Home > Uncategorized > The delta variant is scary, but it won’t sink the economy

The delta variant is scary, but it won’t sink the economy

from Dean Baker

In recent days, major fear has been evident in financial markets and elsewhere that the delta variant of the coronavirus will spread widely and be a considerable impediment to continued economic growth: On Monday, the Dow tumbled 700 points, for example.

At least based on trends we’ve seen so far, these fears appear to be unfounded.

It is highly unlikely that the delta variant will lead to shutdowns of major sectors of the economy, of the sort we saw last spring and summer. The basic story is that in the states where the variant is causing the most infections and deaths, governors and other public officials are resistant to taking steps to contain the pandemic, especially if they carry an economic cost. So most economic enterprises will continue to do business, if not always at full capacity.

These states may face a public-health crisis but probably not an economic one. Meanwhile, the states where political leaders have been more responsive to public health concerns have far higher vaccination rates, and therefore the delta variant is not likely to pose a major health threat. Businesses therefore will continue to operate at a brisk pace.

We should expect this strong growth to continue (although the 7.6 percent rate is higher than we can expect to be sustained). The increased spread of the pandemic due to delta variant may shave a few tenths of a percentage point off our growth path, but it will not reverse it.

Before looking at the economics more closely, it is worth getting some perspective on the health risk posed by the delta variant, because public health and economics intersect. I am an economist, not an epidemiologist — and much is still subject to debate among the epidemiological experts — but it seems clear that a vaccinated population faces relatively little risk, even from delta.

Israel is often cited as a country where the delta variant has taken over rapidly — which is true, as a proportion of cases. But the death rates there remain nothing like they were at the pandemic’s peak, last winter. While cases have risen from essentially zero per 100,000 citizens in early June to roughly 10 per 100,000 citizens this week, death rates remain low: This week, that rate was .01 to .03 per 100,000, compared with more than 1 death per 100,000 people in mid-January. That’s partly because 60 percent of the population is fully vaccinated.

There is a similar story in Britain, where the delta variant has led to an explosion of cases but a limited uptick in deaths. The country reported .01 deaths per 100,000 citizens on Tuesday, compared with more than 2.5 deaths per 100,000 at the January peak. There is a lag between infections and deaths, so the full picture on deaths may not yet be evident, but vaccines weaken the link between cases and deaths; even when vaccinated people become infected, they rarely get seriously ill or die.

Currently, roughly 250 people are dying in the United States of covid daily — a figure that’s up significantly from two weeks ago. But while there is a huge range of uncertainty, we will almost certainly not see anything like the disaster in January, when we had close to 3,500 deaths a day. We probably will not even see a picture anywhere near as bad as last August, when deaths hit almost 1,200 a day at their peak.

And again, regional disparities are important as we attempt to grasp the economic situation. States such as Vermont and Massachusetts, where more than 80 percent of the population over 18 has received at least one dose, are seeing relatively few infections and deaths. Massachusetts, with a population of 6.9 million, has been averaging just three deaths a day from the pandemic. Each death is a tragedy, but such rates are unlikely to interfere with the state’s economic rebound.

By contrast, states such as Alabama and Louisiana, where just over 50 percent of the adult population has gotten at least one vaccine dose, are seeing cases soar and deaths climb. Alabama, with a population of 4.9 million, has been averaging five deaths a day, almost double the rate in Massachusetts. Louisiana, with a population of 4.6 million, has been averaging nine a day, roughly three times the Massachusetts rate.

Even without government action — restrictions on capacity and the like, which seem unlikely in the low vaccination states — there will be some economic hit, as people with serious immune issues, or other reasons to fear the pandemic, will avoid going to restaurants and other public places. But this is not going to have a large impact on the economy. Such people constitute a relatively small segment of the population, and such expenses represent a relatively small share of their normal spending. (Rationally, more unvaccinated people should be curtailing some of their activities, to protect themselves. But we are talking about what they are likely to do, not about what they ought to do.)

