Maybe the Pandemic Will Never End

(Bloomberg Opinion) -- So far, the response to the coronavirus pandemic has operated on the assumption that the worst will be over within a year or so. But what if the malaise lasts much longer? It's a scenario that policy makers must recognize and prepare for.

Breathless media constantly repeat that a vaccine might be widely available by next spring. But even spring of 2023 would be the fastest in medical history, and there's no guarantee of that. Maybe antibodies will turn out to confer little or no protection from infection, as is true for some viruses. In that case, developing a vaccine would be a lot harder, and the concept of “herd immunity” would be meaningless. Almost everyone would remain susceptible, whether or not they'd had it in the past.

So a very long battle with Covid-19 seems entirely possible – while it seems nearly impossible that the U.S. and much of the world can follow New Zealand's lead and almost eliminate the disease. A longer-term crisis would have very different implications for the economy. Sectors that are expected to bounce back – such as tourism – could be out for good. Sectors that have seen a boost – such as streaming services – could be permanent winners.

Yet all the emergency relief from governments and central banks is aimed at easing only a temporary shock. In the U.S., the Federal Reserve, the Treasury and Congress have worked assiduously (and successfully) to ensure that companies have roughly equal access to funding. This would be defensible if officials were sure that the pandemic will pass within a year. But they can't be. If we're in this for the long haul, their actions are encouraging overinvestment in economic activities that face truly existential risks.

The same is true for certain social-distancing measures. The Centers for Disease Control, for example, recommends that long-term care facilities refuse all visitations “except for certain compassionate care reasons, such as end-of-life situations.” Some have suggested that all elderly people remain isolated. This might be bearable for a year. But it seems cruel and unenforceable over longer time frames. We need to be asking: How can a society provide safe and compassionate care for the elderly and vulnerable if Covid-19 remains widespread for many years?

This disease has the potential to impose enormous and lasting change upon the world. Scientists are doing all they can to prevent such an outcome, by defeating the virus quickly. But economic and public-health policy makers should be planning for the possibility that they won't succeed.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Narayana Kocherlakota is a Bloomberg Opinion columnist. He is a professor of economics at the University of Rochester and was president of the Federal Reserve Bank of Minneapolis from 2009 to 2015.