How to win the war: some valuable lessons from history

In my op-ed on March 30, I argued that a more closely targeted containment strategy — focused on protection of the elderly through rigorous isolation, combined with border controls, social distancing, testing and avoidance of crowded venues — would allow the economy to get back towards normality quite soon. This strategy would still leave the economy below its pre-crisis potential output until a vaccine is available. This prospect will test our acceptance of sustained restrictions and tight isolation of the elderly. Comparison with wartime sacrifices might put the necessary inconveniences into perspective.

It’s natural enough for our leaders to invoke wartime analogies as they respond to COVID-19, as this gives them an opportunity to channel their inner Churchill. For its part, the public may like the idea of a noble national endeavour, but a small minority are not ready to inconvenience their daily routines to achieve it.

Where is the wartime analogy relevant?

First, there will be less GDP available on the home front. Private-sector GDP will fall very substantially in the first quarter of the crisis, recover as restrictions are eased, but remain below pre-crisis capacity as sectors involving crowded venues and overseas travel remain closed. A fall in GDP of 10 per cent seems quite possible for 2020.

How does this compare with wartime, when we succeeded in greatly increasing GDP, but then dedicated a good part of it towards defeating the enemy rather than meeting our own domestic needs?

In WWII, around 20 per cent of our population was in the armed forces, with perhaps as many again involved in war-related production. In Britain, the share of defence expenditure rose from 9 per cent of GDP to 40 per cent; in the US, government expenditure rose from 30 per cent of GDP to 79 per cent. Government debt rose sharply to pay for this: in Australia government debt increased from 40 per cent of GDP to 120 per cent. These are all imperfect guides, but a conservative guess might be that prosecuting the war took well over one-third of GDP every year for five years.

Consider, too, that very substantial resources (people, factories, infrastructure, even cities) were destroyed during the war, so not available for post-war reconstruction. In current circumstan­ces, most of the resources in hi­bernation can be quickly revived.

Wartime required far more intrusive government intervention in the distribution of resources. Outside wartime, the market performs well, with no need for rationing or compulsory call-ups, with labour allocated by decree to tasks that are unattractive, dangerous or deadly. In some sectors there is a need to orchestrate distribution: getting face masks, medicines and gowns to where they are most needed, for example. But generally, the market can still do the job, supplemented by common sense.

War experience might be more useful is in changing entrenched behaviour and lifelong habits. ­Accustomed to largely unrestrained personal freedom, the public resents rules that require changing their ways. Demonstration of defiant, insouciant bravery might be useful in wartime, but not now. With the notable ­exception of health workers, patience is more important than bravery. In wartime, our long-standing presumptions about individual freedom were re­moulded.

Of course Churchill’s “mobilisation of the English language” was important at the national level, but community-level organisations played a key role. Perhaps Dad’s Army isn’t the perfect model, but local communities can provide information, support and peer pressure, bypassing the heavy hand of the police.

In wartime, there was a case for careful control over information, to ensure that the enemy didn’t benefit and that the harsh reality of war didn’t lower morale. In current circumstances, there is no enemy and misplaced concerns about morale just undermine trust on our leaders. “D Notices” are not needed. A franker discussion about trade-offs between epidemiology needs and economic costs would be more help.

We should recognise that, as in wartime, there is a grossly unfair distribution of the burden. In current circumstances, generous governmental support can compen­sate for this unfairness in ways not possible in wartime.

How tough is it to impose the necessary measures in social distancing and isolation for the elderly? To put this in perspective, recall the wartime separation of husbands from wives, parents from children, mates from their friends, when soldiers were serving overseas or confined to POW camps, sometimes for years. And without the succour of FaceTime.

One more difference. When victory comes in wartime, few question whether the sacrifices were really necessary. As with any pre-emptive policy where the threatened danger was successfully averted, early containment of this epidemic will lead critics to claim that the measures were unnecessarily restrictive.

Stephen Grenville is a non-resident fellow at the Lowy Institute and former deputy governor at the Reserve Bank.