As we all know, the fate of many lives, not to mention the U.S. and global economy, largely depends on the containment of the novel COVID-19 coronavirus. While there are many vaccine candidates currently in trials, there's no guarantee that any will be approved for effectiveness and safety anytime soon. Though certain treatments have been shown to limit the worst effects of COVID-19, those treatments are only partially effective. The fact is that virus cases are making a big resurgence in certain states, with deaths (a lagging indicator) now beginning to tick up as well. This weekend, ICU beds in Houston, one of the worst-hit new hot-spots, reached full capacity.
On the economic front, the resurgence of COVID-19 is also causing massive damage to the economy. The June resurgence in COVID-19 caused the International Monetary Fund to lower its prior forecast for global growth through next year. The IMF now projects world gross domestic product (GDP) will fall 4.9% in 2020, down from a 3% decline projected in April. Though the IMF expects a recovery of 5.4% growth next year, that's a more gradual recovery than previously contemplated, and still leaves 2021 GDP output 6.5 percentage points lower than pre-COVID estimates. That figure could also be revised lower if we don't contain the virus.
Closer to home in the U.S., things are projected to be worse. The Conference Board, a business-funded nonprofit research organization with about 1,200 companies as members, now projects U.S. GDP will fall by 7% in 2020 and only recover 1% next year, leaving June 2021 U.S. GDP 7.5 percentage points below January 2020 figures, in its baseline scenario.
The Conference Board also gave a range of scenarios for U.S. economic growth, with a better-than-expected "swoosh" recovery leaving June 2021 GDP only 3.8 percentage points below January 2020 levels, but a bear-case "W" double-dip leaving U.S. June 2021 GDP a whopping 10.1 percentage points lower than January 2020.
If a vaccine is a no-show, and treatments are only partially effective, is there anything U.S. citizens can do to help improve these outcomes? According to a recent analysis by Goldman Sachs (GS -0.23%), there's one simple thing Americans can do that would boost U.S. GDP by a whopping five percentage points over these dour scenarios, making a huge difference to the economy, American jobs, and overall prosperity.
Goldman Sachs says a universal mask mandate can save the economy. Images source: Getty Images.
Goldman Sachs: A universal mask mandate can add five points to GDP
Goldman Sachs' analysis, led by chief economist Jan Hatzius, concluded that a universal mask-wearing order can improve the U.S. GDP by a huge five percentage points. Considering that U.S. GDP was $21.73 trillion in 2019, those five percentage points mean over $1 trillion in economic output, bringing with it many jobs and livelihoods along the way.
Goldman's rationale works like this. Agreeing with the growing scientific body of evidence, Goldman's study also concluded that "face masks are associated with significantly better coronavirus outcomes." And while many are resistant to wearing masks in public, the 20 or so states that have issued universal mask orders did affect citizen behavior in a significant way. Hatzius found that 30 days after a state mask order, the proportion of citizens who said they "always" or "frequently" wear a mask jumped by 25 percentage points, and the proportion of people who said they "always" wear a mask in public jumped by 40 percentage points.
That can make a huge difference in certain states where mask-wearing is low, such as Arizona. That state has one of the lowest percentages of citizens who say they "always" wear a mask in public, at just 40%. And Arizona is now the worst-hit COVID-19 state on a percentage basis, with the highest percentage of COVID-19 cases for its population among U.S. states, and 25% of all COVID-19 tests coming back positive.
When applied to the whole country, Goldman's analysis concludes a national face mask order could increase face mask-wearing by 15 percentage points, reducing the transmission growth rate of confirmed cases from 1.6% to 0.6%. By Goldman's logic, increased face-masking would substitute for local lockdowns and social distancing, which caused U.S. GDP to decline 17% between January and April. The amount of lockdown needed to cause a one-percentage-point drop in national transmission rate would equate to about five percentage points of GDP.
A universal mask order can enable more economic reopening and get more Americans back to work. Image source: Getty Images.
In other countries, universal masking has worked like a charm
For those who don't think face masks are effective, mask compliance has been shown to be closely associated with better COVID-19 outcomes in other countries, and there are many examples.
Through late June, Hong Kong has only experienced six COVID-19 deaths, despite being home to 7.5 million people and being one of the most densely populated areas on Earth. Why? Because there is a 97% mask compliance rate during rush hour, with the 3% who don't wear masks mainly coming from European and American travelers and expatriates.
The same is true for other east Asian counties such as Taiwan, South Korea, and Japan. Taiwan, which also has a strong "face mask culture," only has 446 total cases of COVID-19 through June. Not deaths -- cases. Taiwan's total death count is just seven people. To give perspective, the U.S. has 1,200 times as many deaths per capita. Even more highly populated countries such as South Korea and Japan still have extremely low COVID-19 death rates, at just 0.6 and 0.8 deaths per 100,000 people, respectively, and they have done so without locking down their economies. That compares with 38.6 deaths per 100,000 people in the United States.
East Asian countries have been able to open their economies because of universal mask compliance. Image source: Getty Images.
The common link between all of these countries? A robust testing and tracing infrastructure, combined with very high face mask compliance. In East Asia, wearing face masks has been more common than in the West ever since the 1919 flu epidemic. In addition, the East Asian SARS and MERS outbreaks of the early 2000s and 2010s instilled a face mask-wearing discipline, and these diseases didn't spread to the West.
Yet universal masking isn't solely being practiced in East Asia. Though Europe has been spotty at best in their mask-wearing efforts, the Czech Republic is another great example. It was the first country in Europe to impose mandatory face masks in public back in March, and the country now has one of the lowest COVID-19 death rates in the world.
On a more micro level, the town of Jena, Germany, was the first city to require mask-wearing in public after it experienced one of the fastest infection rates in the region back in March. After the order, Jena went from being one of the worst-hit cities in Europe to being completely free from COVID-19 one month later.
Why masks have been a difficult sell to some in the U.S. and Europe
While the evidence suggests that universal mask-wearing can greatly benefit the economy and save lives, it has been a difficult sell to many U.S. citizens as well as those of several Northern European countries, leading to significantly higher death rates and economic damage. While not easily explained, a recent market update from JPMorgan Chase (JPM 0.49%) postulated that the problem may be tied to cultural ideals.
According to a Gallup Social Science and Health Monitor poll, despite the success of many American technology and healthcare companies, Americans rank in the bottom third percentile of 144 countries polled in terms of trust in science, trusting scientific advice from government agencies, and the belief in the safety of vaccines. That may be due to Americans' highest ranking on measures of "individualism," which measures "those acting according to their own beliefs irrespective of the impact it may have on broader groups of people."
Still, there has been no definitive answer as to why mask compliance is so much lower in the U.S. and northern Europe versus other countries.
Cultural ideals around individualism may explain some of the reluctance to wear a face mask. Male COVID-19 death rates are double those of women. Image source: Getty Images.
Your stock portfolio and fellow citizens will thank you for kindly wearing a mask
Even if you currently feel fine and healthy, a recent study concluded that asymptomatic or pre-symptomatic COVID-19 cases can still transmit the disease and may be responsible for over 50% of all infections. That means you can still have COVID-19 and transmit it to others without knowing.
Hopefully, the scientific and economic evidence behind the benefits of universal mask orders will spur more Americans and Europeans to wear them, without the federal government having to issue an official order. As the numbers show, aside from saving lives, the simple task of wearing a mask can potentially save the economy, your job, and the value of your investments along with it.
There are currently plenty available on Amazon.com, Etsy, and other e-commerce sites. Given the e-commerce mask boom going on right now, there has to be at least one out there that suits your style.
