CME: EMCO WILL COMPROMISE THE FUTURE OF THE COUNTRY
THURSDAY, 01 July 2021: The Center for Market Education (CME) is highly concerned with the announcement of an Enhanced Movement Control Order (EMCO) in many areas in Kuala Lumpur and Selangor. It has to be noted that Selangor and Kuala Lumpur host 25.5% of the Malaysian population but together they produce 40% of the Gross Domestic Product (GDP).
“I believe that, at this point, the national economic resilience of the country is compromised for good, and the scars will remain for a long time, with our children paying the higher cost of ideologically driven policies”, declared Dr Carmelo Ferlito, CEO of the Center for Market Education.
In 2020, two-month of MCO 1.0 and lighter MCOs produced a GDP decline of 5.6%. Therefore, it is very likely that we could have further GDP decline in 2021, where the restrictions lasted longer time and where no exit strategy really emerged. It has to be added that, according to the famous Okun’s law, or rule of thumb, a 1 percent decrease in GDP is associated with a slightly less than 2 percent increase in the unemployment rate; the post Great Recession data, furthermore, showed that the relationship may even had worsened.
The Center for Market Education would like also to emphasizes that a strategy aiming to minimize the number of infections is not scientifically backed. In fact, according to Science, a low R0 can keep the pandemic with us for the next 20 years, avoiding is transformation into epidemic. We need, thus, to increase R0, but in a targeted way, protecting the vulnerable.
The distinction between essential and non-essential services should be immediately abandoned. First and foremost, in fact, every business is essential to someone to bring food to the table. Second, the distinction is impossible to be drawn in practice within a complex economic system: what if you can produce food but you do not have your packaging? And what about if your customers are closed? And what about transportation and logistics and all the maintenance services required to keep trucks and machines going? The pretention to draw the distinction is a symptom of deep economic ignorance.
“The government needs to be reminded that economic costs are always human costs too, as the economy is made of human lives and interactions”, Dr Ferlito added. Currently, more than 3 million people are either employed or unemployed, or 700 times higher than the people who succumbed to COVID.
Policy making needs to be based on a sound trade-off analysis. As estimated by Casadio and Williams with Galen Center data, treating COVID patients so far costed RM 8 billion. Lockdowns cost at least RM 175 billion per year. To invest in the healthcare system, in prevention and timely treatments will be just a fraction of the costs of lockdown. So why to insist with a very costly policy that does not produce any significant result? To believe in lockdown is becoming a fideistic behaviour, rather than a scientific one.
What we need now is a 360-degree change in strategy, centered on the following pillars and based also on what was announced recently by Singapore:
- Stop aiming to minimize cases, but focus on developing effective treatments to minimize mortality.
- Open the economy but with compulsory weekly tests (mass, frequent and affordable testing), together with a tracing software.
- Stop throwing money in aids and allow people to get back their salaries and dignities by allowing them to work.
- Invest wisely in strengthening the healthcare system with temporary hospitals, ICUs equipment and pharmaceutical research.
“Most probably, for an effective change in strategy, we need a change in leadership, as the current one does not seem to realize how ineffective the present “strategy” is”, Dr Ferlito concluded.
About CME: The Center for Market Education (CME) is a boutique think-tank based in Kuala Lumpur, Malaysia. As an academic and educational institution, CME aims to promote a more pluralistic and multidisciplinary approach to economics and to spread the knowledge of a sounder economics, grounded in the understanding of market forces. In order to do so, CME is not only involved in academic initiatives, but it organizes seminars, webinars and tailor-made economics classes for students, journalists, businesspeople and professionals who wish to better understand the relevance of economics for their daily lives and activities. Economics matters and needs to be presented in a fashion in which the link with reality is clearly visible. In this sense, we look not only at theoretical economics but also at policy making, with an emphasis on the unintended consequences generated by political actions.