Spanish life is not always likeable but it is compellingly loveable.
- Christopher Howse: A Pilgrim in Spain*
The C Word- Private Eye's in-house medic opines on a remedy:-
- A fascinating moving global timeline, albeit not quite up to date. US numbers have certainly hugely increased since April 4.
Iceland: Has tested one-tenth of its population for coronavirus at random and found that half of people have the disease without realising. They also discovered that 1,600 people have been infected with Covid-19 since the start of the outbreak. Of these cases, there were only seven deaths, indicating a fatality rate of just 0.004%, which is significantly lower than other countries. Experts have argued of limitations to the country's research. Says one: 'It is likely we will only learn the true extent once population based antibody testing is undertaken2
Denmark: Is taking the first step out of lockdown, with schools set to reopen. But all remaining restrictions will stay in place until at least May 10, while a ban on larger gatherings will remain in force until August.
Sweden: As in the USA, the poor an ethnic minorities are bearing the brunt of the deaths. Experts have debated whether this could be down to overcrowding, smoking, health problems, economic deprivation or a higher incidence of intergenerational living.
Austria: Tomorrow, small shops, DIY stores and garden centres across the country will open as the government relaxes the lockdown. From the start of May, department stores, shopping centres and hair salons will join them, with restaurants and hotels back working a couple of weeks later.
The USA: Is continuing to rise up the ranking of death per million of population. Impossible to summarise its lockdown situation as there's no federal view on this and States differ. And no one believes the president's comments about anything 'going forward'. Poverty, urban living and frontline jobs are blamed as black Americans are hit hard, as the virus claims a disproportionate number of African American lives. “The perception that the disease impacts older, more affluent and whiter populations will soon give way to a heartbreaking realisation: the virus is crushing poorer and blacker populations.” In America, perhaps the most potent reason for black susceptibility to the virus is poor health - bad access to healthcare, low health insurance rates and a high rate of medical conditions, from asthma to diabetes to heart disease, all of which can weaken resistance to the virus.
Germany: Could be one of the next countries to move.
Italy: By contrast, the government rebuffed business calls for a “roadmap” back to work. “Scientists are telling us not to ease the restrictive measures,” said the PM, who on Friday extended the lockdown to May 3. In a small concession, stationers, bookshops and those selling children’s clothes can open from tomorrow.
Life in Spain in the Time of Something Like Cholera
- An unusual lockdown breakdown.
- María's Day 29.
- Here's a great podcast to while away some time. You might be able to get it from other sites too.
- Even before they've moved in, my new neighbours have had the ivy which covered our shared link fence uprooted, leaving on my side just the fence. Festooned with dead ivy leaves. My (insulted) Spanish friends - who are considerate - will probably reject my contention that this is a good example of individualismo. María?
- Excellent news, says Private eye, for the virus:-
The Way of the World: More Crystal Ball Gazing
- There has been loose talk from some of the banks about a “V-shaped” recovery. That prediction was wrong after 2009 and it will be even more wrong in 2020, says Niall Ferguson in the first article below, headed: Don’t bet on a quick global resurrection. The speed of the economic recovery will be more tortoise than hare:
- There's a wide-ranging perspective - albeit from a UK standpoint - as the second article below, headed How coronavirus will change the world for ever.
- What a surprise!
Spanish
Yes it's a fire-poker. Until last week, I had 2, the other being shorter. After I'd used it last week, it apparently went on a world tour. So, if you see it, please let me know.
THE ARTICLES
1. Don’t bet on a quick global resurrection. The speed of the economic recovery will be more tortoise than hare: Niall Ferguson, the Milbank Family senior fellow at the Hoover Institution, Stanford, and managing director of Greenmantle. The Sunday Times
Easter never felt more Eastery. The world economy looks dead. Can it be resurrected? Just over a century ago, amid the worst flu pandemic in history, the greatest economist of his generation fell ill. John Maynard Keynes was in Paris, attending the peace conference that would in time produce the Treaty of Versailles. Having collapsed on May 30, 1919, he wrote to his mother: “Partly out of misery and rage for all that’s happening and partly from prolonged overwork, I gave way last Friday and took to my bed from sheer nervous exhaustion, where I have remained ever since.”
He remained prostrate for close to a week, getting up only for meetings with the prime minister, David Lloyd George, and “a daily stroll in the Bois [de Boulogne]”. Did Keynes have the dreaded Spanish flu, as Lloyd George did? His biographer, Lord Skidelsky, says we cannot be sure. If so, he was lucky to survive it. According to the latest estimate, that pandemic killed 39 million people — 2% of the world’s population — dwarfing the battlefield fatalities of the First World War.
Among the victims of the pandemic were the South African prime minister Louis Botha, the Bolshevik leader Yakov Sverdlov, the German sociologist Max Weber and the grandfather of the current US president Frederick Trump.
It was shortly after his recovery and return to Britain that Keynes wrote the inflammatory tract that made him famous, The Economic Consequences of the Peace. In it he deplored the punitive terms of the Versailles treaty — which imposed on Germany an unspecified but potentially vast war reparations debt — and prophesied an inflationary economic disaster, followed by a political backlash.
Who among today’s great economists will write The Economic Consequences of the Plague? Large parts of the world’s economy have been brought to an abrupt standstill by the Covid-19 pandemic. To contain the contagion, countless businesses have been told to cease trading and millions of workers have been told to stay at home. To offset this “supply shock”, and to prevent a catastrophic downward spiral of shrinking demand and debt deflation, the world’s central banks and finance ministries are injecting even more “liquidity” — that’s money, to you and me — than they did in the wake of the 2008-9 financial crisis.
