Comment on “Economic Impacts of SARS/MERS/COVID‐19 in Asian Countries”

Abstract

Tanaka (2022) is a clearly written survey of the impact of the COVID-19 pandemic on Asian economies. It covers the single sector SIR (susceptible, infected, recovered) epidemiological macro-model and discusses results from this class of models for Asian countries. Then, relaxing the model to allow heterogeneity across sectors and workers, the paper examines the impact of the pandemic in Asia. The paper concludes by briefly addressing the policy responses of Asian countries. At this writing, there have been an estimated 212 million COVID-19 cases worldwide (though this is a vast undercount) and more than 4 million deaths (again an undercount of the true excess death associated with the pandemic). The pandemic's severity demands greater attention to those policy issues. East Asia appears to have been uniquely adroit at implementing nonpharmaceutical interventions (NPIs). Targeted forms of interventions have mitigated the pandemic without incurring large economic costs. These would include mass masking, widespread testing, extensive contact tracing, systematic quarantines of individuals likely to be infected, border and movement restrictions, and timely, clear, and consistent public health communication. The execution of some of these measures in East Asia has been overly intrusive and subject to abuse, so implementation should be done with the maintenance of civil liberties in mind (Chorzempa & Huang, 2021). In assessing policy effectiveness, the control of borders should not be underestimated: among the few robust cross-country correlates with effective pandemic response has been being an island. (It is no accident that Hawaii has the lowest cumulative case rate among US states.) In this context, South Korea is for all intents and purposes an island. Other robust correlates include previous experience with pandemics such as SARS or MERS, and having a female leader, though this result may be due to outperformance by New Zealand, and possibly, Germany. That said, vaccination is key: the attainment of herd immunity will facilitate the return to normal economic and social life. As of this writing, approximately 2 billion people or about 25% of the world's population have been fully vaccinated. Further progress will be complicated by the apparent need to give booster shots. Thus far, Asia has been relatively strong on NPIs, but relatively weak on vaccine rollout. There are two core issues: first, the social benefit of vaccination exceeds its private benefit at the level of the individual, and the global benefit exceeds the national benefit at the level of the nation-state. Consequently, there is a prima facie case for the subsidization of production and consumption at the national and global levels. A related issue is distributional: we face an emerging “vaccine famine.” In famines, people do not die because there is not enough food to go around in a physical sense; they die because they are too poor to purchase adequate supplies. “Vaccine nationalism” in which a limited number of producer countries impose export controls, or pre-emptively purchase huge stocks for their citizenry, will leave vast swaths of the world's population, including in Asia, exposed. Unvaccinated populations can act as incubators for the development of variants of concern. Bown and Bollyky (2021) propose a COVID-19 Vaccine an Investment Trade Agreement (CVITA) to leverage COVAX; subsidize investment in vaccine production and the related supply chain; eschew export restrictions; create a transparent monitoring system; and create an authority to act as contractor and ombudsman. Tanaka documents the uneven incidence of the pandemic burden across households; similar inequities are arising in vaccine distribution within countries, particularly in countries characterized by high levels of inequality and ethnic or other social tensions. This could prove particularly challenging in parts of Southeast Asia. A related issue is vaccine hesitancy. This phenomenon has been particularly vexing in countries with populist leaders such as Donald Trump, Jair Bolsonaro or Rodrigo Duterte. Attainment of herd immunity will determine the length of the pandemic and the magnitude of scarring. As Tanaka observes, duration also is relevant to the preferability of providing support to firms (as has been emphasized by the European Union) or support to individual households and workers (as has been emphasized in the USA). The former preserves the enterprise value of firms at the risk of creating zombies; the latter is advisable if considerable cross-sectoral redeployment of resources is necessary but may incur the cost of firm shutdown needlessly if the shock is temporary. The risk is that without an effective global pandemic response, we could find ourselves in a world of recurrent outbreaks, inevitably prompting the imposition of cross-border impediments to the movement of goods and people, with adverse implications for long-run productivity, economic growth, and poverty alleviation.