# The Price of Dying, the Cost of Living

20 NOVEMBER 2020

Life - or saving a life - cannot be a choice based on numbers.

Saving a life defines our humane and civilised society which is why many demand the abolishment of the death penalty: the argument being that a human cannot decide to take the life of another human. That judgement is left to god and to nature.

Faced with the virus that originated in China, policy makers all over the world have - whether they like or not, whether knowingly or unknowingly - taken on the role of playing god.

The actions of federal and state governments have decided whether the citizens of the countries and regions they govern:

• Can suffer a lockdown and stay alive at the cost of surrendering some incomes and freedoms in exchange for life, or
• Focus on incomes and economic well-being as the primary objective - with the probability of life, death and illness being by-products of the monetary-focused decisions.

Take the case of the USA. The estimated loss due to COVID is about 5% of GDP. That works out a loss of USD 1,170 billion. There were 241,873 deaths as of November 6. In earlier press briefings the team of medical advisors had indicated that deaths could be 2.5 million if no restrictions were put in place and the infected citizens kept landing up at hospitals. For simplicity, let's assume a factor of 10 x more expected deaths than reported deaths if the US economy was not shut down due to COVID.

This means that the USA would have had 2,418,730 additional deaths by now. This leads to a mathematical equation. The cost to the economy per assumed death of 2.4 million is = the loss in GDP in USA due to the lockdown, divided by the assumed deaths = US\$ 483,725. The per capita annual income in the USA is about US\$ 59,939. This suggests that the USA, as a country, "spent" 8 x more on a person who would have died if there was no lockdown than what the annual earnings are of a typical American in one year.

For India, the numbers are harsher. The estimated loss due to COVID is about 10% of GDP. That works out a loss of USD 265 billion. There were 125,605 deaths as of November 6. Given the higher density of Indian cities and family life - and poor medical facilities - it is possible that deaths in India could have been over 20 x what they were. This suggests that there would have been a total of 2.5 million deaths if no restrictions and lockdown were put in place to fight COVID and if the infected kept landing up at hospitals.

The cost to the economy per assumed death of 2.5 million is = the loss in GDP due to the lockdown, divided by the assumed deaths = US\$ 105,489. The per capita annual income in the India is about US\$ 1,980. This suggests that India as a country "spent" 53 x more on saving the life of a person who could have died if there was no lockdown than what the annual earnings are of a typical Indian in one year.

#### Table 1: Saving lives, surrendering livelihoods

COUNTRY EST
LOSS IN GDP, US\$ BILLION
DEATHS FROM COVID, Nov 6, 2020 IF NO LOCKDOWN, LIKELY DEATHS,
Assumption
POTENTIAL EXTRA DEATHS COST TO ECONOMY PER ASSUMED DEATH, US\$ GDP PER CAPITA, US\$ DEATH / LIVING
RATIO
USA 1,170 241,873 10 2,418,730 483,725 59,939 8
BRAZIL 204 162,015 10 1,620,150 125,914 9,881 13
INDIA 265 125,605 20 2,512,100 105,489 1,980 53
UK 182 48,475 10 484,750 375,451 39,532 9
ITALY 175 40,638 10 406,380 429,647 32,038 13
FRANCE 181 39,865 10 398,650 453,029 39,827 11
SPAIN 105 38,833 10 388,330 269,874 28,175 10
BELGIUM 40 12,520 10 125,200 319,489 47,603 7
GERMANY 259 11,364 10 113,640 2,279,127 44,680 51
CANADA 82 10,425 10 104,250 786,571 44,841 18
NETHERLAND 73 7,887 10 78,870 927,095 53,024 17
SWEDEN 22 6,022 5 30,110 738,625 54,608 14
SWITZERLAND 38 2,710 10 27,100 1,383,764 82,796 17
TOTAL, AVG 2,757 748,232 8,708,260 316,637 41,456 8
CHINA 123 4,634 20 92,680 1,327,147 8,612 154
JAPAN 245 1,806 20 36,120 6,782,946 38,214 177
SOUTH KOREA 31 476 20 9,520 3,214,286 29,958 107
RUSSIA 157 29,887 10 298,870 525,312 10,846 48
TOTAL, AVG 3,313 785,035 9,145,450 362,252 36,856 10
Sources: Worldometer, Wikipedia

Democracy and Discipline.

The data also suggests some patterns. Countries with open societies and more freedom-oriented populations had a lower Death / Living ratio. The openness (and indiscipline) made more people vulnerable - hence, so many more died.

The approximate average for the first set of countries is 8: the loss in GDP per assumed death in a "no lockdown" scenario was 8 x the per capita income.

India and Germany have been exceptions for different reasons amongst those peers. Germans are more disciplined and the death rate was far lower than other European countries - so the cost of lost GDP is spread over fewer deaths.

In India's case the loss to GDP is expected to be large at 10% of GDP. Though the assumed deaths are high, because the per capita income is very low in India, the death/living GDP ratio is skewed.

