Health protection and economic success should not be played off against each other

Taking a look at Germany

by Karl-Jürgen Müller

It was balm for the human soul that, over the past five weeks, responsible representatives of authorities and political leaders have given absolute priority to working for people’s health and lives and called on all citizens to participate responsibly. This is actually a matter of course - but after all that we citizens have experienced over the past decades, it is also a – rather late – positive surprise. The significant increase in the approval ratings for many of those responsible and their decisions must probably be attributed not least to this.

How thinking and mind can be unsettled

But everyone should know that this road is not guaranteed. Since gloomy reports about the economic consequences of the measures taken so far to protect health and life have increased and the calls for a significant relaxation of the previous measures have become louder, questions have crept into people’s minds and hearts that can be unsettling and misleading: In view of bleak economic forecasts, can we afford to give priority to the protection of life and health? Isn’t it that the initially feared exponential growth in the figures of infections and deaths has not occurred, that the measures taken so far have been successful enough (perhaps even exaggerated) and that the apex of the “crisis” has therefore been overcome? Don’t we always have to take a certain risk in order to maintain our current level of living in future? Isn’t it even true that a severe economic crisis like the one at the end of the twenties, beginning of the thirties has threatened life and health just as much as the corona pandemic does now?
Wouldn’t it be better if for all those who do not belong to a “risk group”¹ , i.e. above all for younger people, the existing restrictions were lifted so that they could resume their usual activities in full – with more health tests, of course, and with the possible retention of certain distance and hygiene rules? Shouldn’t all shops be opened again and businesses be restarted so that the economy can get underway again? Don’t the rest of us want to start living “normally” again? And shouldn’t the ‘risk groups’ be even more ‘protected’, i.e. shielded more than before?

States have set up enormous aid programmes

The political leaders in countries such as Switzerland, Austria or Germany have tried to counter the undeniable economic problems with massive public financing right from the start of the first health policy responses to the corona pandemic.  These aids range from greatly facilitated access to short-time working allowances² to state loan guarantees on very favourable credit terms and tax relief for SMEs and large companies to non-repayable emergency aid for small businesses3. The sum of the funds made up for this purpose exceeds anything previously experienced.
The German “Handelsblatt” titled on 22 March 2020: “Federal government: 1,2 trillion euros against the corona crisis.” Formerly sensible regulations such as a debt brake or debt ceiling are currently no longer being met.
And as can be heard, the aid also reaches those affected at an unprecedented speed – in fact, quite “non-bureaucratic”. Nevertheless, it is not possible to compensate for all the losses, there are also economic and social hardships. Many businesses, especially in the hotel and catering industry, will have great difficulty in surviving.
But many otherwise economically and socially disastrous consequences can still be cushioned. In the first week of April (as of 8 April 2020), for example, more than 7,000 companies applied for credit assistance. The amount of aid requested was more than 20 billion euro – although it must be added that more than 17 billion of this was requested by large companies. In Germany, the Federal States are responsible for processing applications and granting aids. In Saxony, by the beginning of April the competent authorities had received more than 14,200 applications for non-repayable emergency aid. A few days later, 3,000 applications had already been approved, and the money had already been transferred for 1,500 applications. The state of North Rhine-Westphalia reported on 1 April that 2,000 of the 8,500 applications received for public aid for small businesses had already been approved and that the rest would be processed within a week. In the state of Saxony-Anhalt 5,200 applications for non-repayable emergency aid for small enterprises had already been received within the first five hours of being able to apply. “As soon as possible”, the state’s Minister of Economic Affairs was quoted as saying, the applications should be processed and the money paid out.
“The German government is presenting a huge Corona emergency package” was the headline of the “Neue Zürcher Zeitung” on 23 March 2020. The same day, Deutsche Welle said: “It will be more expensive than ever.” Both are true.

The economic figures will go down

However, none of this will change the fact that a significant economic slump is expected in 2020. A few days ago, the Hamburg-based Statista GmbH published a compilation of more than 120 pages of data and forecasts about “Effects of the corona virus (Covid-19) on the economy.”4 Of particular interest is the “ifo scenario calculation for the loss of added value due to the corona shutdown in Germany in 2020” and accordingly the “ifo scenario calculation for the decline in the annual GDP growth rate due to the corona shutdown in Germany in 2020.” The Munich-based ifo Institute, a renowned economic research institute in Germany, assumes six different scenarios, each of which distinguishes between a “shutdown” – or “lockdown” in Switzerland – of one, two or three months. In the case of the loss of added value, the losses in the various scenarios vary between 152 and 265 billion Euros for one month “shutdown”, between 255 and 495 billion Euros for two months and between 354 and 729 billion Euros for three months. In the case of a percentage fall in GDP, the figures accordingly vary between 4.3 and 7.5% for one month “shutdown” between 7.2 and 14% for two months and between 10 and 20.6% for three months.
The “worst-case scenario” looks even more drastic in a study commissioned by the Federal Ministry of the Interior as early as mid-March, which was originally intended for official use only but was made public in early April.5 The scenario is entitled “Abyss” and reads: “Containment of the virus epidemic is not successful. Exit restrictions are imposed for the rest of the year. This means a permanent reduction of economic activity to a lower level. A further reduction in economic activity is assumed after four months with output restrictions. In this situation, GDP would collapse by 32% and industry by 47%. With further intensifying second-round effects and the accumulation of negative expectations, an accelerated downward dynamic cannot be ruled out. This scenario is tantamount to an economic collapse whose social and political consequences are hard to imagine.”