The effects of these measures can be seen in the remarkable performance of corporate stocks and bonds. As I write, the S&P 500 is just 18% below its peak on February 19. At its low point — March 23 — it was down 34%. Those who expected carnage in the low-grade, or “junk”, bond market are amazed. Who could have foreseen that the Federal Reserve would buy even junk?
Yet I feel a bit like Keynes did in 1919. Of course, I see the need to get money to those workers who will be unemployed for as long as it takes the scientists and pharmaceutical companies to find and distribute a Covid-19 vaccine. But the Fed’s current policy would appear to be a generalised bailout of investors, even those whose positions were known to be risky.
And the US Congress has, in great haste and amid frantic horse-trading, passed legislation that commits taxpayers to writing down hundreds of billions of dollars of “loans” to businesses large and small. Moreover, the legislation would appear to make more than half of American workers better off being unemployed than they would have been working.
Turning to some of today’s leading economists, I became more despondent. For the arch-liberal Paul Krugman, this is “the economic equivalent of a medically induced coma”, but the Keynesian remedy of government borrowing can provide the necessary relief and stimulus. “There may be a slight hangover from this borrowing,” he wrote on April 1, “but it shouldn’t pose any major problems.” (Was the date of this blog post significant?)
By contrast, Kenneth Rogoff — one of Harvard’s few conservative professors — wrote last week of an “economic catastrophe . . . likely to rival or exceed that of any recession in the last 150 years”, with lingering effects, potentially leading to a “global depression”. The pandemic, Rogoff argued, was akin to an “alien invasion”.
Larry Summers, who lies somewhere between those two ideologically, chose a more grisly metaphor. “Physical isolation is chemotherapy,” he said, “and the goal is remission. The problem is that chemo is . . . increasingly toxic over time.” He foresees an “accordion-like dynamic” until a vaccine is generally available in 12 to 18 months.
I am with Rogoff and Summers. This is a disaster, the economic consequences of which cannot be offset by even the biggest monetary and fiscal splurge. Over the past three weeks 16.8 million Americans — slightly over 10% of the workforce — have filed for unemployment benefits. According to our best estimates at my macroeconomic and geopolitical advisory firm Greenmantle, GDP has declined by even more and is currently running at 75%-82% of its level in the last quarter of last year.
Our estimates, based on state-by-state assessments that allow for the share of the population who can work from home, suggest a slight drop in GDP for the year’s first quarter (-1.45% quarter on quarter), followed by a lockdown-driven collapse (-10.8%) in the second quarter. We expect a partial rebound of 6.5% in the third quarter, as lockdowns are partially relaxed but social distancing measures remain in place — as they must, until a vaccine is available.
There has been loose talk from some of the banks about a “V-shaped” recovery. That prediction was wrong after 2009 and it will be even more wrong in 2020. The shape we have in mind is something like an inverted square root or a tortoise’s back. Certainly, the speed of recovery will be more like a tortoise’s than a hare’s.
The key is that in the protracted “post-lockdown, pre-vaccine” period, there will inevitably be a reduction of capacity in all sectors of the economy that depend on some level of social proximity, such as retail, air travel, education, live entertainment, hotels and restaurants.
An economy without crowds is not a “new normal”. It may be more like the new anomie, to borrow Emile Durkheim’s term for the sense of disconnectedness. For most people, the word “fun” is almost synonymous with “crowd”. The coming year will be a time of depression in the psychological as well as the economic sense.
Note that our calculations above omit the effects of lockdowns and social distancing on the demand side, including domestic consumption and investment, and the pandemic’s effect on global trade. While Krugman seems confident deficit-funded relief measures will prop up demand, I am not so sure. Panicking people are going to save as much of those benefits as they can. Broke businesses will pocket the government cash and still downsize. And don’t get me started on the enduring hit to trade.
In short, I can’t honestly wish my readers a happy Easter. In the Bible, Christ’s resurrection happens in just three days. The resurrection of the world economy will take far longer. I only wish Keynes could rise from his eternal rest to tell us exactly how long.
2. How coronavirus will change the world for ever: Catherine Philp, The Times.
This too shall pass. The curve will flatten. Humanity will survive. But already the coronavirus outbreak is taking on the shape of a once-in-a-generation watershed. As cities, states and nations scramble to outpace the disease, choices made or rushed through now may alter the shape of the world for decades to come.
The early signs point to changes that may have already been under way, a retreat from globalisation and a resurrection of the nation state as governments scramble, like hoarders in a global supermarket, to make sure that their own households are stocked.
Frontiers effectively erased in Europe have once again slammed shut, even as the southern countries worst affected cry out for a Marshall Plan from the northern industrial giants with whom they share a market and a currency. The leaders of Israel and Hungary have seized for themselves powers almost unthinkable in a democracy, sweeping aside the authority of parliament, the courts and elections. Will they ever give them back?
Last week the official American death toll passed that of China, a landmark humiliation whatever the reliability of Beijing’s figures. Autocratic China, having incubated the virus, is now in recovery and stepping into the global leadership vacuum, sending medical supplies and workers around the world to help countries newly crippled by the crisis, recasting Beijing from Grim Reaper to global saviour.
Emergencies “fast-forward historical processes”, says the historian and philosopher Yuval Noah Harari. “Decisions that in normal times could take years of deliberation are passed in a matter of hours.”
The author Robert Kaplan adds: “Crises like wars put history on fast forward. And history is now on fast forward.” So just weeks into the pandemic, are we witnessing the shape of the world to come?
The balance of power
There has been no pandemic like coronavirus in the globalised age. Since the United States emerged as the postwar global leader, it has led responses to international crises. The US, however, is not only structurally ill equipped to fight the pandemic at home, with no public healthcare system to speak of and an embedded antipathy to big government, but also its leadership is temperamentally unsuited to taking on the problems of the world.
The globe faces “an unbelievably unlucky moment in that we have the first US president since the war, maybe even longer, who is not interested in American leadership”, Anne Applebaum, the author and historian, says.
