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CLOSED FOR BUSINESS

Shutting down the economy during a pandemic may be the best way to protect the economy

A closed deli.
Reuters/Stephen Yang
An economy-wrecking pandemic does not encourage business creation.
  • John Detrixhe
By John Detrixhe

Future of finance reporter

As the coronavirus pandemic intensifies, concerns are growing about the economic toll exacted by policies meant to contain it. Research published this week shows that aggressive social distancing measures, while extremely disruptive to commerce in the near term, can result in faster economic growth when the disease subsides.

More than 670,000 people around the world have been infected with the novel coronavirus, and nearly 32,000 of them have died, according to data compiled by Johns Hopkins University. To save lives and slow the spread of Covid-19, a growing number of countries have resorted to lockdowns that are driving millions into unemployment and threatening a wave of bankruptcies. Wealthy countries have committed to spend and lend more than $4 trillion to try to protect their workers and industries from the fallout.

The economic price of widespread quarantines and business closures may be lower than the alternative, according to the research from economists at the US Federal Reserve and MIT, titled “Pandemics Depress the Economy, Public Health Interventions Do Not: Evidence from the 1918 Flu.”

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