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The Plague: Saving the Old

The basic choice all along with Covid-19 has been: do we let the old die, or do we take a big hit economically? So far, the decision almost everywhere has been to take the hit and save the old (or most of them), but in some places it has been a very near-run thing.

Today or tomorrow, for example, the number of deaths from coronavirus in the United States will surpass the total number who have died in China (3,304 people) from what Donald Trump generally calls the ‘Chinese virus’.

China has four times the population of the United States, but in the end around fifty times as many Americans will die from the coronavirus. That is according to Trump’s own prediction on Sunday, in the speech where he finally did a U-turn, that ‘only’ 100,000-200,000 Americans will die because of his wise decision to extend the national lockdown to 30 April.

It was a decision he took long after the last minute, if ‘last minute’ is defined as the last moment when the right decision would have held American deaths down to the Chinese level. But Trump was not alone in this dereliction of duty: his Mini-Me equivalent across the Atlantic, Britain’s Prime Minister Boris Johnson, also waited much too long, and the United Kingdom will be lucky to escape with 20,000 deaths.

Why did they wait so long before imposing the restrictions on movement that will break the chain of transmission of Covid-19? Because locking down the people also means locking down the economy: huge numbers of people will lose their jobs, at least temporarily, and the stock market will crash.

Whereas if you don’t impose the restrictions, perhaps on the plausible pretext that you are pursuing an alternative solution called ‘herd immunity’, then the economy will keep ticking over nicely. However, achieving herd immunity requires 60%-70% of the population to have had the disease – and with this particular coronavirus, about one or two percent of those people will die.

But who cares? Almost all the victims will be over 70, two-thirds of them will be male, and at least half of them will also have ‘underlying conditions’ that are already forcing the health services to spend a lot just keeping them alive. They are entirely dispensable to the economy. We would be even richer if they did die.

Did Johnson understand that this was the real strategy? Possibly not: he’s never been a ‘detail’ man. But his Svengali and chief political advisor, Dominic Cummings, certainly did understand it, and seems to have been perfectly OK with it.

What forced Johnson into a thinly disguised about-face two weeks ago was one or both of the following facts. One: almost everybody his policy was condemning to death was somebody’s beloved father or mother. And two: it amounted to carrying out a cull of Conservative voters, since two-thirds of British people in the over-70s group vote for the Tories.

He was late, but not too late. Even the strictest measures now will not keep the British death toll under 20,000, according to the Imperial College London group that did the key calculations two weeks ago – but half a million would have died without them. And exactly the same equation applies to Donald Trump.

It’s always tough to know what Trump really believes, because he will say whatever he thinks works best politically at this precise moment. If it flatly contradicts what he said yesterday, he doesn’t care. And if some journalist calls him on the contradiction, he just denies what he said yesterday. It doesn’t matter if the statement is on the record; it’s ‘fake news.

We cannot know if Trump ever really understood the choice he was making when he condemned lockdowns and repeatedly promised the imminent ‘reopening’ of the economy. And then, two week after the Imperial College group published its prediction that without lockdowns 2.2 million Americans would die, he finally read it and reversed course. Or so we are supposed to believe.

He even claimed credit for saving two million American lives by abandoning his old strategy (if that’s the right word for it). His real calculation, at some level of his conscious or unconscious mind, was that his re-election in November would be even more damaged by two million needless American deaths on his watch than by a deep recession and huge unemployment.

But at least half of the Americans who will still die would have survived had he moved two weeks sooner, when he already had ample evidence that it was the only sane course. Exactly the same criticism applies to Boris Johnson. But here’s a consoling thought.

Everywhere from China and India to Spain and Russia, and even in the United Kingdom and the United States (after stalling as long as possible), governments are putting the lives of the ‘useless’ old ahead of the alleged needs of the economy. Because that’s what their people really want.
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To shorten to 725 words, omit paragraphs 8 and 11. (“Did…it”; and “It’s always…news”)

Gwynne Dyer’s new book is ‘Growing Pains: The Future of Democracy (and Work)’.