And of course, there are states that fall between the extremes of Vermont and Louisiana. In New York, for example, the proportion of fully vaccinated adults is 67 percent, with large variations across the state. It is very plausible that, if infection rates grow, New York state or New York City would impose restrictions on some activities such as indoor dining — although even in these cases, we are probably talking about limiting seating, not complete bans. The same could hold for theater and other activities involving indoor crowds. This will pinch parts of the New York economy, but restrictions on theater capacity will have little effect on the national economy.

In short, we have gotten lucky with the delta variant. It seems that our vaccines are largely effective in preventing death and serious illness — which makes a world of difference where the economy is concerned. The unvaccinated population is at greater risk, which is a huge public health issue, but the political leadership in the states where they are concentrated is not likely to take major steps to contain the pandemic — steps that would also hurt the economy.

There is, however, a hugely important point that we should all recognize. While our vaccines may be effective against the delta variant, the more the pandemic is allowed to spread around the world, the greater the risk that we will see a new variant against which they are not effective. That would lead to a whole new round of disease, death and economic shutdowns. Then economic pessimism would be warranted.

We should be mounting a World-War-II-scale, all-out effort to get the world vaccinated as quickly as possible. The humanitarian case for such an effort is overwhelming, but the case is compelling even on narrow self-interested grounds. If we fail to act, and a new strain forces another round of shutdowns, we would have only ourselves to blame for the economic calamity.

  1. July 27, 2021 at 2:42 am

    This is a great article but for me the idea of economic growth is acceleration to extinction and Covid-19 is just a pandemic. Of course capitalist countries should be vaccinating everyone in the world who wants it, but that’s not capitalism. War games around the world are capitalism. Making sure people are healthy is socialism.

    British Columbia is an example; about 6% of temperate rainforest is left and that is being rapidly pelletized into green growth energy while people with good intentions have meetings.

    • John Jensen
      July 27, 2021 at 3:35 pm

      Garrett: You have a pretty narrow view of both Capitalism and Socialism but I’m not sure how that is related to 6% of Temperate forests left in BC. I say that because we both know that the majority owners of those forests are the BC Government, which = socialism. I was obviously surprised at you 6% figure so I googled it and came up with this: “the whole temperate rainforest region on the coast of BC covers about 15 million hectares, with about 10 million covered in forests, the remainder is largely non-forested alpine areas, and freshwater lakes, wetlands and rivers.” I see that as 66% left. So apparently, you also have a distorted view of Temperate Forests in B.C. You say that “Covid-19 is just a pandemic” but a lot of people are dying of it as you say this so your entire comment is factually incorrect and pretty confusing. What did you really mean to say?

  2. July 27, 2021 at 2:49 am

    Covid: new vaccines needed globally within a year, say scientists
    https://www.theguardian.com/world/2021/mar/30/new-covid-vaccines-needed-within-year-say-scientists

    “The urgency we see in rich nations to vaccinate their populations, aiming for all adults by the summer, is simply not reflected globally. Instead, we have Covax aiming for perhaps 27% by the end of the year if we possibly can manage it – that is simply not good enough,” said Max Lawson, head of inequality policy at Oxfam and the chair of the People’s Vaccine Alliance, which is calling Covid-19 vaccine developers to openly share their technology and intellectual property to boost production.

    “Where is the ambitious global goal? A goal that the science tells us is needed?’ I think that’s the key point – we just don’t see the ambition that would go along with it, widespread recognition that limited vaccination is quite dangerous.”

  3. John Hermann
    July 27, 2021 at 5:58 am

    The problem with this analysis is the implied belief that we can (or should) resume economic growth (“…the coronavirus will spread widely and be a considerable impediment to continued economic growth, …”). By which I presume Dean means GDP growth.

