Open letter to the federal government: "Saving the economy requires controlling the pandemic"

In the healthy scientific debate experts typically take different, even radically opposed, positions. The current discussion about a new lockdown in Switzerland to curb the second wave of the COVID-19 pandemic, however, sees a group of economists - from different fields and orientations - agree on the subject. Last week, an open letter to the Federal Government recommending a swift second lockdown was issued by around fifty Swiss-based academic economists from almost all Swiss universities, including professors from USI.

"There are several studies that show how the recession occurred because of the health crisis not because of the closures, but because this has led people to seek social distancing and therefore to give up all services that require personal contacts (such as hairdressers, restaurants, & gyms)", explains Prof. Giovanni Pica, from the USI Institute of Economics (IdEP), interviewed by the Corriere del Ticino. "In fact, the drop in demand has not improved after the easing of the measures, precisely because the collapse was and is due to the fear of contagions. Furthermore, it is also demonstrated that it is not true that countries that close have a greater collapse of GDP which means there is no trade-off between our health and the health of the economy’. Since the lockdown is not making the economy feel bad, the letter reads, the real choice would therefore be between a recession and many deaths or a recession and fewer deaths".

The arguments of the group of economists draws also from the empirical evidence so far found in scientific studies that have analysed the heterogeneous experiences of many countries, often in collaboration with experts in epidemiology. The recommendation made to the Federal Council for a second lockdown includes an important element in support of small and medium-sized enterprises, small entrepreneurs and the most vulnerable groups of workers. "Obviously, a strong fiscal policy intervention must be added to the lockdown", comments in the Corriere del Ticino article Francesco Franzoni, Full professor at the USI Institute of Finance (IFin). "And Switzerland is fortunate enough to be able to afford greater public debt".

On the subject of fiscal measures, the signatories of the letter believe that such measures seem "appropriate and sustainable", and that "targeted fiscal support could engender a virtuous circle whereby concerned households and businesses are given incentives to and thus become more likely to accept the extra restrictions".

But, as in any healthy scientific debate, there are also those who beg to differ, as USI professor Giovanni Barone Adesi points out in the Corriere del Ticino article: "services contribute to 70% of GDP, it is absurd to say that a second lockdown would not hurt the economy. So much so that all governments are worried about the possible consequences. More serious containment measures are probably needed now, but speaking of a generalised lockdown does not reflect the different situations in Switzerland. [...] Instead, I fully agree with the fact that this is not the time to save: the Confederation must give strong support to the economic fabric in this moment of crisis".