Nobody Mention UBI

When you lock the people down (to save their lives), you inevitably close down a lot of the economy as well. And the lockdown will definitely have to last in most countries until May or June: Donald Trump’s promise of a ‘beautiful timeline’ to reopening the US economy just two weeks hence is delusional. So where’s the money coming from in the meantime?

The majority of people still have jobs they get paid for: people in essential services who have to go to work, people who can do their work from home, and quite a few others as well.

However, between a third and quarter of the employed population has been left idle as their employers, from airlines to retail businesses, downsize or shut temporarily. If you leave these people without income, then you are reproducing the conditions of the Great Depression of the 1930s, when unemployment peaked at 24% in the United States and the country’s GDP shrank by almost half.

Adolf Hitler came to power when German unemployment reached 30%: misery and desperation can lead to violence. Nobody wanted to see that movie again, so after the Second World War every developed country created a welfare state to shelter its population from the worst effects of the ‘business cycle’.

The welfare state has served us well for most of a century (including in the United States, whose rudimentary welfare state was first in the field with Franklin Roosevelt’s New Deal of the 1930s). But it is not enough to keep the wheels turning when a huge chunk of the workforce had dropped out for reasons that are not economic but health-related.

That’s why governments, including deeply orthodox right-wing ones like the Conservatives in Britain and the Republicans in the United States, are turning to what economist Milton Friedman first named ‘helicopter money’ half a century ago.

The idea is that a government can reboot an economy in which spending power has collapsed (because so many are out of work) by simply giving the penniless consumers free money – as if throwing it out of a helicopter. After all, it’s free money for the government too: they just ask the central banks to print it for them.

At this point traditionalists will begin to mutter about inflation, and the risk of undermining the work ethic, and various other shibboleths, but the governments in all the bigger Western economies – the US, the UK, Germany, France – are in conservative hands at the moment, and they are all doing it.

As Robert Chote, director of Britain’s comically named Office for Budget Responsibility, said last week: “When the fire is large enough you just spray the water and worry about it later.” So get in the chopper and start dropping the money.

Sweden has guaranteed laid-off workers 90% of their incomes until the health crisis is past, France is offering ‘partial unemployment benefits’ equal to 84% of the workers’ incomes, and Britain is offering 80%. In every case the employers (who are also getting government aid) are expected to hold their employees’ jobs open for them when normal service is restored.

Even the self-employed, including the ‘gig’ workers who now make up around 10% of the workforce, are not being left out. Norway is giving them 80% of their income based on their last three years of tax returns (tough luck if they understated it), and most other European countries will follow suit.

The United States government is less generous, of course, and would be even under a Democratic administration: the free-market ideology is the real national religion. President Trump is talking about $1,200 per person (the same as Hong Kong is giving its citizens), but only for one month or at the most two. And the proposal is still stuck in Congress.

Nevertheless, what all these governments (and others elsewhere in the world) are really playing with is the idea of a guaranteed national income that nobody can fall below. Only temporarily, you understand. Once the Covid-19 virus is tamed, we’ll go back to the dog-eat-dog, devil-take-the-hindmost economy we all know and love.

Really? You think that after six months or a year of this we will just go back tamely to the old economic rules? I rather doubt it.

The political and economic rules do not evolve gradually in modern societies; they shift in sudden great lurches. The First World War drew millions of women into the factories and kick-started women’s emancipation.

The rise of fascism and the Second World War required the creation of the full welfare state (which was previously restricted to meagre old age pensions) to avoid a replay the next time the economy tanked.

The current emergency may be fostering the rise of ideas previously seen as too radical to contemplate, but nobody say ‘Universal Basic Income’ yet. You’ll frighten the horses.
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To shorten to 700 words, omit paragraphs 8 and 11. (“At this…doing it”; and “Even…suit”)

Covid-19: The Exit Problem

Most of the countries in Asia, Europe and North America are now in lockdown to slow the spread of the Covid-19 virus. This is the ‘suppression’ strategy, and it should keep the death rate from going exponential for a while. The unanswered question is: what do we do next?