Kurt Campbell and Rush Doshi, of the Council on Foreign Relations, observe that the pandemic “has amplified Trump’s instincts to go it alone and exposed just how unprepared Washington is to lead a global response”.
Global orders have a tendency to change gradually at first then all at once, they add, suggesting that the virus could be a “Suez” moment for the US, marking its decline as a world power.
China was the first country to respond to Italy’s pleas for assistance when neighbours failed to assist it. Serbia dismissed European solidarity as “a fairytale”, declaring that “the only country that can help us is China” as it gratefully received President Xi’s largesse.
Beijing’s ability to respond was helped not only by the timing — Wuhan, where the disease started, has emerged from lockdown — but also because it was already the leading manufacturer of the masks, respirators and ventilators that the world needs to fight the virus.
The US, by contrast, has discovered that its own stocks were only a tiny percentage of what was now needed at home, much less give away abroad. Charles Parton, a former British diplomat, now at Rusi, a British think tank, called China’s efforts “a deep propaganda campaign” intended “to obscure the fact it caused the virus in the first place”.
The former foreign secretary, Lord Hague of Richmond, predicted that China would emerge from the crisis ever more powerful, with a swiftly rebounding economy. He also cited President Trump’s “extraordinary absence of global leadership” but added, chillingly, that Beijing would “gain from the new age of the surveillance state that will be summoned into existence in the coming months”.
He wrote: “Already some countries are requiring citizens to wear wrist-tags if they are too far from their phone for their movements to be tracked. And guess who will be well placed to supply the systems, software and data on a large scale?”
Kurt Campbell says that although there may be a backlash against China, Washington should be concerned that the lack of US leadership may not be forgotten. He predicts “a brutal outpouring of disappointment: how could you have done this to us?”
Authoritarianism v democracy
China’s apparent containment of the coronavirus has many states pondering the question: could they have done the same if they possessed Beijing’s autocratic powers? China’s response has been vastly aided by surveillance technology, renewing debates in the West about privacy and big data.
David Miliband, president of the International Rescue Committee, fears that “the wrong lessons are learnt” in the pandemic, that isolationism and authoritarianism triumph in the belief that they are the only way out of “the ultimate disease” of the connected world. “It’s not the case that autocracies have dealt with this well and democracies have dealt with this badly,” he says, pointing to the successes of democracies such as Taiwan and South Korea in combating the virus, as well as China’s many missteps.
Iran’s authoritarian theocracy has fared poorly, lacking capacity and adherence to science along with popular legitimacy.
Authoritarian backsliding from established democracies without welfare provision, such as India, could result in very rapid disasters.
Nationalism v globalism
Global supply chains are under urgent scrutiny, especially in the US. Peter Navarro, architect of Mr Trump’s most protectionist policies and his trade war with China, raged against European countries that imposed export controls on critical supplies such as ventilators, declaring that “in a global public health emergency, the US is alone”. Yet Mr Trump is accused of trying to buy monopoly rights over a vaccine from a German pharmaceutical company for $1 billion.
Washington is also waking up to uncomfortable statistics, such as China’s 95% share of the US market in antibiotics, drugs needed to fight secondary infections from the coronavirus. The pandemic, warns Robin Niblett, of Chatham House in London, could be “the straw that breaks the back of economic globalisation”. Stephen Walt, of Harvard University, fears that it will bring about a world that is “less open, less prosperous and less free”.
Isolationism v multilateralism
“A collective paralysis has gripped the international community. There seem to be no adults in the room,” Harari says. “If each country does its own thing in complete disregard of the other, the result will be chaos.”
The rapidity of the American withdrawal and a growing assault on multilateralism has left international structures with little power.
The World Health Organisation (WHO) has legally binding protocols on pandemic handling and reporting which every nation in the world has signed up to. But loopholes intended to preserve national sovereignty have undermined its ability to act.
The pleading of the UN secretary-general, António Guterres, who called the pandemic the worst crisis the global organisation has faced since its founding, has struggled to cut through the din of national leaders making their siloed cases.
The G7 and G20 belatedly cobbled together teleconferences only for a proposed declaration from the latter to be kyboshed by the US insistence on references to the “Wuhan virus”. In the UN Security Council, Russia has blocked attempts to organise remote voting.
The 2008 crash taught us “that individuals matter”, Mr Miliband notes, recalling the G20 cast led by Barack Obama and Hu Jintao, who worked together on the crisis in a way that Washington and Beijing have this time failed to do. But while urgent measures were taken then, fundamental weaknesses in the system were never addressed, and they persist in this new crisis.
The WHO has been both lauded and criticised for its role in the pandemic, most recently on Tuesday, when Mr Trump accused it of “China-centrism” for its early work with Beijing and threatened to defund it before backtracking. The WHO is likely to come under scrutiny and demands for post-pandemic reform but it could equally make the case that its weaknesses are the result of its inability to compel states to respond in concert to health crises that respect no borders.
The future of Europe
Coming hard on the heels of Brexit, the pandemic has shaken the foundations of the European Union. Prosperous states such as Germany and the Netherlands responded slowly to pleas for help from Italy and Spain, the first southern states to be stricken by the virus.
The Italian prime minister, Giuseppe Conte, warned that the EU itself faced collapse if it could not show solidarity and help to fund the entire continent’s recovery with common debt. Europe’s leaders are “facing an appointment with history”, he told the BBC. “If we do not seize the opportunity to put new life into the European project, the risk of failure is real.”
Italian public opinion is sharply veering away from Brussels; 67% of Italians think the EU disadvantages them. Spain has warned that the euro itself risks collapse, if not the entire union. Angela Merkel conceded that the EU was facing its biggest crisis but although she agreed on triggering the European stability mechanism bailout fund she made no mention of the “coronabonds” Italy demanded.