  4. Ikonoclast
    July 27, 2021 at 11:28 am

    The last two paragraphs are correct. And since we are most patently NOT mounting an all-out effort to get the world vaccinated then its conclusion follows. New and worse strains are certain. There will very likely be a full-blown global social, economic and geopolitical crisis within this decade.

  5. Meta Capitalism
    July 27, 2021 at 11:56 pm

    Radical Uncertainty

    I am not so sure your confidence in the delta variant remaining the only variant of concern is warrented. With the politicization of vaccinations and mask wearing the future state of variants becomes radically uncertain except of course for the certainty of mutation.

    https://www.msn.com/en-us/health/medical/cdc-the-coronavirus-could-be-just-a-few-mutations-away-from-evading-vaccines/ar-AAMCU1O?ocid=mmx&PC=EMMX20

  6. Ikonoclast
    July 28, 2021 at 1:39 am

    To expand on my previous post, we are seeing nothing less here than the final failure of capitalism, specifically in the confluence of climate change as dangerous anthropogenic global warming) and novel zoonotic disease pandemics of which COVID-19 is the newest and worst. Capitalism has been failing, is failing and will continue to fail to deal with these crises. This is so long as extensive capitalism, market fundamentalism and corporate globalization continue.

    It has been said: “It is easier to imagine the end of the world than the end of capitalism.” But we don’t need to imagine either any more. Both processes have begun and will continue to the complete destruction of both; the world as a livable environment and extant political economy as a livable “nomos-space”.

    This will occur with near 100% certainty unless people rebel (in various possible ways) against fundamentalist capitalism and all of its prescriptions. A revolutionary overthrow of capitalism might save us. I emphasize might. It might already be too late with too much damage having been done to the carrying capacity of the earth and all its systems. Humans might also not be capable of the levels of genuine reason and morality necessary to chart such a path; at least not after having become so intellectually and morally debased by capitalism. The way back may be too far. Socialism or barbarism await us, perhaps even near-term extinction.

  7. Econoclast
    July 29, 2021 at 8:13 pm

    I write in response to some of the comments posted here. I agree completely with Garrett Connelly and Ikonoclast.

    “Making sure people are healthy” is a “narrow view of socialism”? Wow! I’ll simply quote my brother Bob on this: “socialism is that radical view of sharing”.

    Capitalism and its self-justifying economic ideology, neoclassical, cannot, by design, deal with either human or environmental problems. The ideology intentionally omits humans, social groups, and the environment from its seductive equations. So, in this ideology, health care, public health, and pandemics do not happen. That’s my “narrow” view.

    Lately I’ve been interested in an old phrase, attributed (without evidence) to Vladimir Lenin: “useful idiot”, defined in The Oxford as “a derogatory term for a person perceived as propagandizing for a cause without fully comprehending the cause’s goals, and who is cynically used by the cause’s leaders.” The phrase certainly applies to those who embrace Ayn Rand libertarianism and neoliberalism. Perhaps we are finding some in this blog.

  8. Ken Zimmerman
    July 30, 2021 at 11:22 am

    Dean, I must disagree. The wild card in this is vaccination levels. If the current level of vaccinations does not improve, particularly in the regions where the delta variant is most common, the health care institutions in these and adjacent regions may collapse. With this event, other economic sectors may shutdown. Voila, general economic slow down or perhaps even collapse,

  9. Ikonoclast
    July 31, 2021 at 12:05 am

    I consider that the world faces serious further dangers from the COVID-19 pandemic. These dangers are so great that in the future, and looking back, we will probably view the first two years of the COVID-19 pandemic 2020/21 as a mere prelude to the truly terrible years. Why do I say this?

    Part of it has to do with the link Meta Capitalism posted and which ends:

    “Virologists call variations of a virus that slip past the immune defenses we’ve built “escape mutants.” If the virus continues to spread and mutate rapidly, such escape mutants could be around the corner, Ravindra Gupta, a microbiology professor at the University of Cambridge, previously told Insider.