But slip to the lower portion of the table and see the pain - and success - of the more disciplined countries like China, Japan, South Korea and Russia. These economies took it on the chin. They went in for harsh and long lockdowns - and wearing a mask was compulsory. This cost them a lot of GDP. It resulted in fewer deaths so their GDP per assumed death was high. And the Death / Living ratio was very high: over 2 x that of India.

India took it on the chin - but not as hard as the other Asian countries.

The controversial Swedish experiment.

Sweden, highlighted in yellow in Table 1 above, took a very different approach. Sweden never had any lockdown though it did limit the number of people in a gathering to less than 50, closed schools and universities for those over the age of 16 for three months, and suggested that people work from home. Bars and restaurants remained open thought people were expected to maintain social distancing. The Swedish government's epidemiologist, Anders Tegnell, view was: "Yes, we can all get into a lockdown, but what is the path for emerging from a lockdown?"

Sweden did not have an outlandish number of deaths in absolute terms but, per 1 million of population it was 626 while Germany had 182, Switzerland 441, Italy 791, UK 793 and Spain had 899. A mixed outcome: not as good as Germany's control of death rates (but note Germany's 51 x Death / Living ratio) but far better than the Italy, UK and Spain. The benefits to a society that was allowed to roam relatively freely are not factored in. The costs to the family of those who died (and may have been saved if there was a lockdown) are immeasurable. Playing god can have unintended consequences.

What next?

On a personal level, there is much to cheer, given the good news that the vaccine is not far off.

The bad news is that it may take a few years for a few billion people on the planet to get vaccinated.

Though I am a "at risk" person, my personal rule on taking the vaccination is likely to be:

1. Let those who created it - and their family members - take it first,
2. Let those who approve it - and their family members - take it next;
3. Let those legislators and government officials who endorse it - and their family members - take it next.

After that list is run through, I will have more faith that these new set of vaccines - which have jumped from lab to limb in 10 months - are as safe as vaccines which normally take 10 years to be ready for market.

On the broader front, COVID is still around. The numbers may not be reflecting it, but I know of more people who have COVID today than before. Some of it may be the natural phenomena of the spread: as more people get it every day, inevitably you know someone who has it. A part of it may be a desire to test less as has been reported in some media.

Given the long lead time to vaccinate billions of people, the economies of the world will keep on sputtering in fits of start / stop - like a car which has some petrol still left in it.

Every halt of the economy will lead to the uncomfortable debate of saving the at-risk-of-dying at the cost of killing the income of the living. Every lockdown or restriction will help someone live - but will hurt someone's income. The "Swedish experiment" will continue drawing attention from believers and dis-believers.

In India the data suggests that it cost USD 105,489 per person to prevent more people from dying - which is 53x what the average living Indian earns every year. One life saved; 53 people's livelihoods at risk.

The stock markets are running on fuelled expectations.

Policy makers, world over, will have 2 very different choices:

1. More restrictions on economic activity to control deaths,
2. Let the economy run and those who die, well...

The stock markets prefer economies running on a full tank of petrol with the foot pressed hard on the accelerator.

Let's see whether policy makers focus on preventing deaths and hit the brakes of an economic revival - or press on the accelerator and focus on growth.

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Disclaimer: The Honest Truth is authored by Ajit Dayal. Ajit is Founder of Quantum Advisors Pvt. Ltd. which is the Sponsor of Quantum Asset Management Company Pvt. Ltd – the Investment Manager of the Quantum Mutual Funds. Ajit is also the Founder of Quantum Information Services which owns Equitymaster and PersonalFN. The views mentioned herein are that of the author only and not of Quantum Advisors, Quantum AMC or Equitymaster. The information provided herein is compiled on the basis of publicly available information, internally developed data and other sources believed to be reliable by the author. The information is meant for general reading purpose only and is not meant to serve as a professional guide / investment advice for the readers. Readers are advised to seek independent professional advice and arrive at an informed investment decision before making any investment. Whilst no specific action has been suggested or offered based upon the information provided herein, due care has been taken to endeavour that the facts are correct, accurate and reasonable as on date. None of the Author, Quantum Advisors, Quantum AMC, Equitymaster, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in The Honest Truth.

2 Responses to "The Price of Dying, the Cost of Living"

N M R Shreedhar

Dec 3, 2020

Interesting read - IMO, when the lockdown was imposed ,nobody could've foreseen the consequences of imposing/ not imposing — in fact most of us under-estimated the seriousness, so at that point the decision was correct — the initial lockdown decision seemed to be correct, but whether subsequent lockdown extensions were justified is a matter of debate — in Sweden itself there were several eminent economists advocating a lockdown , which Sweden did impose partially later. So, now it appears that maintaining GDP has become more important than saving lives —by this logic whatever be the price to be paid, GDP growth and economic progress should be pro-actively maintained and perhaps increased —— the modern version of survival of the fittest !!!

Like (1)

Ramesh B

Nov 20, 2020

of late, writing on serious issues! kudos! very interesting!
welcome change of path! more insights!