COVID-19: Learning From Bitter Political Experience?

Ryan Bourne

Why did some countries deal with COVID-19 better than others?

Books, academic journal articles, and PhD dissertations will be written on that subject, with analysis having to contend with a vast array of country‐​specific variables that could, conceivably, have affected public health outcomes. But public choice economics offers up one underexplored way to think about the quality of responses: as driven by political incentives.

Despite claims by economists such as Mariana Mazzucato that governments are forward‐​looking, there’s a good reason to suspect they will be ill‐​prepared when it comes to low‐​probability, high‐​risk events such as pandemics.

In part, this can be explained by electoral incentives. A classic paper by Neil Malhotra and Andrew Healy analyzed how voters responded to politicians handling natural disasters, such as hurricanes, earthquakes, and tornadoes. They found that spending on disaster prevention was highly cost‐​effective, often returning payoffs of 15‐​to‐​1. Yet when voters cast their ballots in presidential elections, candidates engaging in that type of spending saw no electoral benefit.

Increases in relief spending in reaction to disasters, on the other hand, significantly increased the incumbents’ vote share. Voters tend to reward those who react to crises by dishing out relief, in other words, but do not react to those who prevent the worst outcomes from crises by preparing. No wonder we’ve seen so much focus on checks during this pandemic.

This is, perhaps, unsurprising. Preparation or improving regulatory frameworks for emergencies is largely unobservable to the ordinary voter, especially if it is not utilized because a crisis does not actually occur. Even hearing about preparation or reform provides voters with little information about how effective it would be when the next crisis hits, so there is likely little political benefit from it. In fact, given how infrequent these types of crises are, politicians may find that their preparatory work actually ends up benefiting those who come long after them.

There are therefore strong electoral incentives that point toward spending money and political capital on observable, day‐​to‐​day government programs or transfers, and then providing extensive and rapid relief when crises do hit. As Malhotra concludes, it is perfectly rational for politicians to “kick the can down the road” because that is what, on most occasions, is in their electoral interests.

But if electoral incentives can partially explain why governments might generally underprepare for such unusual events, then how do we explain why some countries, such as South Korea, performed much better?

In my forthcoming book, Economics In One Virus, I posit that when a threat or crisis *does* emerge, the political incentives for many voters flip. The threat of a pandemic becomes salient in electoral terms in a way that it wasn’t before. Dalliance with a viral outbreak tends to change the public’s risk appetite for that type of threat. That brings with it the strong political incentive to ensure similar threats are mitigated against in future. It becomes politically popular to be ready to fight the last war.

Importantly, South Korea suffered a similar and credible threat of an infectious disease in the form of MERS as recently as 2015. The government at the time was heavily criticized for how it handled that outbreak, including for failures on testing and a lack of transparency in regard to the spread of the infection. The leader of South Korea’s opposition harshly criticized the administration, saying that the government had lost the people’s trust. That critic is now the president of South Korea, Moon Jae‐​in. In response, the country completely rewrote its infectious disease prevention legislation. Politicians reacted in part because there was a political imperative to do so.

The crisis was a short enough time ago that it was still a pertinent political issue in 2020. As a result, Korea was ready when this crisis hit: the country swiftly implemented smarter “containment” policies that focused on monitoring international arrivals, temporary school closures, a permissive regulatory approach to testing, screening, and use of contact tracing, self‐​quarantines incentivized via fines and support, and extensive public health guidance on mask wearing and social distancing. Crucially, this quicker action obviated the need or demand for the cruder, more destructive stay‐​at‐​home orders and business closures used in many Western countries.

Some of Korea’s policies, particularly the contact tracing efforts, would be anathema to libertarians on civil liberties grounds. But, overall, who has seen more liberty this past year, South Koreans or Americans? Since April 2020, at least, the Oxford Stringency Index for government COVID-19 restrictions has been consistently higher in the United States than South Korea.

While public policies clearly do not drive all outcomes, the headline results are striking: South Korea has seen 34 COVID-19 deaths per million population; the US has seen 1,700 deaths per million. South Korea currently has an unemployment rate of 4.9 percent, with it being much lower than this for most of the past year; here the unemployment rate is currently 6.2 percent, having been as high as 14.8 percent last year.

By cherry‐​picking two countries, of course, we can prove just about anything. But in a new paper published in the Centre for Economic Policy Research’s COVID Economics series, economists Alexandra Fotiou and Andresa Lagerborg test the thesis that past run‐​ins with viral outbreaks of SARS in 2003 and MERS led to better COVID-19 performance.

Their results suggest they did: these countries (a list which includes Taiwan, Singapore, Vietnam, Canada, and Hong Kong, as well as South Korea) tended to enact a much faster response with targeted closures or screening at high risk venues, including airports, and were more likely to embrace testing and guidance, rather than crude lockdowns. Overall, as a result of early action and better targeting, they enjoyed less restrictive measures on people’s lives for 2020 overall. As a result, past experience with these threats is significantly associated with lower Covid‐​19 deaths per capita and higher real GDP growth in 2020, results that are robust to controlling for the age of the population.

There are likely all sorts of other country‐​specific factors that these economists might be missing. But so far in discussing “why did we fail?” we tend to overfocus on individuals and particular decisions, while underfocusing on the electoral incentives politicians faced over long periods of time.

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For much more on the economics of the pandemic, you can pre‐​order my book Economics In One Virus on your country’s Amazon store.

Source: https://www.cato.org/blog/covid-19-learning-bitter-political-experience