In Hungary Viktor Orban’s seizure of extraordinary emergency power raises questions about the limits to which the union can stretch. His move to rule by decree, without recourse to parliament, the courts or elections, has barely raised a murmur in a preoccupied Brussels.
Fragile states in a developing world
The coronavirus has yet to take hold in the developing world but the potential for disaster is enormous in countries where the simple instruction to wash your hands or stay away from family members is nearly impossible to fulfill. “Africa may suffer the worst, yet it will not be the last,” Abiy Ahmed, the Ethiopian prime minister and Nobel peace laureate, warned. “If the virus is not defeated in Africa it will only bounce back to the rest of the world.”
The International Crisis Group warned of the potential of the pandemic to exacerbate present and dormant conflicts in many fragile states, fuelling migration. Rogue regimes scent opportunity in the world’s preoccupation. North Korea continued ballistic missile testing last week even as Seoul and Washington bickered over the US decision to furlough thousands of Koreans working with the military.
Climate change
Last week Britain called off the COP26 climate talks planned for November, acknowledging that the pandemic made the pre-event diplomacy required impossible. In the US, Mr Trump has issued a “get-out-of-jail-free card” for environmental violations if the perpetrator can prove the pandemic was the cause. The bandwidth for international action on climate change has never looked narrower, even though plunging oil prices and fear over the instability of the oil market have some predicting the death of fossil fuels, inadvertently saving the planet.
A bright spot: the decrease in human activity has cleared air pollution above stilled cities. “If climate change had an effect as immediate as coronavirus, I imagine you’d get a similar response,” mused Kelly Hogan, a British scientist marooned in Antarctica, the only coronavirus-free continent. “It can be frustrating because the pace of climate change is slower. But maybe it’s reassuring to see that a response of this magnitude can happen when we want it to.”
Global Britain
Britain was due to deliver its integrated review on foreign, defence and security policy in July, but this has been delayed as resources have been diverted to deal with the pandemic. Malcolm Chalmers, of the Royal United Services Institute, counsels that the pandemic is so changing the “foreign policy baseline” that it would be absurd to forge a multi-year policy without taking those changes into account.
“This is not a minor moment in international security. It’s comparable to 9/11 as a shock to the international system, in some ways bigger, but it’s going to have some very big impact on our thinking. It will generate a new debate about whether we are giving enough priority to homeland security,” he notes, which could even include new consideration of the diversity of our supply chains and a greater need for national self-reliance.
The NHS
The health service has rapidly reorganised in the face of the pandemic, making the most of being a national system in a way that bypasses many of the reforms of recent years. NHS England has taken on powers usually devolved to the GP-led clinical commissioning groups in each area. That has allowed them, for example, to negotiate a national contract with the private sector to buy up almost all of its beds and staff.
Cancer services usually undertaken on a hospital-by-hospital basis are being marshalled by central hubs, such as the Royal Marsden in London. Children’s services, too, are being centralised, with paediatric patients from across the capital being gathered in Great Ormond Street.
The way in which doctors see their patients has also changed rapidly, with the vast majority of GP and hospital outpatient appointments now conducted over the phone or via video link in a move prompted both by necessity and by funding to make it work.
Professor Martin Marshall, chairman of the Royal College of General Practitioners , said that it had taken “two and bit weeks to achieve more than we have achieved in 20 years” in adopting new technology. Many inside the NHS believe that swift change will herald a permanent transformation.
The economy
Britain will bear the scars of the outbreak for years. The national debt is likely to rise above 100% of GDP for the first time since 1963 as borrowing surpasses the horrors of the 2008 financial crisis. One legacy of the pandemic will be a bigger British state, as the public shoulders more tax to pay down the extra borrowing, to meet the consequent higher interest cost and strengthen the NHS.
“The sheer cost of the crisis is going to result in a lot more debt, so we are going to have to tax people more. In the end this has to be paid for,” Lord Macpherson of Earl’s Court, the Treasury’s former top civil servant, says. Households and businesses, too, will be weighed down by a new debt burden. They will have to borrow to get through this, despite the billions pledged by the state in job retention and business support schemes. For the young, after a decade of lost wage growth and a housing market that remains out of reach, this may be seen as one economic betrayal too far.
As Lord King of Lothbury, the former Bank of England governor, warned, many of them will say: “Why on earth is our future being put at stake to help prolong the life expectancy of older people?”
The death of cash
The coronavirus pandemic has seen the use of cash halve amid concerns that banknotes could spread the virus. It has accelerated a trend already under way for contactless and card payments, with the limit on contactless payments increased from £30 to £45.
Smartphone services such as Google and Apple Pay already ignore those limits. The move puts Britain closer in line with countries like Finland, where cash is already considered outdated. But 1.3 million British adults have no bank account, mostly the poor and elderly, and they are at risk of being marginalised in a cashless society.
Home working
The pandemic has brought an explosion in home working for those who are able to do it. Companies are learning what the benefits might be in reduced overheads, as are workers, grateful to avoid grinding commutes. Millions trying to juggle childcare and work in cramped quarters may see the workplace as an escape, while others may not want to return to it at all. A shift to more home working could spell trouble for the businesses serving the needs of office workers, from sandwich shops to newsagents.
While parents have struggled with juggling home working and home schooling, those who have long advocated more flexible working and an end to presenteeism and “face time” are celebrating a potential culture shift.
“Women are more likely to have care responsibilities, so the belief that the best work is done in the office hurts us most,” Brigid Schulte, of the Better Life Lab, says. “As the coronavirus upends every corner of our lives, I hope it also disrupts the outdated beliefs about working that hold us back.”
