose, treat, and isolate COVID-19 cases and their contacts. During this phase, schools and businesses can reopen, and much of normal life can begin to resume in a phased approach. However, some physical distancing measures and limitations on gatherings will still need to be in place to prevent transmission from accelerating again. For older adults (those over age 60), those with underlying health conditions, and other populations at heightened risk from COVID-19, continuing to limit time in the community will be important. … States may move forward at a county or regional level if these conditions vary within the state and that coordination on reopening among states that share metropolitan regions will be necessary.” When should the move to Phase II be made? Gottlieb and his associates write, “The trigger for a move to Phase II should be when a state reports a sustained reduction in cases for at least 14 days (i.e., one incubation period); and local hospitals are safely able to treat all patients requiring hospitalization without resorting to crisis standards of care; and the capacity exists in the state to test all people with COVID-19 symptoms, along with state capacity to conduct active monitoring of all confirmed cases and their contacts.”

According to Gottlieb and his colleagues, “Once a vaccine has been developed, has been tested for safety and efficacy, and receives FDA emergency use authorization, or there are other therapeutic options that can be used for preventive or treatment indications and that have a measurable impact on disease activity and can help rescue very sick patients, states can move to Phase III.” In Phase III, physical distancing measures can be lifted and society can find out what the new normal entails. As Sneader and Singhal explain, “A shock of this scale will create a discontinuous shift in the preferences and expectations of individuals as citizens, as employees, and as consumers. These shifts and their impact on how we live, how we work, and how we use technology will emerge more clearly over the coming weeks and months.” As Baker notes, “The real turning point won’t come until there’s a proven, widely available treatment or, even better, a widely available vaccine.”

Long-term Decisions

Part of long-term decision-making must include planning for the next pandemic. Gottlieb and company explain, “The COVID-19 pandemic has exposed serious gaps in our nation’s pandemic preparedness. COVID-19 will not be the last public-health emergency to threaten American society. We must invest in the scientific, public-health, and medical infrastructure needed to prevent, detect, and respond to the next infectious disease threat.” Sneader and Singhal insist this will be an important period in which to reimagine the future. They write, “The crisis will reveal not just vulnerabilities but opportunities to improve the performance of businesses. Leaders will need to reconsider which costs are truly fixed versus variable, as the shutting down of huge swaths of production sheds light on what is ultimately required versus nice to have. Decisions about how far to flex operations without loss of efficiency will likewise be informed by the experience of closing down much of global production. Opportunities to push the envelope of technology adoption will be accelerated by rapid learning about what it takes to drive productivity when labor is unavailable. The result: a stronger sense of what makes business more resilient to shocks, more productive, and better able to deliver to customers.” In the long-run, businesses are going to have a better understanding of where technology can improve operations and where humans remain essential for success. Protecting essential workers will rise in priority as new safety measures are put in place.

Concluding thoughts

Sneader and Singhal observe, “The world now has a much sharper definition of what constitutes a black-swan event.” As a result of the exhaustive efforts of millions of people to combat the spread of Covid-19, they believe numerous reforms will take place in its aftermath. They explain, “The aftermath of the pandemic will also provide an opportunity to learn from a plethora of social innovations and experiments, ranging from working from home to large-scale surveillance. With this will come an understanding of which innovations, if adopted permanently, might provide substantial uplift to economic and social welfare — and which would ultimately inhibit the broader betterment of society, even if helpful in halting or limiting the spread of the virus.” Voices for reform will come from social activists, labor leaders, healthcare providers, and the general public. Businesses willing to listen and respond will not only be able to cope with the next crisis they will earn loyalty from both employees and consumers.

Footnotes
[1] Sam Baker, “We can’t just flip the switch on the coronavirus,” Axios, 10 April 2020.
[2] Gabriel Leung, “Lockdown Can’t Last Forever. Here’s How to Lift It.The New York Times, 6 April 2020.
[3] Bruce Mehlman, “Politics & Policy in the Age of Pandemic,” Mehlman Castagnetti Rosen & Thomas, Second Quarter 2020.
[4] Staff, “Restarting America Means People Will Die. So When Do We Do It?The New York Times Magazine, 10 April 2020.
[5] Kevin Sneader and Shubham Singhal, “Beyond coronavirus: The path to the next normal,” McKinsey & Company, March 2020.
[6] Scott Gottlieb, Caitlin Rivers, Mark McClellan, Lauren Silvis, and Crystal Watson, “National coronavirus response: A road map to reopening,” American Enterprise Institute, 29 March 2020.