Sunday, April 26, 2020
Lockdowns are different, and getting out of them is the hard part
Posted by David Smith at 09:00 AM
Category: David Smith's other articles

My regular column is available to subscribers on This is an excerpt.

A pandemic which originated in the Far East is sweeping across the country, leading to many thousands of deaths and putting the National Health Service under intense pressure. Aspects of normal life are significantly interrupted. The fear among experts is of a second wave even deadlier than the first.

I am not, for once, talking about the current coronavirus pandemic, which I shall come on to shortly, but about an earlier one, employing the technique used by the very good Radio 4 programme The Long View. This is the pandemic that affected Britain half a century ago, Hong Kong flu, and I have become a little obsessed with it.

Hong Kong flu hit Britain in two waves, the winters of 1968-9 and 1969-70. It caused some 80,000 deaths in those two waves, according to estimates in the government’s recent coronavirus action plan, out of what the World Health Organisation says was up to four million deaths worldwide.

It did have an impact. Nicholas Timmins, chronicler of the welfare state in his excellent book The Five Giants, recalls some of that impact on the website of the King’s Fund, the health think tank.

“For a briefish period, everything stopped for tea, so to speak, “ he writes. “There was no email in those days, and much of the post stopped being delivered, or was very late. The milk – almost all of it delivered to the door in glass bottles – stopped arriving. Trains and buses ran to heavily reduced timetables: not because of the sorts of decisions being taken now, but because drivers had the flu. Clinical staff, of course, also caught it, and for a period the NHS was overwhelmed.”

Hong Kong flu was serious. Ed Conway, Sky’s economics editor, who has been diligently tracking death tolls from the coronavirus in Britain and elsewhere, a few days ago highlighted a new dataset from the Office for National Statistics, providing weekly death tolls from the beginning of 1970.

The biggest weekly death toll in the period, bigger than has been experienced so far in this coronavirus crisis, was in the first week of 1970, with the second week not too far behind. This was during the deadlier second wave of the Hong Kong flu pandemic, when more deaths occurred than during the first.

I too lived through the Hong Kong flu pandemic and have written about the economics of the period extensively in books. One striking thing, however, in comparison with what we are currently going through, is that a public health emergency did not also become an economic emergency. Unless we all missed it, the government did not even contemplate a lockdown. Sporting fixtures, with spectators crowded onto terraces, continued.

The economic preoccupations in the 1968-70 period were the aftermath of the November 1967 devaluation of sterling - an economically necessary humiliation for Harold Wilson’s Labour government – and that government’s battles with the unions, which included Barbara Castle’s In Place of Strife proposals to limit their power.

The economy grew by a strong 5.5% in 1968, boosted by devaluation, slowed to 1.9% in 1969 as the government imposed post-devaluation austerity measures, but picked up to 2.7% in 1970. Growth over the three-year period exceeded its long-run average.

In his King’s Fund piece. Timmins rightly draws the contrast between flu and Covid19, which appears to be both more transmissible and result in a higher proportion of severe respiratory problems.

It is nevertheless worth asking the question about the response we have seen, and how lockdowns became the international norm, in a way we have not seen before.

Even a decade or so ago, in 2009, when Simon Wren-Lewis and Marcus Keogh-Brown wrote their paper, ‘The possible macroeconomic impact on the UK of an influenza pandemic’, they saw the main negative impact on the economy through the impact of school closures, though also through a reduction in “social consumption”, pubs, restaurants, hairdressers and so on, as people sought to reduce social interaction to minimise their chances of catching it.

That same year, 2009, when the swine flu pandemic hit, there was no question of a lockdown, though there was a rush to spend a lot of money acquiring doses of vaccine.

When China introduced its lockdown in Wuhan province in January, it initially seemed like something that only an authoritarian regime could do. Even when the lockdowns spread, including to countries like Italy, there was an element of “it could never happen here”.

But it has. Covid19 is not flu and perhaps for this reason earlier pandemics do not provide much of a template. But, while Hong Kong flu barely registered as an economic event, this one clearly has, with a bigger recession this year than during the global financial crisis, and possible since 2009. A new forecast from the EY Item Club, using the Treasury’s model of the economy, says that the economy will not get back to 2019 levels of gross domestic product until 2023.

The purchasing managers’ survey and the CBI’s industrial trends showed an economy pounded by the coronavirus lockdown. The Treasury and the Debt Management Office revealed the mountain of government borrowing that will be required to deal with the crisis, with £382bn of gilt issuance over the next 12 months, £225bn of it over the April-July period. The longer the lockdown persists, the more that mountain will grow.

The government, while its response to the crisis was slow and uneven, and lacked focused leadership, lurched from complacency to lockdown. It ended up in the same place as other countries, and this is not to criticise ministers for eventually putting public health first, almost whatever the cost.

Its approach, however, may have had unintended consequences. The lurch into lockdown successfully put the fear of God into people, as do the daily news reports from intensive care units. But it also went further than intended. Some of the businesses which have announced that they will be recommencing operations next month, such as DIY chains and building sites for new houses, were never required to close under government guidance and rules.

The Treasury’s coronavirus schemes have so far had a decidedly mixed record, particularly the business interruption loans, but some aspects of them, such as the job retention scheme which provided 80% of normal pay for furloughed staff, may have encouraged a bigger shutdown than would have occurred, while rightly trying to save as many jobs as possible.

There is also tentative evidence that the peak in deaths and new infections, which appears to have happened around April 8, came before the effects of the lockdown, and reflected the voluntary social distancing that happened before it.

The trouble with lockdowns, as we will see, is that though it is a huge step for any government to impose them, it is even harder to get out of them. The only thing that has changed so far is that the fear of the NHS being overwhelmed in this wave has diminished. It is why the task of weaning the country off it will be a delicate one.

There are plenty of good ideas around, some of which are being studied in Whitehall, such as the “traffic light” system proposed by the economists Gerard Lyons and Paul Ormerod. In the “red” phase starting next month, small and local shops would re-open, while maintaining safe social distancing, while schools would be allowed to open, at their discretion, for pupils at a vital stage f their education, for example Year 10 and 12. The amber phase would see all schools reopen and unlimited private car journeys, but masks required on public transport. The green phase, which they say could be as early as mid-June, would see a return to normal
It is a plan, though the timetable looks very ambitious, particularly in the light of the chief medical officer’s observation that significant social distancing measures will have to remain in place all year, and the government’s reluctance to go against scientific advice. We have never seen anything like this lockdown, or its economic effects, before. We may have to live with it for a time yet.