For the second time in less than 15 years, the world economy is facing a huge negative shock. While the current COVID-19 crisis directly threatens the health of the population and can kill indiscriminately, the 2008 financial crisis had significant adverse health consequences due to prolonged economic hardship in the form of the most severe economic recession since WWII (Case and Deaton 2020). Restarting the economic system quickly once the epidemic has subsided is therefore a crucial task.
In the case of the financial crisis, economic activity plunged because nobody knew which banks were ‘safe to trade with’. To restore confidence, stop panic and restart the economy, the injection of public money on a massive scale and in the form of bailouts (i.e. direct money, and/or public guarantees) was a top priority. Then, as a second step, the banking system needed a thorough clean-up to ensure banks were able to provide funds efficiently to both firms and households. The first phase, while costly, was ‘easy’ and lead to a rebound of economic activity within roughly 12 months. The second phase was more delicate, which explains why financial crises typically generate very high economic costs over a prolonged period of time (e.g. Reinhart and Rogoff 2011).
Under the present crisis, the first phase is already under way, and involves the use of temporary income or credit support for laid-off workers and for firms impacted by the disorganisation of production. Again, these measures are ‘easy’, albeit quite costly to public finances. To date, the most conservative estimate puts the magnitude of the total extra fiscal stimulus announced by various governments of countries affected by the virus at 2% of global GDP, which is more than was mobilised in response to the global financial crisis of 2007-2009 (Economist 2020a). Clearly, in the case of the global financial crisis, decisive and massive public interventions aimed at convincing markets and households that governments were serious about countering the shock paid off. In the present crisis, there are cues attesting that markets are responding favourably to the same signal.
The second step – restarting economic activity as quickly as possible – is crucial but much more challenging than the first step. What needs to be overcome here is not the fear of trading with an insolvent counterparty, but the fear of working with someone who is contaminated.1 We cannot wait for treatment or vaccines to emerge (the latter are expected to take 12 to 18 months), although since these obviously represent the only ultimate solution, they deserve immediate and massive investment. It is also possible that some already known drugs could be effective against the disease2 (chloroquine seems promising in this regard). In the meantime, however, systematic testing of the population deserves immediate and massive attention as a complementary policy. This is because the scientific knowledge is already available (Vogel 2020). The problem is therefore one of ‘logistics’, which have to be scaled-up massively but can be organised by the state in a top-down fashion, as is usual in war-like situations. Ideally, it will be coordinated on a global scale.
Restarting production in the economy requires the reliable identification of individuals who will not contract the virus or transmit it to others, whether they have previously displayed the associated symptoms or not. Serology, which ELISA3 tests for SARS-Cov-2 specific antibodies, allows the detection of protected individuals who have been infected by the virus and have recovered. In contrast, RT-PCR4 tests, which are based on an RNA diagnostic, detect the presence of the viral genetic material and are only valid just before and during the infection. As asymptomatic individuals who test positive with a serological test may still carry the virus and infect others for a certain period of time, there is a need to verify, through a RT-PCR test, that these immune individuals are no longer carrying the virus. Only those who test positive with a serological test and negative with a RT-PCR test should be allowed to return to work.
In short, the combined use of the two tests would allow the economy to be relaunched in such a way that minimises the risk of ‘additional waves’ of the epidemic – that is, the risk that the virus will return within a few weeks of restrictions being lifted. Since this is a major concern among many epidemiologists – the radical, confinement strategies, now followed by many European countries, keep the infection rates relatively low but by the same token leaves many people susceptible to the virus – the double-edged testing approach that we propose is appealing.5 Another advantage is that it removes the risk of ‘false negatives’ in RT-PCR testing – i.e. the risk that an individual who tests negative today is no longer negative a few days later. Testing too early after contact with other potentially infected individuals may not reveal the presence of the virus.
