What we make of it.
This opinion piece has been written as the events the Covid-19 pandemic have unfolded, updates may follow according to the mood and motivation of the writer.
Three years of a bull market has been wiped out in seven days; people have been dying in what resembles a Hollywood apocalypse movie; one third of humanity lives in confinement; Zoom (a videoconference app) is worth more than the entire US airline industry or General Motors.
What a time to be alive, and the hits keep on coming.
Life is not about what is given to us, but about what we make of it. A decade from now, assuming the world goes back to what we refer to as “normal”, we would all be inquiring if our response to this could have been any different. Ironically, 2020 marks the 100th anniversary of the Spanish Flu pandemic: selfishness, xenophobia and finger-pointing were our reaction to the crisis then, they need not to be our response now.
Our generation has been afflicted by poor leadership, and a dangerous ability to outsource tasks that used to require our collective mobilization to a small cohort of people: wars to hired guns, disease to nurses, etc. This made us vulnerable to non-discriminatory threats, such as this pandemic, that require a joint response and now is the time to face that harsh reality. Let’s start with the issue in our leadership.
Poor leadership is best demonstrated in the form of the Leader of the Free World responding to the crisis by closing borders, as he believes all evil comes from foreigners, and focusing his full energy on solely trying to boost the markets, as he has declared the S&P the only metric for his term’s success. European countries have not received any heads-up for the travel ban and so far there has been no talks about a Manhattan Project to solve this mess — this should not come as a surprise in a world where the United States acts as if it no longer has any allies or friends, only interests. Judging by his Tweets it is clear that the current president has acknowledged the mere existence of a problem not as people fell ill, but when the Dow started to plummet. I wonder if at that moment he thought about building a wall around Europe or China.
At Crisis Management 101 you are told to first acknowledge the issue, then take responsibility and finally overcorrect for it: a sound course of action taught to people in leadership positions for when things go wrong. So far, most of our governments have been busy looking for a political silver lining or were too afraid of making a mistake, which placed them in analysis paralysis. We are now seeing first-hand, and some of us are paying for it literally with their lives, how perfection is the enemy of good in times of emergency.
The analogy that comes to mind is the AIDS crisis in the 1980’s. Back then, we also used to say that it was foreigners that brought the plague to our land or that it only affected a precise category of the people engaged in a “risky behavior” — the homosexuals. Today, anyone with hands or lungs outside of his home can be considered as “engaging in risky behavior” and as much as some want to point the blame to China it is hard to make the case that the virus cares about where you come from, and it is still too soon to be casting blame… What we can do is educate the population on how to stop the disease from spreading and make everyone realize that they need to take this stuff seriously. In the late 80’s, Magic Johnson contracting HIV was the pivot moment that made everyone understand that they are also a target. My hope was that now this might have been Tom and Rita Hanks testing positive for the virus in Australia, hope that did not survive the scenes of drunk spring breakers in Florida dancing and kissing or Parisians holding hands in parcs last week. I guess we are still in search for our 2020 Magic Johnson, no pun intended.
The second burden is our seeming inability to collectively rise to the challenge. Since the end of the Cold War, we have lost the common enemy to unite us against, and terrorism is much more effective at making us fear guys with beards than to unite us against barbarity. Reagan famously said about world unity that “Perhaps we need some outside universal threat to make us recognize this common bond. I occasionally think how quickly our differences worldwide would vanish if we were facing an alien threat from outside this world”. This health crisis provides us with an opportunity to show that events can be not exclusively divisive — as they have been for the past couple decades — and that in the face of adversity we can appear united and resolute. This should be the mother of all wake-up calls for ourselves, our institutions and our countries.
Sadly, thus far the lack of general coordination is dearly missed within each country as well as internationally. Historically, multiple pandemics killed people in times when we did not have planes, caravans, or even the notion of “migrants”. We started moving faster and on longer distances, and yet infectious diseases were kept at bay as we also starting washing our hands and drinking clean water: information has proven to be a much more powerful tool to stop the outbreaks than isolation. Technology has also delivered the promise of a better health: we no longer ask our gods why the plague afflicts our land, but sequence the entire genome of the new virus in two weeks and create a reliable test for it. But then somehow we fail to distribute the tests to everyone even in first-world countries, fail to orchestrate a harmonized response and communicate contradictory information to the public. Politics and human nature have become the biggest enemies of our progress, and defiance makes us spend an awful lot of time hesitating and seeing what the others would do, as they can neither trust one another nor rely on each others’ help. The leaders of this world were all presented (I believe as early as end of 2019) with the choice to be the first one to ring the alarm and act — but none of them has seen a first-mover advantage to act.
Here’s why distrust makes it politically hard to have a timely and appropriated response to a new virus in an isolated country:
- Having to close down your cities when you think you will get no help from your neighbors is really scary.
- Treating all information from abroad as manipulation makes any alerts unreliable and distrusted by the governing bodies.
- Admitting that you may have a country-wide health problem and that you may need international help, when you constantly believe to be on the brink of a foreign invasion, is virtually impossible.
As of March 23rd, Russia has reported fewer than 300 cases.
