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[Shang-Jin Wei] Life, liberty and lost output

The anti-quarantine protests that erupted across China last month highlight the gulf between the Chinese people and Communist Party leaders regarding the necessity of the strict zero-COVID policy. Given the obvious disconnect, it is worth examining how and why the authorities and the public have grown so far apart in their assessment of the policy’s costs and benefits.

One important difference seems to be the value that the two sides assign to liberty. While the public may prioritize freedom over severe pandemic restrictions, the government asserts that sacrifices are necessary to save lives.

There is little doubt that China’s containment strategy has saved many people. As I recently argued, China’s huge population means that even if it had the same death rate, vaccines, vaccination rates, public attitudes, and public-health policies as the United States, more than a million Chinese likely would have died from COVID-19 this year, compared to roughly 240,000 in the US. It could be argued, therefore, that the zero-COVID policy has saved at least a million Chinese lives.

Then there is the monetary value of the lives saved. One way to estimate this is by using the ratio of per capita income in China to that in the US and the US statistical value of life. In 2021, Chinese per capita income was 17% that of the US. If the value of a statistical life in China was proportional to this ratio, a Chinese life would be worth roughly $1 million, implying that the total value of lives saved by China’s zero-COVID policy is around $1 trillion.

This figure may be even higher. Considering China’s lower vaccination rates, less effective vaccines, and weaker medical facilities, it is possible that the zero-COVID policy saved as many as two million people, bringing the aggregate value of the lives saved to $2 trillion.

On the other hand, the value of the lives saved could be lower. Suppose China had phased out its stringent COVID-19 restrictions, but the Chinese people remained as vigilant as the Singaporeans and the Japanese, the containment strategy may have saved only 400,000 lives, with an aggregate value of $400 billion. But for the purposes of this discussion, let us consider $1 trillion as the baseline assessment of the value of the lives saved.

To calculate the costs of the zero-COVID regime, we would need to add the estimated loss of economic output to the value of freedoms lost due to strict pandemic restrictions. The containment strategy has likely reduced the Chinese economy’s growth rate this year by 2.2 percentage points, implying a cost of $384 billion in lost GDP. If we assume that Chinese people value the freedoms they lost at, say, at $1,000 per person, or one month’s worth of per capita GDP, the total cost, $1.4 trillion, outweighs the benefits of the zero-COVID policy. On the other hand, if the authorities place a much lower value on civil liberties (anything less than $460 per person), they would reach the opposite conclusion.

When would Chinese policymakers adjust their COVID policy? If they revise their valuation of freedom up, to at least $460 person, they may conclude that the cost of maintaining the policy would outweigh the benefits. Indeed, the authorities have begun to lift some virus restrictions in several cities.

While the ongoing spread of the virus complicates the phaseout of the zero-COVID policy, China can ramp up its vaccination efforts, especially among the elderly, over the next few months and prepare medical facilities to deal with a potential increase in cases, including by expanding the capacity of hospitals’ intensive-care unit. Reducing the reliance on the zero-COVID policy would also facilitate the restoration of normal life for Chinese citizens.

In sum, if the authorities revised up the value of liberty, or revised down the expected number of people that need to be saved by the zero-COVID policy, they could decide to exit the current strategy. If that happens, the whole world, not just the Chinese people, would be able to breathe a huge sigh of relief.

Shang-Jin Wei

Shang-Jin Wei, a former chief economist at the Asian Development Bank, is a professor of finance and economics at Columbia Business School and Columbia University’s School of International and Public Affairs. -- Ed.

(Project Syndicate)



By Korea Herald Photo (khnews@heraldcorp.com)
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