Resistance to another „shutdown“...

Such “forecasts” are the starting point of the critics, who use economic “arguments” to argue against a continuation of the previous attempts to contain the corona pandemic. They claim that, now that one month of “shutdown” has already passed, a second or even third month with an expected GDP decline of 20% or even more cannot be handled and is therefore not to answer. But perhaps the critics are also overlooking something essential, just as the study by the Federal Ministry of the Interior formulated it as the starting point of the economic abyss: “Containment of the virus epidemic will not succeed.” Here it becomes clear how important the protection of health and life is for a functioning economy that wants to call itself “humane.”
An example of the viewpoint of such critics is the “IW-Report 13/2020” published on 7 April 2020 by the German Institut der Deutschen Wirtschaft (German Economic Institute), which is close to employers, entitled “Ein Überblick über aktuelle Konjunkturstudien zur Corona-Krise”6 (Overview of Current Economic Studies on the Corona Crisis; German) The IW-report speaks of a “large-scale increase in testing and treatment capacities” and the special protection of “risk groups.” However, the conclusions are primarily concerned with stimulating the economy: the resumption of schooling and childcare is therefore „of fundamental economic importance, because only in this way can parents pay the necessary attention to their employment.“ The report goes on: “As soon as possible, commercial transactions and currently prohibited services should be allowed to resume. […] In order to be able to restart industrial production, complex added value networks must be reactivated. This requires that companies remain in the market […]. The complex added value chains are based on the international division of labour and the associated international exchange of goods. Borders for goods must be kept open and, where necessary, reopened without friction; this also applies to the exchange of labour close to the border […].
How exactly further infections with the corona virus are to be avoided or whether further infections are to be approvingly accepted is not said.”

… and future perspectives

An interview with a consultant of German family businesses shows that things can be weighted differently.7 She says, “With their long-term perspective and solid capital base, family businesses can go through hard times like this for a while.” When asked why family businesses are more successful than others are, she answers: “First, the equity ratio of family businesses is now – after the financial crisis in 2008 – often over 40%, which provides financial scope. Second, independence from the capital market – and thus also from nervous investors – enables companies to plan for the long term and to act with foresight and much more calm. Third, small and medium-sized family businesses are active internationally, but not always completely globalised, so that they are dependent on supply and value chains from continents far apart.” Conclusion: There are “many family businesses, which have great opportunities right now due to their business model.”
Entrepreneurs and companies had five weeks to reflect on how to adjust their future economic activities to the reality of the corona pandemic and, if necessary, to adapt them. This was and is a big challenge and needs support from the state, and from all citizens. A particularly big problem for the German economy is the fact that around 50% of German value added has been generated by exports in recent years. Many German companies also depend on international supply chains. The pandemic has affected the entire world, with severe restrictions and economic slumps in all countries, affecting German sales abroad and making previous investments for German companies more difficult. There are German companies, for example in the automotive industry, which are able to deal adequately with the risks of infection by the corona virus in their own factory buildings, but which are nevertheless unable to produce at present because suppliers have dropped out or customer bases have broken away. Therefore, supporting other countries is also conductive to your own country.
It is therefore important to find ways to do business in times of the corona pandemic in such a way that health and life of all employees and customers are optimally protected. Business associations such as the Association of German Chambers of Industry and Commerce (DIHK) have established websites where companies can get information on many issues related to the Corona pandemic.8 This would also be an opportunity to provide practical examples of what companies can do to restart or maintain operations while protecting health and life.

Conclusion: Responsible action
also means independent thinking

Everyone would like to see that the measures restricting economic life are withdrawn as soon as possible. It is not necessarily the case that there has to be a conflict between the protection of health and life and economic success. On 13 April the German National Academy of Sciences (Leopoldina) published its third, 18-page ad hoc statement on the corona pandemic entitled “Coronavirus Pandemic – Sustainable Ways to Overcome the Crisis.”9 The Leopoldina advises the German Federal Government. She also writes: “In principle, there is no contradiction between protecting health and the immediate resumption of public life, which has been largely suspended. In fact, the two are mutually dependent.”
Whether the recommendations of the Leopoldina meet this requirement may remain open here. Even with this top-class advisory board, you can perceive not only political approaches without any alternatives, which every citizen is welcome to call into question (for example, with the plea for accelerated digitisation in the education sector or for restructuring the economy in the direction of a “European Green Deal”). The request to every citizen to take part responsibly includes independent thinking. Such thoughts may also go in the following direction.
It very likely also depends on the way we want to do business in the future, so that there are no longer conflicts between protecting life and health and our way of doing business. When can we say that an economy is successful? Does it just depend on sales, growth rates and international interdependencies? “Property entails obligations. Its use should also serve the public good”, says Article 14 of the German Basic Law. It cannot be denied that the common good is no longer safeguarded when health and life are no longer protected. The corona pandemic can certainly be a bitter occasion to think outside the current box.  •