The pandemic has the potential to be the ‘Suez moment’ for the United States: when the gradual loss of power and prestige takes shape and is no longer disputable. We already start to see China emerge as a leader in this crisis, as we forget that it had delayed the response to begin with. Beijing’s ability to lead is, to an extent, propped by the reality that much of what is required to contain the spread is being made in China but now the regime’s response is also being praised for its effectiveness.
This is such a rapidly moving infection that losing a few days is bad, and losing a couple of weeks is terrible. Losing two months is close to disastrous, and that’s what we did.
— Ashish Jha, director of the Harvard Global Health Institute.
Our best choice here is to overreact and adopt drastic remedies, commensurate with the severity of the case. The downside of doing so is relatively small when the upside has the potential to be huge: it is, for once, an inexpensive investment to make in your personal health, and no one is making fun of Romney for self-quarantining anymore. Physical distancing is today particularly easy, considering that our ability to stay home has never been so great: this is literally what the internet was built for. Personally and so far, the pandemic experience has been as worrisome as fertile: I am not sick but remain concerned about it, and all the time well-spent in confinement feels like an investment in my future well-being.
Side note: Wikipedia is probably one of the last bastions of what’s wonderful about the internet. Today, the internet is more associated with idiots targeting epilepsy-prone kids with flashing videos.
The economic perspective is nonetheless grim. A prolonged period of lost demand coupled with a collapse of the healthcare system is a recipe for prolonged recession. We are not eating and drinking in May all the burgers and coffees we are didn’t get in April, but companies like McDonalds and Starbucks have the means (i.e. cash on their balance sheet) to weather this storm. In the same way, one’s ability to divest will prove to be a great weapon: if you have or can create quickly create cash, you will get access to cheap assets (think machinery, property or talent), you will also be able to retain your workers and not dilute your organizational knowledge, and could easily bulk up marketing spending after this storm. It is the smaller players that will go through a wave of lay-offs and, for some of them, chapter 7 closures. Worrying about the big players makes even less sense now that several governments are talking about a bailout; and if we are truly believing in the supremacy of capitalism we should be Darwinian and let some companies fail. Giving taxpayer money to the same people who spent theirs on share buybacks in the past decade is against all moral principles of fairness: capitalism is indeed harsh as it rewards the fittest and adaptive ones — let’s not put the short-sighted and greedy corporations of this world on artificial life support.
This too shall pass, and scalability is always of great importance in downturns. For companies like Uber and AirBNB the costs of folding their services and going into hibernation are almost negligible. It is much harder to do so when you have a factory to run or have workers on your payroll. There is no reason for us to travel or eat less after this is over, so whoever is able to quickly scale down and reopen first can come on top of this. Big Tech is once again the obvious winner: not only we spend more time online now and they can hit “pause” pretty easily for their services (Tim Cook will be applauded for outsourcing his fixed costs) but as the valuation of all startups is shrinking, the tech giants with loads cash in their chests can engage in compulsive potential-competitor buyouts, for much cheaper.
Overall, after this crisis we will probably end up with:
- More market concentration
- More economic inequalities within industries and people
- More distrust towards institutions and media
- More political divide and finger-pointing
- More power in the hands of the few
As if we needed that.
We already see some people looking at the Chinese autocracy as a model to follow for when a collective response is needed — ignoring that it is the same autocracy that props-up lies within its system and comes at a personal freedom costs that most of us are not ready to bear. The people tend to turn to anger after being threatened and will be keen to elect strong men that are just the facade of power-hungry demagogues. Democracies need not only to contain the epidemic better but also tell a better story than do the autocrats — the survival of the democratic system might depend on this. This comes back to the notion of the need for coordination, both political and economic. As we have exhausted the bullets in the interest rate policy gun, fiscal stimulus will have to be our weapon of choice. A joint announcement of a quantitative easing program by the Fed, the ECB, the World Bank and China is the way to go: we see that in today’s mess the Fed announcing its own QE program is simply drowned in the infotsunami that the pandemic has caused and barely calms the acute stroke that the markets are going through.
We realize now that governments do matter, and that firing 80% of the CDC staff to showcase better short-term economic health does have an impact in out long-term well-being. We also see how our inegalitarian and divided society struggles to combat outside threats, as it is hard for us to cooperate with people with whom we have nothing in common.
Piketty has claimed that economic inequalities that come after deregulation of free markets tend to reduce only during violent events, explicitly exemplifying plagues in his bestseller. More than a Magic Johnson case to make us all take this seriously, we need this economic crisis to be our economic policy “Saul on the road to Damascus” moment: we have to acknowledge that the Chicago school has had too much influence over the White House policies, that a billionaire does not get five haircuts a month so his wealth does not trickle down on the rest of us, and that if let to themselves market forces wreak havoc on the institutions on which they rely and result in the few capturing both economic and political power.
As all the aspects of our lives are being touched by this pandemic, collectively behaving in a way for us not feel ashamed when time will come to talk about it, and using this crisis as the stimulant we need to reshape our political and economic systems is how we can come out on top of it. The optimists should see the opportunity to start with a clean sheet of paper, and we should all seize it. Now is the time to unbundle economic growth from pollution, to change the metrics we use to measure progress and to redesign capitalism with fairness in mind. And seriously, who still believes it make sense to keep funding fossil fuels and trying to make all our stuff for cheap in Asia?
OST
