What price of life to avoid the death of the economy?
Life or the stock market? The economy or COVID-19? Answer, both, dosing at best, explaining and above all convincing – let’s hope so. As we have seen: the choice is a partial reconfinement, to reduce the number of cases and deaths as much as possible, while also reducing as much as possible the number of unemployed and the economic loss linked to closures and the risk of bankruptcy. For this, President Macron emphasizes the behavior of each and the solidarity between all. We can always discuss these measures, say that they had to be taken earlier, or others, or be stricter, it is clear that the development of the pandemic is faster than expected, leading to clear measures for slow down and then reduce its expansion, while allowing the economy to recover.
Life or the stock market? It all depends on the intensity of the threat. It is in fact behaviors and expectations that are at stake: it is the recent acceleration that changes everything. What is happening today comes first from the risks and extrapolated economic costs of the spread. France is now the 5th country in the world by the number of cases (1.2 million), behind the United States (9 million), India (8 million), Brazil (5.5) and Russia (1.6), out of a global total of 45 million (officially) infected people. Of course, these figures do not say everything: we must take into account the number of cases and deaths per million inhabitants (respectively 19,000 and 550 for France) and especially the current acceleration: on average 38,200 le October 27, over the previous 7 days, against 34,500, still on average, on the 25th.
R is the number that explains everything: it is the threat, the number of infections caused by a person carrying the virus. It is therefore an indicator of the speed of the pandemic’s spread. It is currently 1.4, down since the start of the curfew when it was at 1.7, but still above 1, thus indicating an acceleration of the disease. We are no longer at 0.8 as in May, after confinement, and yet it is essential to go lower than this figure.
Cohabitation with COVID-19 first and at best, then the drop in R is the strategy of the authorities. It is obviously expensive if we want to count in the cost of avoided deaths: between 2% and 5% of GDP per month, that is to say between 4 and 10 billion, without omitting especially the closures of factories or businesses, unemployment, otherwise says the social costs of unemployment, the psychological and social problems associated with confinement and unemployment. Lives lost, lives damaged.
The choice of partial confinement is therefore a mix of health and economic measures, a dosage intended above all to avoid a movement of economic, social and financial panic. French growth is already reduced: the jump in the 2021 Draft Budget to 8% of GDP, described as “voluntary” by the High Council of Public Finance (HCFP), after a -10% in 2020, is at stake. is to prevent the economy from sliding towards a lasting and significant loss of growth that the 2020 deficit will widen further, hoping to “save Christmas” and, in fact, save 2021 and beyond. It is the future that is at stake: it must be said.
“Whatever the cost” said the President, “a life is priceless”: phrases that may seem generous but are dangerous if they do not talk about numbers, the cost of lives saved and jobs threatened and lost, if we don’t really change behavior. COVID indeed comes “in addition” to the rest: the American financial crisis of 2007 which we do not get out of, that of the European states of 2010, the technological revolution, the advance of China, the American-Chinese tensions which mounting tensions everywhere, plus internal French problems. Containment should not fuel fears of change in this fast-paced world.
So: life or the stock market? Both, as always, but speaking more courageously about what life is today, with its prospects and its risks, to prepare for the stock market, in other words the economy… and life. It is in fact dramatic that France is so exposed to the virus, unless one mentions its sluggish growth, unemployment and permanent deficits to help understand what is happening to us. We are not alone in this case, but undoubtedly very threatened as the second power of the euro zone, especially if we continue to hide ourselves behind this virus.