Radical solutions
Crises spur radical solutions. Spain has suggested one: universal basic income, first floated in Thomas More’s 1516 satirical book Utopia but revived in recent years as automation threatens the notion of work for all. In More’s book, a character suggests that a country should “provide everyone with some means of livelihood, so that nobody’s under the frightful necessity of becoming, first a thief, and then a corpse”.
Under basic income, all existing social security benefits are replaced with a flat-rate payment for all, without means testing. The idea that underpins it is that a modest income, which can be supplemented by work, reduces reliance on other benefits.
UBI pilots have been conducted from Canada to Kenya with mixed results: they have been applied either geographically or only to the unemployed. Daniel Susskind, the economist and author of A World Without Work, suggested that Britain introduce a basic income of £1,000 a month for every adult. Susskind said that he had previously approached the notion of UBI “from a position of scepticism” but “the arrival of coronavirus has changed my attitude”.
“Robots may not have taken all the jobs just yet, but the pandemic is decimating the demand that those jobs rely upon,” he said. Or as Andrew Yang, the former Democratic US presidential candidate, said of his UBI centred campaign: “I should have been talking about a pandemic instead of automation.”
And a few words of hope
Predictions are just that. President Steinmeier of Germany is one of those who refuses to give in to the gloom, calling for global unity at a moment of truly global crisis. “This is not the time for geopolitical turf battles,” he warns. “We realise that our societies will not be the same after the crisis and the world we live in will also be different. But we defy all those who pretend to know already today that it will be a poorer, colder world. Our decisions over the course of the coming weeks and months will determine what the world looks like tomorrow.”
*A terrible book, by the way. Don't be tempted to buy it, unless you're a very religious Protestant.
- Repeated Word of the Day: Gilipolla: Cockwomble(infra)
- A word new to me:-
Finally . . . .
- The Blue Mountain card company has reminded me that today is my anniversary. I have no bloody idea of what.
- A foto:-
THE ARTICLES
1. Don’t bet on a quick global resurrection. The speed of the economic recovery will be more tortoise than hare: Niall Ferguson, the Milbank Family senior fellow at the Hoover Institution, Stanford, and managing director of Greenmantle. The Sunday Times
Easter never felt more Eastery. The world economy looks dead. Can it be resurrected? Just over a century ago, amid the worst flu pandemic in history, the greatest economist of his generation fell ill. John Maynard Keynes was in Paris, attending the peace conference that would in time produce the Treaty of Versailles. Having collapsed on May 30, 1919, he wrote to his mother: “Partly out of misery and rage for all that’s happening and partly from prolonged overwork, I gave way last Friday and took to my bed from sheer nervous exhaustion, where I have remained ever since.”
He remained prostrate for close to a week, getting up only for meetings with the prime minister, David Lloyd George, and “a daily stroll in the Bois [de Boulogne]”. Did Keynes have the dreaded Spanish flu, as Lloyd George did? His biographer, Lord Skidelsky, says we cannot be sure. If so, he was lucky to survive it. According to the latest estimate, that pandemic killed 39 million people — 2% of the world’s population — dwarfing the battlefield fatalities of the First World War.
Among the victims of the pandemic were the South African prime minister Louis Botha, the Bolshevik leader Yakov Sverdlov, the German sociologist Max Weber and the grandfather of the current US president Frederick Trump.
It was shortly after his recovery and return to Britain that Keynes wrote the inflammatory tract that made him famous, The Economic Consequences of the Peace. In it he deplored the punitive terms of the Versailles treaty — which imposed on Germany an unspecified but potentially vast war reparations debt — and prophesied an inflationary economic disaster, followed by a political backlash.
Who among today’s great economists will write The Economic Consequences of the Plague? Large parts of the world’s economy have been brought to an abrupt standstill by the Covid-19 pandemic. To contain the contagion, countless businesses have been told to cease trading and millions of workers have been told to stay at home. To offset this “supply shock”, and to prevent a catastrophic downward spiral of shrinking demand and debt deflation, the world’s central banks and finance ministries are injecting even more “liquidity” — that’s money, to you and me — than they did in the wake of the 2008-9 financial crisis.
The effects of these measures can be seen in the remarkable performance of corporate stocks and bonds. As I write, the S&P 500 is just 18% below its peak on February 19. At its low point — March 23 — it was down 34%. Those who expected carnage in the low-grade, or “junk”, bond market are amazed. Who could have foreseen that the Federal Reserve would buy even junk?
Yet I feel a bit like Keynes did in 1919. Of course, I see the need to get money to those workers who will be unemployed for as long as it takes the scientists and pharmaceutical companies to find and distribute a Covid-19 vaccine. But the Fed’s current policy would appear to be a generalised bailout of investors, even those whose positions were known to be risky.
And the US Congress has, in great haste and amid frantic horse-trading, passed legislation that commits taxpayers to writing down hundreds of billions of dollars of “loans” to businesses large and small. Moreover, the legislation would appear to make more than half of American workers better off being unemployed than they would have been working.
Turning to some of today’s leading economists, I became more despondent. For the arch-liberal Paul Krugman, this is “the economic equivalent of a medically induced coma”, but the Keynesian remedy of government borrowing can provide the necessary relief and stimulus. “There may be a slight hangover from this borrowing,” he wrote on April 1, “but it shouldn’t pose any major problems.” (Was the date of this blog post significant?)
By contrast, Kenneth Rogoff — one of Harvard’s few conservative professors — wrote last week of an “economic catastrophe . . . likely to rival or exceed that of any recession in the last 150 years”, with lingering effects, potentially leading to a “global depression”. The pandemic, Rogoff argued, was akin to an “alien invasion”.
Larry Summers, who lies somewhere between those two ideologically, chose a more grisly metaphor. “Physical isolation is chemotherapy,” he said, “and the goal is remission. The problem is that chemo is . . . increasingly toxic over time.” He foresees an “accordion-like dynamic” until a vaccine is generally available in 12 to 18 months.
