Road Out of Covid is Cloudy

Road Out of Covid is Cloudy 150 150 CloudGovCo

Nothing will be the same for anyone after #Covid. The organising principles and assumptions of neoliberal markets are collapsing or simply evaporating: austerity, deregulation, privatization, and trickle-down economics. More than 3 million people around the world have been infected with the Sars-Cov-2 virus, according to Johns Hopkins University. The worst-affected country is the US, with 978,680 cases on April 27.

Some economists are predicting a V-shaped recovery and others are saying it will be U-shaped. Real-estate boards are saying the market will bounce back in September.

This is magical thinking. We will be lucky if the economy recovers to 60% in 2021. People without a government job will face a decade of recovery with loss of assets along the way. For some businesses, who spent 12 years rebuilding after the 2008 financial crash, this will be the second black swan. (Been there. Done that.)

What happens for a business is that your market goes away and may never exist again. For example, retail will accelerate its move online and consolidate further around Amazon and Walmart and stores like Costco and Target. The barrier to entry will be higher for new outlets (it will be harder to find them with the Google algorithm). There will be more friction in unexpected places. Getting simple things like screws will become an expedition to a destination. Business will find it hard to restore supply chains because the road to recovery will be different in every jurisdiction.

In addition to real-estate and retail, there will be no jobs for summer students. Semesters will be lost and won’t fully return until January. Air travel will be reduced. Airlines are already consolidating through administration and other forms of insolvency. Suppliers like Boeing and Airbus are struggling with reduced demand for aircraft.

There will be bankruptcies in restaurants, bars and cafes. Even if they open for business they will not be able to break even with restricted seating capacity to enforce social distancing. Nobody will want to go to the theatre or a concert or a movie unless they are insane. If they do, we will have a Covid spike.

Consequently, the tax base for governments and especially municipalities, isn’t coming back. National governments can use fiat currency to keep going but municipalities dependent on property taxes will have to reduce to providing core services and impose new taxes such as congestion charges.

All of these, and more, will be chains of dependencies that are very fragile and easily broken, leading to more failures and lost jobs.

The employment participation rate has fallen to unchartered territory. (Divide the number of people actively participating in the labour force by the total number of people eligible to participate in the labour force.) Jobs will be harder to find and employers will demand more specialized skills. More people will be in the gig economy.

The road back requires:

  • Covid curve declines to a safe threshold.
  • The transmission rate from person to person is less than one.
  • Widespread mass testing, identification, quarantine, and contact tracing of every case suppresses Covid.
  • A Covid vaccine and effective anti-viral drugs give people confidence to co-mingle at work, in stores and at events.

Without these we will continue to live in Covid World with social distancing and its knock-on cost effects. It’s difficult to compare countries because many are under testing, and tracking death rates per million is a better indicator. Even that can be misleading because Covid deaths outside hospital might be attributed to something else. The London Financial Times has suggested that deaths in excess of normal levels is the best overall measure.

The below curves graph the daily progress of the virus in several countries, showing how far some have to go to knock down Covid.

Countries that suppressed Covid

Covid cases in China

Daily Covid cases in China April 27 (John Hopkins)

Covid cases in NZ

Daily Covid cases in NZ April 27 (John Hopkins)

Covid cases in Australia

Daily Covid cases in Australia April 27 (John Hopkins)

Daily Covid cases in Germany

Daily Covid cases in Germany April 27 (John Hopkins)

Far Eastern nations like Singapore, South Korea, Taiwan, Viet Nam and China, plus Germany, Australia and New Zealand have had a superior response to the Covid pandemic than most nations. China was a bit slow off the mark at the outset but, generally, all of these countries went in fast and hard to suppress the virus. This can be seen in the narrow width of their graphs of daily cases, which also have strong downward slopes. These countries are starting to relax restrictions.

Countries that mitigated Covid

Covid cases in Canada

Daily Covid cases in Canada April 27 (John Hopkins)

Daily Covid cases in Spain

Daily Covid cases in Spain April 27 (John Hopkins)

Covid cases in Italy

Daily Covid cases in Italy April 27 (John Hopkins)

Most other countries adopted a mitigation strategy to “flatten the curve”. This means striving to keep the number of cases within the capacity of the health system by locking down the economy. While the curve might flatten it will remain very broad for months.

These countries were backed into mitigation because they failed to act quickly. They had no other choice.

For example, Canada, like the USA, didn’t act until March. By then Covid had already seeded the population especially in Ontario and Quebec which failed to limit the school March break. Canada was also hampered by divided responsibilities in its federation. Going forward this will be difficult politically as regions demand a return to normalcy on different schedules.

The media is also not helping, with a focus on flattening the curve without explaining that we need a downward slope to a safe threshold. With provinces like Saskatchewan and New Brunswick already opening up the media message will be even more mixed. And, at press time, Quebec announced elementary schools will reopen May 11 but high-school students will remain out and protected from Covid until September.

Countries believing in Unicorns

Covid cases in UK

Daily Covid cases in UK April 27 (John Hopkins)

Covid cases in USA

Daily Covid cases in USA April 27 (John Hopkins)

In the UK and USA there has been magical thinking.

The UK persisted in muddled thinking, believing first in herd immunity. Then, after a U-turn, it inexplicably cancelled all community testing and contact tracing when the UK had fewer than 10 deaths and less than 500 confirmed cases. It is also under reporting by only counting deaths and cases in hospitals. It also passed up opportunities to get masks and ventilators through the EU because it believed in British exceptionalism. Prime Minister Johnson visited Covid patients in a hospital and boasted that he shook everyone’s hand. How did that work out for you, eh.

The UK was an advocate of the discredited herd immunity theory before it went into lock-down, and is now on track to be the worst case in Europe. The theory holds that if at least 60% of people catch Covid then the total herd of people will be prevented from catching it. It makes many assumptions, such as it’s impossible to catch Covid a second time (we don’t know that), and that deaths will be minimal. The British is Best belief has extended to the development of UK tracking apps which will have a centralised database managed by the National Health System instead of using an open Apple-Google Covid protocol. Also, people in the UK have burned down 40 cell phone towers because they believe the towers spread Covid.

As for the USA, it is a deeply dysfunctional country. It has thrown up Trump as a symptom of widespread stupidity and ignorance and hubris about America being great and the best. Most people there believe paying for healthcare is OK because the market is always right. If you’re poor and sick it’s your own fault. Trump is no worse than the celebrity anti-vaxxers and gospel ministers holding masses to cast out Covid.

In the USA there was denial that Covid could affect white Americans even as multi-cultural California headed for lock-down. It wasn’t until mid-March for the US to begin to respond. By then, Covid had been circulating in New York City for two months. The US response is also hampered by the federated organization of the country. Trump, the object of blame (often rightly so for many things) can not actually order governors of states to do anything. So states like Alaska, Georgia and Oklahoma are re-opening.