Branko Milanović – Deaths vs. the economy: an unexpected reversal

The pandemic has thrown up so many important questions. Here’s another.

Branko Milanović is an economist specialised in development and inequality. His newest  book is “Capitalism, Alone: The Future of the System That Rules the World”

Cross-posted from Branko’s blog

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Every decision to impose a lockdown in a pandemic is a decision to sacrifice the economy in order to save lives, at least in the short-run. The lockdown decisions may prove, over the longer term, even good for the economy—but it clear that every government, at every administrative level, has since the very beginning of the pandemic weighed its lockdown decisions that would save lives against the costs they would impose on the economy.

            Now, assume that you do not know anything about how different countries have handled the pandemic so far and are given the following exam questions: there is a very rich country with a democratic government, and there is a significantly less rich country trying to catch up with the richest (but still at 1/3 of the richest country’s per capita income level) with an authoritarian government. Which government is more likely to use lockdowns to stop the spread of the disease?

            I assume that you are a very good student. You would say the former. And would explain it on several grounds. First, richer countries, in principle, value human lives more than poor countries. Not only if we look at individuals as economic producing machines: a person living and working in a rich country will during his/her lifetime produce X amount of real goods and services, while an equivalent person living and working in a poor country would produce a fraction of X. (Consequently, the death of the former would reduce output by more than the death of the latter.) Likewise, you could add, supporting this argument, when people from rich countries are killed by people from poor countries, the compensatory payments are much greater than when people from rich countries kill people from poor countries.

Second, as countries get richer, they tend to become “nicer”: there are greater social spending as a share of total income, more attention is being paid to the handicapped and sick people, there are more days of vacation, sick leave is compensated fully etc. It follows that in the case of a pandemic too, the rich country will tend to care more for its people—because it can afford it, and because there is a greater demand for such protection.

            Third, our good student will write that democracy as such will care more about the lives of its citizens than an authoritarian regime that can leave them out to die. He could easily give numerous historical examples that support his case.

            Finally, the student could provide yet another argument: if the authoritarian government is obsessed with catching up with the democratic country in terms of its GDP, will it not be additionally loath to sacrifice economic growth.

            He would thus conclude that on all reasonable grounds, rich democratic country should impose lockdowns more frequently. And he would probably get an A.

            But this pandemic has shuffled cards in very unexpected ways. When we look at the reality around us, we see rich democratic countries averse to lockdowns and quite willing to run a huge bill in terms of human casualties. And we see an authoritarian government in a less rich country that is in the grip of an ideology of “GDP-ism”, much more willing to impose lockdowns, protect lives and sacrifice the economy.

            So we have to ask another student to give us his answer.

            Now, the iconoclastic student might answer as follows. The authoritarian county’s government finds its legitimacy in showing that it is much more efficient than a democratic government. It thus has to fight all the time. It has to be on its toes permanently. So if it sees saving lives to be an indicator of its efficiency (and if people seem to agree) it will apply lockdowns whenever it thinks they are needed.

            But a democratic government is an elected government. It knows that the elections are far away. It is not well organized; different parts of the government think differently; they often work at cross-purpose. The central part of the government might also think that, by the time the elections are called, many people will have forgotten about the pandemic and even about the dead. (And the dead, as we know, do not vote.) But people might not have forgotten about having lost their jobs and slid into poverty, even if temporarily. So the government might lose more votes by being seen as callous about people’s jobs than by being callous about people’s lives

            The iconoclastic student might continue: if individuals tend to underestimate their risks of getting the disease and dying, while the risks of losing income and jobs are quite clear and obvious, would not this add to the pressure on the government to refrain from lockdowns? And since it is a democratic government, would not that government listen to the voice of the people, and keep the economy going?

            The iconoclastic student would have made some good points too. But before the reality was revealed to us, we would have probably given him a B: good but not wholly persuasive, especially when compared with our hard-working first student.

            Would our grading be right?


Branko Milanović

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