The advice of the scientists hired by the UK government and the governments interpretation of that advice seems to be at odds with the advice of scientists in many other countries. That must, at the very least, lead to some serious questions being asked about UK policy.
The first, and most important, question is what is being done by countries that are successfully controlling the spread of the virus and why is the UK not following very similar policies? In China they seem to have got on top of a wide spread of infection and in Singapore they seem to have controlled and managed the outbreak and stopped it growing exponentially. The World Health Organisation has looked hard and long at that experience and it is telling governments that it is important to test as many people as possible, to put people who have tested positive into isolation and to control and limit social interactions of those who don’t show any signs of infection but are at risk. The UK government decided to ignore that advice. Mr Johnson’s government felt it appropriate to allow the Cheltenham race festival to go ahead bringing 60,000 people a day together from all around the country and from outside the country. It thought it no problem for Premier League football to go ahead with away fans travelling. The government left it to the league itself to call off fixtures. As I write the government is telling people over 60 or with health problems not to go on a cruise – which presumably means that they think it is fine for anyone else to do so. In France the government decided that it was scientifically advisable for sporting events to be cancelled at an early stage. Why is the scientific advice different on this side of the channel? Could it possibly be because our government is being advised by out of their depth ‘nudge’ theorists whilst other countries have hired more conventional advisers with a better grasp of the problem?
Then there is the question of preparation. We have been assured that the NHS will get whatever it needs. Which is great. What we haven’t been told is how. What exactly are the practical plans to make more doctors available? If it is proposed to use retired doctors and nurses despite them being in a high risk group what are the measures that are being taken to contact them, brief them and retrain them? How many intensive care beds are currently available? How many respirator units? Why has it taken so long for the government to think about putting measures in place to increase supply of this kind of specialist equipment and of simple things like hand sanitisers?
Amongst the many issues of preparation is that of testing. This is an absolutely crucial issue yet in the UK the public are being told they will only be tested if they are ill enough to be admitted to hospital. How can we know how many people have caught the disease if we only test a small proportion of people? How can we plan if we don’t know the extent of the transmission? How are people to know whether and when it is OK for them to go back to work or to visit elderly relatives if they don’t know whether they’ve had the disease and recovered or not? What is the reason for this policy? Is the country short of testing kits and if so what is being done to get hold of more? Or is it a misplaced attempt at massaging numbers?
Those health related questions are, of course, the most serious and immediate ones. But the economic and social impact of the pandemic could be every bit as consequential. Poverty kills. And a lot of people could end up an awful lot poorer as a result of the economic consequences of the coronavirus.
When more people stay at home there is an obvious immediate impact on the economy. The first businesses to hit problems are travel companies, hotels, restaurants, shops, the entertainment industry, events organisers and sports companies. Anyone working in these sectors is highly likely to lose work and income. That then impacts on other sectors like insurance, banking, and retail. A loss of income for all those millions of people means bankruptcies, unemployment, and stagnation. Once that happens it triggers a multiplier effect which must inevitably run throughout the economy and trigger a fresh round of misery.
Stock markets reacted quickly to that risk by collapsing. We know from the 2007-8 financial crisis how quickly a panic in one financial sector can spread to others. It won’t be long before loans become hard to pay back and banks and financial markets start to encounter problems of liquidity. Those problems could be worse than they were in 2008 and even longer lasting.
Faced with the start of such events a number of governments and central banks have taken some significant but inadequate and ill co-ordinated actions. In the UK, for example, the Chancellor announced a package of help for some of those impacted by the crisis at the same time as he was busy injecting £30 billion back into the economy in his budget. The Bank of England dropped interest rates to one half of one per cent on the same day. The judgement of the markets on these actions was swift and clear. The markets fell by another ten per cent.
There are two reasons for this. One is that this is a global problem and it requires global economic action not the action of one individual country to deal with it. The other is that the measures taken weren’t remotely adequate to meet the potential need. There is no point in cutting interest rates to encourage businesses to borrow if there are very few customers out there and those businesses need every penny they can find to simply cover their debts. No one is going to borrow and invest when they are worrying about simple survival as an individual and as a business.
What people and what businesses need in these circumstances is reliable income and a method of getting through months of hard times. It is not enough to tell workers that they will be able to claim sick pay or get benefits. They need something more substantial and quickly.
If next to no one is going out to socialise then self-employed taxi drivers are out of work. If people won’t go to the pub or to sporting events then casually employed gig economy workers are the first to go. If travel companies aren’t moving people then they lay off staff at the same time that hotel workers are losing their jobs. Then there is the rather important issue that we need people who are even a little bit sick to stay at home. We really don’t want slightly ill people forcing themselves to drag themselves to work delivering parcels so that they can support themselves and their family only to find that they are also carrying the coronavirus to front doors. Asking millions more people to rely on Universal Credit and having to battle with the tender mercies of that system is not a very clever way of controlling the spread of the virus. Or of providing people with secure and steady incomes during a crisis that is not of their making. Or of shoring up an economy against the risk of a health crisis turning into a full-blown economic slump that creates serious misery for millions.
When people are worrying about how to pay their rents and buy their food then the only adequate response is to announce a temporary citizens’ income that everyone can rely on and which is paid with the minimum of bureaucracy. Businesses need something similar or they will simply not exist when the health crisis is over. Then there is the small matter of financing health services, pharmacies, care services, local government and volunteer groups to steer us through a period of massive additional demand on their services.
That, of course, costs money. Yet national governments are currently carrying high levels of debt that they built up whilst they were dealing with the 2008 financial crash. Few national governments are in a healthy position to simply run negative budgets for months in order to see their countries through this crisis. That means that the only way of financing the necessary government deficits is for central banks to print money and make it available to central governments.
If one country does this at a time of high demand in the economy the only result is inflation and a worse crisis. At a time when there is a huge risk of an international slump all the risks are in the opposite direction. If all the major economies in the world engage in a planned programme of creating money at a time of falling demand then it carries little or no risk of inflation and avoids the very real risk of a worsening collapse running more virulently through the world economy than the virus is doing through the world population.
Co-ordinated expansionary policies would of course be massively more effective if they also focus on investment for the future. Especially if that investment was in technology that encouraged the decline in consumption of fossil fuels and plastics.
The gap between this description of the only necessary and workable policies for successful economic survival and the thinking of most Western governments is frightening. Once a recession turns into a proper slump it requires thoughtful direct action by far sighted governments who have a clear vision of how they are going to get the economy back to work. What we have instead is a bunch of narrow-minded nationalists who have swallowed myths about free markets and low taxation economics and don’t have any intellectual tools that might enable them to properly understand how to react to a full blown international economic crisis.
I don’t know what worries me more. A government that seems to be making up its own scientific theories about a health crisis whilst ignoring policies that have been used effectively elsewhere. Or a government that is stumbling about in confusion at the start of another major shock to a fragile unmanaged global economy. Oh, hang on. Perhaps I do know what worries me more. Governments that will listen to scientific evidence that tells them thousands of people must die in a pandemic before we gain herd immunity but won’t listen to scientific evidence that millions are going to die in an environmental emergency if we don’t act more urgently on that.