Dealing With COVID-19 in Texas: Goodbye China, Hello Sweden

Among the many strategies undertaken by the countries in the world to fight the Covid-19 pandemic, two extreme forms stand out prominently. One is China's heavy-handed authoritarian approach which prescribes what individuals and businesses should and should not do with little consideration of civil liberties.  The primary goal of this strategy is to reduce the number of new infections as quickly as possible.  In Hubei Province, the ground zero of the pandemic, all nonessential businesses were shut down and people were confined to their homes except for grocery or medicine shopping.  On the opposite side of the coin is Sweden's liberal approach, which aims to minimize disruption to civil liberties and the economy. The primary goal of this strategy is to put some basic restrictions in place to slow the growth in new infections -- such as banning large-size public gatherings.  The idea was to slow the growth in new infections just enough to avoid hospitals getting overwhelmed.  The Swedish approach meant that, unlike most other people in the virus-ridden world, the Swedes have been able to go to restaurants, get haircuts, and send children to school throughout the outbreak.[1]
These two opposite strategies highlight the fact that there exists a tradeoff between human lives and the economy in each country's fight against Covid-19.  Business shutdowns and social distancing measures can save lives, but they have negative impacts on the economy.  Shutting down businesses may have been deemed necessary, but the cost is obvious in terms of unemployment and lost GDP.  Moreover, it is not clear what is the optimal response.  This partly depends on how each country views the tradeoff between lives saved and economic loss.  It also depends on many currently unknown or uncertain features of the pandemic, such as the likelihood and speed at which a successful vaccine can be found and produced, and the likelihood and speed at which effective treatments of those infected can be found and disseminated among medical providers.  It also depends on characteristics of the virus itself, and on the staying power of its highly infectious nature. If Covid-19 were short-lived, like SARS and MERS in the past, or if a vaccine is available for mass immunization soon, then there is more agreement that putting the economy on hold for a short period of time to save lives is the better choice.  If the virus is long-lived and a vaccine will take multiple years to develop and produce, then decisions to put the economy on hold seem less attractive.  In this latter scenario many more people will eventually be infected prior to the availability of a vaccine, and many more of the vulnerable part of the population -- the old and sick -- will become infected.
The U.S. in general, and Texas in particular, have followed a strategy that is somewhere between that followed by China and that followed by Sweden.  However, there is a recent national trend that is shifting our strategy away from that of China and toward that of Sweden.  This is certainly true in Texas.   Beginning on May 1, Texas started a process of phased reopening.  Restaurants and nonessential retail shops were able to admit in-store customers with limits on the number of customers at any given time, initially at 25% capacity.  On May 18, Governor Abbott issued the order for the second-phase, expanded reopening. Childcare facilities can reopen, restaurants are able to open at 50% capacity, and bars, which had remained closed, can open at 25% capacity.  In addition, youth sports and other camps are allowed to open, and many professional sports can apply to the state to host events without spectators.
It is clear that Texas (and many other states) are adopting policies that make Texas much like Sweden; it appears that we have de facto adopted the Swedish approach.  Our ‘opening up’ is quickly adopting rules that mimic what have been the ‘rules’ in Sweden.  The big exception currently is that elementary schools are open in Sweden and will remain closed here, but in Texas the spring semester is essentially over at this point for public school students.  We will have to wait and see what the fall semester brings.  As for the virus, we have clearly decided to accept a continuation of daily cases as long as they are not exploding and threatening to overwhelm our hospitals. In support of his second-phase reopening order, Governor Abbott cited the increased testing capability and hospital capacities in Texas.  He also noted that, even though the daily new infections remain high, the infection rate of those tested has dropped to under 5% in recent days from its peak of 13% in mid-April. 

Figure 1. Daily New Cases in Texas

Figure 2. Daily New Cases in the U.S.

Although politicians will be loath to admit this, their decision to open up (and to de facto adopt the Swedish model) is due to the inescapable tradeoff between human lives and the economy.  The U.S. Department of Labor recently reported that, so far, a total of more than 35 million Americans have lost their jobs. The Federal Reserve's Jerome Powell also warned that the unemployment rate of 14.7% in April could eventually reach 20% to 25% in the days ahead, a level that has never been seen since the Great Depression.  Importantly, while Covid-19 kills, so does unemployment.  The negative health effects of unemployment -- including mental health -- have been widely documented.  This unsettling reality in the labor market, together with the recognition that Covid-19 does not appear to be disappearing any time soon, that hospitals have not been overrun, and that an effective generally available vaccine is likely to be 12 to 18 months away, has apparently tilted the decision makers against China’s model and in favor of Sweden’s.
Of course, one size does not fit all.  Countries will have different views on the acceptable tradeoff between economic harm and deaths from Covid-19, and hence may choose different mitigation strategies even if they agree on the nature of the virus and the prospect of the vaccine.  The strict Chinese approach was never going to be adopted in toto by the U.S.  Our concern for civil rights and our traditions are vastly different from those in China. Within nations, different geographic localities with different degrees of infection will likely choose different strategies.  Even within Texas, El Paso and Amarillo have been given more time in their reopening timetable because of recent flare-ups of new infections in those two cities.  Believers in individual freedom and in the market mechanism should be confident that, with more freedom at their disposal, individuals and businesses will come up with creative solutions for the problems rising up in the pandemic, to survive and prosper even in this period of crisis.
[1]Sweden did close universities and high schools.

Posted: May 27, 2020 by Dennis W. Jansen, Liqun Liu