I am with Rogoff and Summers. This is a disaster, the economic consequences of which cannot be offset by even the biggest monetary and fiscal splurge. Over the past three weeks 16.8 million Americans — slightly over 10% of the workforce — have filed for unemployment benefits. According to our best estimates at my macroeconomic and geopolitical advisory firm Greenmantle, GDP has declined by even more and is currently running at 75%-82% of its level in the last quarter of last year.
Our estimates, based on state-by-state assessments that allow for the share of the population who can work from home, suggest a slight drop in GDP for the year’s first quarter (-1.45% quarter on quarter), followed by a lockdown-driven collapse (-10.8%) in the second quarter. We expect a partial rebound of 6.5% in the third quarter, as lockdowns are partially relaxed but social distancing measures remain in place — as they must, until a vaccine is available.
There has been loose talk from some of the banks about a “V-shaped” recovery. That prediction was wrong after 2009 and it will be even more wrong in 2020. The shape we have in mind is something like an inverted square root or a tortoise’s back. Certainly, the speed of recovery will be more like a tortoise’s than a hare’s.
The key is that in the protracted “post-lockdown, pre-vaccine” period, there will inevitably be a reduction of capacity in all sectors of the economy that depend on some level of social proximity, such as retail, air travel, education, live entertainment, hotels and restaurants.
An economy without crowds is not a “new normal”. It may be more like the new anomie, to borrow Emile Durkheim’s term for the sense of disconnectedness. For most people, the word “fun” is almost synonymous with “crowd”. The coming year will be a time of depression in the psychological as well as the economic sense.
Note that our calculations above omit the effects of lockdowns and social distancing on the demand side, including domestic consumption and investment, and the pandemic’s effect on global trade. While Krugman seems confident deficit-funded relief measures will prop up demand, I am not so sure. Panicking people are going to save as much of those benefits as they can. Broke businesses will pocket the government cash and still downsize. And don’t get me started on the enduring hit to trade.
In short, I can’t honestly wish my readers a happy Easter. In the Bible, Christ’s resurrection happens in just three days. The resurrection of the world economy will take far longer. I only wish Keynes could rise from his eternal rest to tell us exactly how long.
2. How coronavirus will change the world for ever: Catherine Philp, The Times.
This too shall pass. The curve will flatten. Humanity will survive. But already the coronavirus outbreak is taking on the shape of a once-in-a-generation watershed. As cities, states and nations scramble to outpace the disease, choices made or rushed through now may alter the shape of the world for decades to come.
The early signs point to changes that may have already been under way, a retreat from globalisation and a resurrection of the nation state as governments scramble, like hoarders in a global supermarket, to make sure that their own households are stocked.
Frontiers effectively erased in Europe have once again slammed shut, even as the southern countries worst affected cry out for a Marshall Plan from the northern industrial giants with whom they share a market and a currency. The leaders of Israel and Hungary have seized for themselves powers almost unthinkable in a democracy, sweeping aside the authority of parliament, the courts and elections. Will they ever give them back?
Last week the official American death toll passed that of China, a landmark humiliation whatever the reliability of Beijing’s figures. Autocratic China, having incubated the virus, is now in recovery and stepping into the global leadership vacuum, sending medical supplies and workers around the world to help countries newly crippled by the crisis, recasting Beijing from Grim Reaper to global saviour.
Emergencies “fast-forward historical processes”, says the historian and philosopher Yuval Noah Harari. “Decisions that in normal times could take years of deliberation are passed in a matter of hours.”
The author Robert Kaplan adds: “Crises like wars put history on fast forward. And history is now on fast forward.” So just weeks into the pandemic, are we witnessing the shape of the world to come?
The balance of power
There has been no pandemic like coronavirus in the globalised age. Since the United States emerged as the postwar global leader, it has led responses to international crises. The US, however, is not only structurally ill equipped to fight the pandemic at home, with no public healthcare system to speak of and an embedded antipathy to big government, but also its leadership is temperamentally unsuited to taking on the problems of the world.
The globe faces “an unbelievably unlucky moment in that we have the first US president since the war, maybe even longer, who is not interested in American leadership”, Anne Applebaum, the author and historian, says.
Kurt Campbell and Rush Doshi, of the Council on Foreign Relations, observe that the pandemic “has amplified Trump’s instincts to go it alone and exposed just how unprepared Washington is to lead a global response”.
Global orders have a tendency to change gradually at first then all at once, they add, suggesting that the virus could be a “Suez” moment for the US, marking its decline as a world power.
China was the first country to respond to Italy’s pleas for assistance when neighbours failed to assist it. Serbia dismissed European solidarity as “a fairytale”, declaring that “the only country that can help us is China” as it gratefully received President Xi’s largesse.
Beijing’s ability to respond was helped not only by the timing — Wuhan, where the disease started, has emerged from lockdown — but also because it was already the leading manufacturer of the masks, respirators and ventilators that the world needs to fight the virus.
The US, by contrast, has discovered that its own stocks were only a tiny percentage of what was now needed at home, much less give away abroad. Charles Parton, a former British diplomat, now at Rusi, a British think tank, called China’s efforts “a deep propaganda campaign” intended “to obscure the fact it caused the virus in the first place”.
The former foreign secretary, Lord Hague of Richmond, predicted that China would emerge from the crisis ever more powerful, with a swiftly rebounding economy. He also cited President Trump’s “extraordinary absence of global leadership” but added, chillingly, that Beijing would “gain from the new age of the surveillance state that will be summoned into existence in the coming months”.
He wrote: “Already some countries are requiring citizens to wear wrist-tags if they are too far from their phone for their movements to be tracked. And guess who will be well placed to supply the systems, software and data on a large scale?”