    “Full vaccine escape viruses, we’re not necessarily that far away from them,” he said.” – Business Insider.

    This suggests that COVID-19 (SARSCov2) vaccine escape variants are likely, though not certain, to be a significant part of our future for several years to come at least. Vaccine technology will be playing catch-up in that case. Each COVID-19 season or major wave will be like each new influenza season with a new, dangerous flu. New vaccine escape variants will require new boosters, which because of the catch-up nature of the “game” will always a bit behind. New variants will catch and kill new victims before vaccine technology can catch up.

    There is even more to be concerned about. New studies suggest that even 80% vaccination rates will not be sufficient to stop new major outbreaks. Indeed, a New Zealand study suggests a vaccination rate of 97% would be necessary to stop the delta variant without any other public health measures. This is both because of the danger of new variants and because the delta variant has already escaped the current vaccines.

    “Recent Public Health England analyses found that two doses of Pfizer’s vaccine were 88% effective at preventing symptomatic COVID-19 from Delta, while a single shot was just 33% effective. That’s compared to 95% efficacy against the original strain, with 52% after one shot.” – Business Insider.

    These are still good results and will save a lot of lives but it is not good enough to stop new wave (continuing pandemic) and further deaths. Nor is it good enough to stop further mutations.

    Beyond this there is still a further danger to global security, human health and economies. Paradoxically, those few developed or semi-developed nations which had great success in avoiding large early waves (Australia and China come to mind) are now prisoners of their own success. Theey continue to have very “COVID naive” populations immunologically speaking. This makes them very vulnerable in a world where COVID-19 is mostly pandemic and endemic. In Australia, this vulnerability is mediated by a very poor vaccine rollout for a developed country. Australia has only 18% of people vaccinated with two doses and most of these are withAstraZeneca which isn’t quite as efficacious as Pfizer anyway. China has 40% of citizens fully vaccinated against COVID-19 but thier vaccines

    Indeed, it looks the Chinese vaccines, Sinopharm, Sinovac are considerabklt less effective in preventing symptomatic disease, hospitalisation and death. It’s hard to find figures. The Chinese authorities are certainly not forthcoming.

    “In Brazilian trials, Sinovac had about 50% efficacy against symptomatic Covid-19, and (a claimed) 100% effectiveness against severe disease, according to trial data submitted to the WHO. Sinopharm’s efficacy for both symptomatic and hospitalized disease was estimated at 79%, according to the WHO.” – CNN.

    Claims of 100% against severe disease, and by implication against death are simply not credible.

    “The rise of severe cases in inoculated medical workers (in Indonesia) has raised questions about the China-produced Sinovac jab, which Indonesia is heavily relying on to vaccinate more than 180 million people by early next year.” – Business Insider.

    Fourteen fully vaccinated health workers (vaccinated with Sinovac) have died in Indonesia.

    China and Australia continue to be vulnerable to outbreaks, If delta outbreaks get going in either country (and one is starting up in Sydney right now) then these countries could suffer large and very damaging outbreaks. Australia is relatively irrelevant to the global economy except for providing some net food exports to the world (about enough to feed 50 million people over and above Australia’s 25 million population and for providing iron ore to China and coal to some other Asian nations. Much as it might hurt Aussie pride (and I am an Aussie) we really are of little importance to the global economy.

    China is another matter entirely. If China has a delta or delta plus outbreak etc., the geopolitical and economics consequences will be severe from global depression to regional wars… or worse. The CCP (Communist Party of China) bases its legitimacy and the support from its people on delivering a continuing economic miracle and rapid growth putting its economy (already) well ahead of its main competitor, the USA. If all this falters under a large COVID-19 pandemic in China, then as stated above the economic and geopolitical consequences could be somewhere dire to catastrophic. I think the world is in extreme trouble. Add in climate change (witness the global fires at the moment) and the global outlook becomes apocalyptic or as some term it, an anthropocalypse.

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