There is no exit strategy. “This type of intensive intervention package [‘social distancing’ of the entire population, home isolation of Covid-19 cases, and household quarantine of their family members] will need to be maintained until a vaccine becomes available (potentially 18 months or more) – given that we predict that transmission will quickly rebound if interventions are relaxed.”

That’s from the executive summary of the key Imperial College London report that on Monday forced the British government to abandon its insane policy of letting the infections grow and hoping the population (or what was left of it) would achieve ‘herd immunity’.

The 30-strong Imperial College team estimated that an ‘unmitigated epidemic’ – no closure of schools, shops, restaurants and bars, no household quarantines of suspected coronavirus cases and their families, no ‘social distancing’ – would directly cause 510,000 deaths in the United Kingdom in the first wave of infections (now to July or August).

Infections would grow rapidly through March, and the demand for beds in intensive care units (ICUs) would exceed supply by the second week of April. At the peak of the first wave of infections in mid-May, demand for ICU beds would be thirty times greater than supply.

They did the same calculations for the United States, and concluded that 2.2 million Americans would die in the first wave of infections. (This number was instrumental in jolting the Trump administration out of its ‘deny, distract and downplay’ strategy last weekend.) Such huge case loads would inevitably crash the health-care systems in both countries, causing further ‘secondary’ losses of life.

So the team moved on to consider the ‘mitigation’ model. This concentrates on ‘flattening the curve’ of infections, which would now peak in late June. Suspected cases of infection are confined to their homes and their families are also quarantined, schools are closed, over-70s are required to self-isolate – but shops, bars, restaurants, etc. stay open, and the economy staggers on more or less intact.

The mitigation policy’s outcome is slightly better, but the peak case load is still so high that it crashes the health system. Total deaths in the first wave are reduced only by half: i.e a quarter-million die in the United Kingdom, and a million in the United States. So the Imperial College team moved on to examine the third option: ‘suppression’.

Suppression, or ‘lockdown’ if you prefer, drastically reduces human contact in order to reverse the rate at which infections are spreading. ‘Social distancing’ applies to everyone, not just the over-70s, and almost all public venues except food shops and pharmacies are closed. It does the job – after a few weeks death rates drop sharply – but the economy also goes into decline: probably 6% down or worse by the end of the year.

This is now the policy in most developed countries: mass death is no longer on the doorstep. The United States as a whole is still in ‘mitigation’, because it takes a long time to turn a supertanker like Mr Trump all the way around, but New York and some other big American cities and states have already moved on to suppression.

It has all happened very fast, and governments are just starting to realise that we will be in this mode for a long time. In fact, unless this particular coronavirus fails to cause a second wave of infections next winter – it isn’t certain – we will probably be stuck in lockdown most of the time until an effective vaccine becomes widely available, probably no sooner than eighteen months from now. August of 2021, let’s say.

In the meantime, the best we can hope for is a few breaks when new infections have fallen so low that the controls can be “relaxed temporarily in relatively short time windows” for a month or two. But the virus will still be at large in the population, and we’ll probably have to re-impose the controls as the number of infections starts to spike again.

Economically, it will be as big a hit as the Great Recession of 2008-9. Saving everything from shuttered shops, theatres and restaurants to passenger-starved airlines from bankruptcy will be a huge challenge. Keeping their laid-off employees out of poverty will be just as hard. There will have to be mortgage and rent holidays and maybe ‘helicopter money’ (dropped from above by central banks).

But here’s a silver lining, if you want one. In every country we have collectively decided, without even an argument, that we care more about the lives of our fellow-citizens than we do about the damned economy.
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To shorten to 700 words, omit paragraphs 10 and 12. (“This is…suppression”; and “In the…again”)

Gwynne Dyer’s new book is ‘Growing Pains: The Future of Democracy (and Work)’.