Kurt Campbell says that although there may be a backlash against China, Washington should be concerned that the lack of US leadership may not be forgotten. He predicts “a brutal outpouring of disappointment: how could you have done this to us?”
Authoritarianism v democracy
China’s apparent containment of the coronavirus has many states pondering the question: could they have done the same if they possessed Beijing’s autocratic powers? China’s response has been vastly aided by surveillance technology, renewing debates in the West about privacy and big data.
David Miliband, president of the International Rescue Committee, fears that “the wrong lessons are learnt” in the pandemic, that isolationism and authoritarianism triumph in the belief that they are the only way out of “the ultimate disease” of the connected world. “It’s not the case that autocracies have dealt with this well and democracies have dealt with this badly,” he says, pointing to the successes of democracies such as Taiwan and South Korea in combating the virus, as well as China’s many missteps.
Iran’s authoritarian theocracy has fared poorly, lacking capacity and adherence to science along with popular legitimacy.
Authoritarian backsliding from established democracies without welfare provision, such as India, could result in very rapid disasters.
Nationalism v globalism
Global supply chains are under urgent scrutiny, especially in the US. Peter Navarro, architect of Mr Trump’s most protectionist policies and his trade war with China, raged against European countries that imposed export controls on critical supplies such as ventilators, declaring that “in a global public health emergency, the US is alone”. Yet Mr Trump is accused of trying to buy monopoly rights over a vaccine from a German pharmaceutical company for $1 billion.
Washington is also waking up to uncomfortable statistics, such as China’s 95% share of the US market in antibiotics, drugs needed to fight secondary infections from the coronavirus. The pandemic, warns Robin Niblett, of Chatham House in London, could be “the straw that breaks the back of economic globalisation”. Stephen Walt, of Harvard University, fears that it will bring about a world that is “less open, less prosperous and less free”.
Isolationism v multilateralism
“A collective paralysis has gripped the international community. There seem to be no adults in the room,” Harari says. “If each country does its own thing in complete disregard of the other, the result will be chaos.”
The rapidity of the American withdrawal and a growing assault on multilateralism has left international structures with little power.
The World Health Organisation (WHO) has legally binding protocols on pandemic handling and reporting which every nation in the world has signed up to. But loopholes intended to preserve national sovereignty have undermined its ability to act.
The pleading of the UN secretary-general, António Guterres, who called the pandemic the worst crisis the global organisation has faced since its founding, has struggled to cut through the din of national leaders making their siloed cases.
The G7 and G20 belatedly cobbled together teleconferences only for a proposed declaration from the latter to be kyboshed by the US insistence on references to the “Wuhan virus”. In the UN Security Council, Russia has blocked attempts to organise remote voting.
The 2008 crash taught us “that individuals matter”, Mr Miliband notes, recalling the G20 cast led by Barack Obama and Hu Jintao, who worked together on the crisis in a way that Washington and Beijing have this time failed to do. But while urgent measures were taken then, fundamental weaknesses in the system were never addressed, and they persist in this new crisis.
The WHO has been both lauded and criticised for its role in the pandemic, most recently on Tuesday, when Mr Trump accused it of “China-centrism” for its early work with Beijing and threatened to defund it before backtracking. The WHO is likely to come under scrutiny and demands for post-pandemic reform but it could equally make the case that its weaknesses are the result of its inability to compel states to respond in concert to health crises that respect no borders.
The future of Europe
Coming hard on the heels of Brexit, the pandemic has shaken the foundations of the European Union. Prosperous states such as Germany and the Netherlands responded slowly to pleas for help from Italy and Spain, the first southern states to be stricken by the virus.
The Italian prime minister, Giuseppe Conte, warned that the EU itself faced collapse if it could not show solidarity and help to fund the entire continent’s recovery with common debt. Europe’s leaders are “facing an appointment with history”, he told the BBC. “If we do not seize the opportunity to put new life into the European project, the risk of failure is real.”
Italian public opinion is sharply veering away from Brussels; 67% of Italians think the EU disadvantages them. Spain has warned that the euro itself risks collapse, if not the entire union. Angela Merkel conceded that the EU was facing its biggest crisis but although she agreed on triggering the European stability mechanism bailout fund she made no mention of the “coronabonds” Italy demanded.
In Hungary Viktor Orban’s seizure of extraordinary emergency power raises questions about the limits to which the union can stretch. His move to rule by decree, without recourse to parliament, the courts or elections, has barely raised a murmur in a preoccupied Brussels.
Fragile states in a developing world
The coronavirus has yet to take hold in the developing world but the potential for disaster is enormous in countries where the simple instruction to wash your hands or stay away from family members is nearly impossible to fulfill. “Africa may suffer the worst, yet it will not be the last,” Abiy Ahmed, the Ethiopian prime minister and Nobel peace laureate, warned. “If the virus is not defeated in Africa it will only bounce back to the rest of the world.”
The International Crisis Group warned of the potential of the pandemic to exacerbate present and dormant conflicts in many fragile states, fuelling migration. Rogue regimes scent opportunity in the world’s preoccupation. North Korea continued ballistic missile testing last week even as Seoul and Washington bickered over the US decision to furlough thousands of Koreans working with the military.
Climate change
Last week Britain called off the COP26 climate talks planned for November, acknowledging that the pandemic made the pre-event diplomacy required impossible. In the US, Mr Trump has issued a “get-out-of-jail-free card” for environmental violations if the perpetrator can prove the pandemic was the cause. The bandwidth for international action on climate change has never looked narrower, even though plunging oil prices and fear over the instability of the oil market have some predicting the death of fossil fuels, inadvertently saving the planet.