Currently, such a strategy is hampered by technical and logistical constraints which prevent mass screening using validated and certified tests. During the scaling-up of the testing capacity, a gradual approach based on clearly established priorities will therefore be necessary. It should first target healthcare professionals and holders of ‘essential jobs’ (public transportation, transportation and distribution of essential goods, gas service stations, etc.), and then those for whom teleworking is not an option. Thereafter, if easy-to-use COVID-19 antibody assays applicable via finger prick samples (e.g. Biomerica Inc.) are rapidly proven to be reliable and certified, they might be used in conjunction with FDA-approved point-of-care viral RNA testing (Xpert® Xpress SARS-CoV-2, Cepheid Inc.) to implement the suggested two-step screening on a large scale. Hopefully, this will arrive in time to guide decisions about the continuation or otherwise of current lockdown and confinement measures in Europe, the US and elsewhere.
There is a second plank to the strategy we recommend: random samples of the population should be tested immediately. The purpose of this is to obtain an idea of the proportion of asymptomatic individuals in the population – that is, the proportion of unidentified individuals who have already been contaminated by, and are now resistant to, COVID-19. This will provide an unbiased estimate of how deadly the disease truly is. Indeed, while we currently know the numerator of the ratio measuring the mortality rate of the virus (that is, the number of death casualties), we do not know the value of the denominator (the number of people infected). Such a statistic will also inform authorities about how close we are to herd immunity (understood as a situation in which a certain proportion of the population has become immune to the virus).
Science is evolving quickly, and there is a distinct possibility that new techniques will soon become available that relax at least some of the logistical constraints mentioned above. This is strikingly illustrated by the so-called Covid-19 Rapid Test Cassettes, which have recently been certified. This new test allows early detection of antibodies specific to coronavirus that does away with blood sampling (it consists of a finger-prick sampling) and identifies in only ten minutes the body’s response to coronavirus three to seven days after infection.
In the current debate, the focus is on the inherent trade-off between a ‘mitigation strategy’, which is centred on two-week quarantines of infected households, and a ‘suppression strategy’, which relies on some form of confinement of the whole population (with exceptions for vital workers in the health sector and the subsistence economy). The core idea is that while the mitigation strategy is costly in terms of lives lost, the suppression strategy is economically and psychologically unsustainable. The former effect results from the fact that quarantines are imposed only on the small fraction of people who have tested positive or have characteristics making them prone to infection (for example, they have been in recent contact with an infected individual or they have come from a hotspot). The latter effect arises because the cost to governments of a significant disruption of the economy is huge and will be hard to sustain beyond a limited period of time. Moreover, ‘confinement fatigue’ among people unaccustomed to isolation is not to be underestimated.
A key advantage of our proposal is that it avoids this trade-off, as it is an approach that would minimise both loss of life and the risk of a severe economic and financial crisis accompanied by serious social tensions.
Authors’ note: We thank François Bourguignon, Pierre Courtoy, Jim Goldman, Michel Kazatchkine, Nicole Moguilevsky and André Sapir for very useful comments.
Case, A and A Deaton (2020), Deaths of Despair and the Future of Capitalism, Princeton University Press.
Economist (2020a), “The Economic Emergency : Experimental Treatment”, 21 March.
Economist (2020b), “The Lockdown and the Long Haul”, 21 March.
Lo, A (2019), Adaptive Markets: Financial Evolution at the Speed of Thought, Princeton University Press.
Reinhart, C and K Rogoff (2011), This Time Is Different – Eight Centuries of Financial Folly, Princeton University Press.
Vogel, G (2020), “New blood tests for antibodies could show true scale of coronavirus pandemic”, Science, 19 March.
1 See Lo (2019) on the role of episodes of fear in markets.
2 While it is true that drugs do not make people immune to disease, if severe cases can be treated more effectively, letting people circulate more freely would raise fewer fears.
3 The enzyme-linked immunosorbent assay (ELISA) is an immunological assay commonly used to measure antibodies, antigens, proteins and glycoproteins in biological samples.
4 Reverse transcription polymerase chain reaction.
5 According to the Robert Koch Institute, a German government health agency, tough restrictions will have to remain in place until a vaccine can be made, tested and put into use – a period it predicts could last up to two years (Economist 2020b).