1  When talking about “risk groups” in the context of Covid 19 disease, we are talking about statistically determined probabilities of infection with a severe course of the disease, and this according to the current, rather imperfect state of knowledge. Nobody can guarantee that an infection with the corona virus cannot lead to a serious illness or even end fatally for people who do not belong to one of the risk groups. Is it therefore not advisable for everyone to avoid infection with the virus as far as possible?
2  The “Aachener Zeitung” reported on 9 April 2020, that the number of companies in Germany that have announced short-time work as a result of the corona pandemic had risen to 650,000, compared to only 470,000 companies on March 27. It is estimated that the number could rise to 6 million short-time workers in the course of the year.
3  An overview for Germany is provided, for example, by the text of the Federal Ministry of Finance “Questions and Answers on the billion-euro protection shield for Germany” (German) from 6 April 2020 (https://www.bundesfinanzministerium.de/Content/DE/FAQ/2020-03-13-Corona-FAQ.html). In contrast to Switzerland, small enterprises in Germany with up to 5 employees can apply for up to 9,000 euros and with up to 10 employees up to 15,000 euros in one-off, non-repayable emergency aid. The amount of the benefits depends on the monthly turnover in 2019, for which a total of 50 billion euros will be made available.
4 https://de.statista.com/statistik/studie/id/71344/dokument/auswirkungen-des-coronavirus-auf-die-wirtschaft/
5  The 17-page study is entitled “Wie wir Covid-19 unter Kontrolle bekommen” (How to get Covid-19 under control) and can be found as a file on the FragDenStaat website (https://fragdenstaat.de/dokumente/4123-wie-wir-covid-19-unter-kontrolle-bekommen/).
6 https://www.iwkoeln.de/fileadmin/user_upload/Studien/Report/PDF/2020/IW-Report_2020_Konjunkturstudien_KW14.pdf from 7 April 2020
7  “Was bedeutet Covid-19 für Familienunternehmen?” (What does Covid-19 mean for family businesses?), https://www.pwc.de/de/mittelstand/was-bedeutet-covid-19-fuer-familienunternehmen.html from 13.3.2020
https://www.dihk.de/de/aktuelles-und-presse/coronavirus/faq-19594
9 https://www.leopoldina.org/uploads/tx_leopublication/2020_04_13_Leopoldina_Coronavirus_statement_3_en.pdf

Support of the the economy and protection against the infection

km. In a telephone conference on 15 April 2020, the Federal Chancellor and the heads of government of the Federal States agreed on key points for further “restrictions on public life to contain the Covid 19 pandemic“1. However, these key points do not only include “restrictions”, but also easing of restrictions on the business activities of and other support measures for companies. From 20 April, for example, Shops with a sales area of up to 800 square metres and, irrespective of the sales area, car dealers, bicycle dealers and bookstores can reopen. In doing so, they must comply with “regulations on hygiene, access control and avoiding queues.” In the service sector, hairdressers should prepare themselves to resume operations from 4 May onwards under the same conditions and by “wearing personal protective clothing.“ Companies that have problems with suppliers are also to be supported. The resolution states: “The federal and state governments support the economy to restore disrupted international supply chains. For this purpose, the federal and state ministries of economics are setting up contact points for affected companies. These are intended to contribute at the political level to ensure that the production and delivery of required supplier products can be resumed smoothly wherever possible.” All this is subject to the protection of public health. At the beginning of the resolution it says: “For the time to come, the guiding principle of our actions is that we want to protect all people in Germany as well as possible from infection.” (Translation of all quotes Current Concerns) The concept of immunising as many people as possible through an infection over a long period of time and thus also protecting the so-called risk groups from infection (“herd immunity”) is not being pursued. It explicitly states: “Achieving a timely immunity of the population against Sars-CoV-2 without a vaccine is not possible without overburdening the health care system and the risk of many deaths.”On 30 April, there will be another meeting to discuss whether the new decisions have proved successful.
We citizens are also called on to take part in this examination.

1 https://www.bundesregierung.de/resource/blob/973812/1744452/b94f2c67926030f9015985da586caed3/2020-04-16-bf-bk-laender-data.pdf?download=1 from 15 April 2020

 

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