Is the ‘Devil Virus’ a ‘Black Swan’?

China officially went back to work on Monday, after an extended two-week Lunar New Year holiday, while the authorities struggled to get the spread of the new coronavirus under control. But a lot of Chinese are not going back to work yet, and the spread of the ‘devil virus’ (as President Xi Jingping called it) is manifestly not under control.

This virus has already killed over 800 people – more fatalities in two months than the SARS (severe acute respiratory syndrome) outbreak of 2002-03 caused in seven months– and it’s accelerating. The last few days have seen more than 80 deaths a day, and the death rate in the city of Wuhan in Hubei province, the point of origin of the disease and still its epicentre, is now 4% of those infected.

The death rate is still only 2% nationally, but infections elsewhere are generally more recent than those in Hubei province and may not reflect the final death rate. And it’s still spreading fast within China: four large cities in Zhejiang province on the coast are now also locked down.

Significantly, President Xi is no longer claiming that he is “personally commanding” the anti-virus fight. If this is going to be a complete disaster, somebody else should take the blame, and the man in charge of the national campaign against the virus is now vice-premier Sun Chunlun.

Well aware that he is now the designated fall guy, Sun immediately visited Wuhan and declared that the city and country now face ‘wartime conditions’. Waxing full-on hysterical, he warned: “There must be no deserters, or they will be nailed to the pillar of historical shame forever.” But mere rhetoric won’t save him if the epidemic goes nationwide.

It probably will: the two or three weeks that were wasted after the virus was first detected cannot be recovered. But the enforced holidays, travel curbs and lockdowns, belated though they are, may still limit the spread of the virus beyond China.

Or maybe not, but even if the virus is largely contained within China the risk of financial infection is high. High enough, in fact, to qualify as a potential ‘black swan’.

A ‘black swan’ is an unforeseen event that has a huge impact on the normal course of events. The SARS epidemic in 2002-03 was a black swan: it knocked about two percentage points off China’s economic growth that year. However, that epidemic did not cause a global recession, because back in those days China was only a small part of the global economy.

Now the Chinese economy is the world’s second-biggest. It takes up four times the space in the global economy that it occupied in 2002, so a 2% fall in Chinese economic growth translates into at least a half-percent hit to the entire global economy. Which would not be a big deal if the global economy was in good shape, but it isn’t.

Indeed, twelve years after the 2008 sub-prime financial crisis the global economy is still in the intensive care ward. There has been no return to the pre-crisis high growth rates, and interest rates, except in the United States, are still at rock-bottom. That means the banks have no room to cut the cost of borrowing and stimulate demand if the economy is starting to tank.

This applies in particular to China itself, where the banks have been forced by the government to finance huge amounts of unproductive investment as the regime continuously ‘primed the pump’ in order to ward off a recession.

It worked, in the sense that the loans financed a further orgy of construction that has now equipped the country with 100,000 km of under-used expressways and four half-empty 60-storey apartment towers at all four corners of every major intersection in each of the country’s hundred biggest cities. China was the only major country to avoid a recession after 2008 – but it left the banks staggering under a mountain of bad debts.

By now China has a Potemkin economy where the official economic growth rate is 6% a year but the true number, as measured by electricity use or megatons of freight carried by the railways, is between 2% and 3%. Knock 2 percentage points off that and you have no growth at all – and a crisis of survival for the regime.

That would be the biggest black swan you ever saw, but remember that the lies and official incompetence that surrounded the Chernobyl disaster played a big part in making the Soviet public ripe for regime change a few years later. Could the coronavirus have a similar effect? It’s not likely, but it is conceivable.

The immediate and short-term deaths from the Chernobyl melt-down amounted to sixty people. The Wuhan coronavirus has killed a dozen times as many Chinese citizens already.
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To shorten to 675 words, omit paragraphs 3 and 13. (“The death…down”; and “It worked…debts”)