One of the biggest mistakes I made early on in lockdown was to refer to the downturn as the first “government-created” recession in history. Governments across the world had, for the most part, decided it was easier to repair the economic damage of shutting down much of society than it was to repair the social damage of many thousands of deaths from coronavirus (and, in addition, the tens of thousands of excess deaths because of the disease’s capacity to wipe out healthcare capacity).
This, of course, had the consequence of removing demand from the economy at pace. But what I got wrong was describing what was happening as “government-created”. As Ryan Bourne shows over at ConservativeHome, and as various measures of economic performance already indicated, the lockdown is not primarily a government policy decision. It is the reaction of many individuals and companies. Consumer confidence was already falling before the lockdown. Many businesses were already moving to homeworking, while footfall at bars and restaurants was already down.
When you understand that, you understand two problems. There is a problem with the government’s new strategy of urging people who can’t work from home to return to work, and there is a problem with the criticism on the right that the government should “end the lockdown” in order to end the economic repercussions of Covid-19.
First, let’s take the industries that cannot operate at all without acting as vectors of infection: pubs, restaurants and so on. The government mandated their closure from 23 Marc-, but many restaurants and bars had shut voluntarily before then. But, equally importantly, people weren’t going to them in sufficient numbers. You will only be able to trigger a recovery in these sectors if people feel that they are relatively safe to do so, whether through developing a robust enough infrastructure to track, test and isolate new cases or through the development of palliative treatments and/or a vaccine. Boris Johnson can do as many televised conferences as he likes – it ain’t gonna happen.
Then there are the jobs that cannot be done from home. There are a variety of construction jobs that actually can be done fairly safely for the most part: an open-air building site is pretty safe, for example, for the same reason that hanging out in a park is fairly safe. The problem, though, is that it’s far from clear how much demand there is. What large-scale construction project would you happily sign off on, knowing it will be unused for the foreseeable future? And if you are working at home, you will certainly be willing to put up with the inconveniences and risks of social distancing if your toilet breaks or your boiler packs up. But to remodel your kitchen or bathroom? That’s less clear.
Then there is work you can do away from home but is more dangerous, like cleaning. Viruses spread through “viral shedding”. You expel virus particles from your body into the atmosphere, whether through sneezing, coughing, singing (this is why so many clusters of infections start with choir groups), or using the toilet. If we continue to look at cleaning, some people will be willing to take the risk of having someone doing this job in multiple households come into theirs. Some will be willing to take the risk for themselves, but unwilling to have their cleaner take the risk of commuting. Some, but not all of the people in either group, will continue to pay their cleaners. A third group will be just fine with both risks. But however those three groups split up, there is not going to be as much money going into cleaner’s pockets as there was before the lockdown.
Then there is work you can do at a distance but whose products cannot easily be transferred without social contact: like the selling and renting of houses. Some people will have to move in the age of lockdown: they will be in relationships that end or perhaps they will be partway through a house purchase. But it seems unlikely, to put it mildly, that people will be trying to sell their houses in market conditions where we would expect most people’s homes to have lost value.
These, too, are (with the exception of construction and housing) not sectors that are powering large amounts of economic activity. If you want to unlock the economy at anything like its pre-disease level, you at some point have to convince people in Cornwall it is safe to welcome tourists from the rest of the country with open arms: a difficult ask when people are being told they can’t even hug those outside their immediate household.
You can, from behind a desk in Downing Street, urge people in these industries to work all you like, but you can’t compel people to buy their services. And that’s the central problem with seeing this as a “government-caused” recession. It is the rational response to the virus that has caused the downturn, and will likely endure until either palliative treatments or a vaccine reduce the risks.