A bright spot: the decrease in human activity has cleared air pollution above stilled cities. “If climate change had an effect as immediate as coronavirus, I imagine you’d get a similar response,” mused Kelly Hogan, a British scientist marooned in Antarctica, the only coronavirus-free continent. “It can be frustrating because the pace of climate change is slower. But maybe it’s reassuring to see that a response of this magnitude can happen when we want it to.”
Global Britain
Britain was due to deliver its integrated review on foreign, defence and security policy in July, but this has been delayed as resources have been diverted to deal with the pandemic. Malcolm Chalmers, of the Royal United Services Institute, counsels that the pandemic is so changing the “foreign policy baseline” that it would be absurd to forge a multi-year policy without taking those changes into account.
“This is not a minor moment in international security. It’s comparable to 9/11 as a shock to the international system, in some ways bigger, but it’s going to have some very big impact on our thinking. It will generate a new debate about whether we are giving enough priority to homeland security,” he notes, which could even include new consideration of the diversity of our supply chains and a greater need for national self-reliance.
The NHS
The health service has rapidly reorganised in the face of the pandemic, making the most of being a national system in a way that bypasses many of the reforms of recent years. NHS England has taken on powers usually devolved to the GP-led clinical commissioning groups in each area. That has allowed them, for example, to negotiate a national contract with the private sector to buy up almost all of its beds and staff.
Cancer services usually undertaken on a hospital-by-hospital basis are being marshalled by central hubs, such as the Royal Marsden in London. Children’s services, too, are being centralised, with paediatric patients from across the capital being gathered in Great Ormond Street.
The way in which doctors see their patients has also changed rapidly, with the vast majority of GP and hospital outpatient appointments now conducted over the phone or via video link in a move prompted both by necessity and by funding to make it work.
Professor Martin Marshall, chairman of the Royal College of General Practitioners , said that it had taken “two and bit weeks to achieve more than we have achieved in 20 years” in adopting new technology. Many inside the NHS believe that swift change will herald a permanent transformation.
The economy
Britain will bear the scars of the outbreak for years. The national debt is likely to rise above 100% of GDP for the first time since 1963 as borrowing surpasses the horrors of the 2008 financial crisis. One legacy of the pandemic will be a bigger British state, as the public shoulders more tax to pay down the extra borrowing, to meet the consequent higher interest cost and strengthen the NHS.
“The sheer cost of the crisis is going to result in a lot more debt, so we are going to have to tax people more. In the end this has to be paid for,” Lord Macpherson of Earl’s Court, the Treasury’s former top civil servant, says. Households and businesses, too, will be weighed down by a new debt burden. They will have to borrow to get through this, despite the billions pledged by the state in job retention and business support schemes. For the young, after a decade of lost wage growth and a housing market that remains out of reach, this may be seen as one economic betrayal too far.
As Lord King of Lothbury, the former Bank of England governor, warned, many of them will say: “Why on earth is our future being put at stake to help prolong the life expectancy of older people?”
The death of cash
The coronavirus pandemic has seen the use of cash halve amid concerns that banknotes could spread the virus. It has accelerated a trend already under way for contactless and card payments, with the limit on contactless payments increased from £30 to £45.
Smartphone services such as Google and Apple Pay already ignore those limits. The move puts Britain closer in line with countries like Finland, where cash is already considered outdated. But 1.3 million British adults have no bank account, mostly the poor and elderly, and they are at risk of being marginalised in a cashless society.
Home working
The pandemic has brought an explosion in home working for those who are able to do it. Companies are learning what the benefits might be in reduced overheads, as are workers, grateful to avoid grinding commutes. Millions trying to juggle childcare and work in cramped quarters may see the workplace as an escape, while others may not want to return to it at all. A shift to more home working could spell trouble for the businesses serving the needs of office workers, from sandwich shops to newsagents.
While parents have struggled with juggling home working and home schooling, those who have long advocated more flexible working and an end to presenteeism and “face time” are celebrating a potential culture shift.
“Women are more likely to have care responsibilities, so the belief that the best work is done in the office hurts us most,” Brigid Schulte, of the Better Life Lab, says. “As the coronavirus upends every corner of our lives, I hope it also disrupts the outdated beliefs about working that hold us back.”
Radical solutions
Crises spur radical solutions. Spain has suggested one: universal basic income, first floated in Thomas More’s 1516 satirical book Utopia but revived in recent years as automation threatens the notion of work for all. In More’s book, a character suggests that a country should “provide everyone with some means of livelihood, so that nobody’s under the frightful necessity of becoming, first a thief, and then a corpse”.
Under basic income, all existing social security benefits are replaced with a flat-rate payment for all, without means testing. The idea that underpins it is that a modest income, which can be supplemented by work, reduces reliance on other benefits.
UBI pilots have been conducted from Canada to Kenya with mixed results: they have been applied either geographically or only to the unemployed. Daniel Susskind, the economist and author of A World Without Work, suggested that Britain introduce a basic income of £1,000 a month for every adult. Susskind said that he had previously approached the notion of UBI “from a position of scepticism” but “the arrival of coronavirus has changed my attitude”.
“Robots may not have taken all the jobs just yet, but the pandemic is decimating the demand that those jobs rely upon,” he said. Or as Andrew Yang, the former Democratic US presidential candidate, said of his UBI centred campaign: “I should have been talking about a pandemic instead of automation.”
And a few words of hope
Predictions are just that. President Steinmeier of Germany is one of those who refuses to give in to the gloom, calling for global unity at a moment of truly global crisis. “This is not the time for geopolitical turf battles,” he warns. “We realise that our societies will not be the same after the crisis and the world we live in will also be different. But we defy all those who pretend to know already today that it will be a poorer, colder world. Our decisions over the course of the coming weeks and months will determine what the world looks like tomorrow.”
*A terrible book, by the way. Don't be tempted to buy it, unless you're a very religious Protestant.
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