I am far from alone in being worried right now. I know that. Quite reasonably people are fearful at many levels. And so am I.
At a purely personal level I am relieved that I have, almost certainly, had coronavirus. It's not fun, and I know this does not deliver complete immunity (contrary to government expectations) but at least, for me, it's likely to be done. That knocks one worry off my list. But many remain.
I can do nothing about the coming healthcare crisis in the UK. I cannot stop the many thousands of deaths that will happen as a result. But I can think about the economic consequences of all this.
Three things worry me there. One is the poverty of many of the claims being made about this crisis. I have already this morning addressed the claim that inflation will follow from government cash creation. It will not.
In that same piece I also tackle the claim that taxes must rise to pay for this crisis when the economy starts again. Nothing will make our recovery worse than that: for some time to come tax increases will be the last thing that the UK, and many other countries will need.
Conventional logic, which had already delivered us low or no wage income growth, rising debt mountains, austerity, an almost useless social safety net and an NHS denuded of resources, is not what we need now.
Conventional thinking is, then, the first concern I can address.
The second is that we need fresh thinking, more than ever. This explains why modern monetary theory will be featuring here quite often right now. Many regular readers might be familiar with it, but blog traffic is running at about double or more of normal rates at present: repetition for the sake of new readers will do no harm.
In this context I am also now framing my thinking on what I am calling a post-coronavirus consensus (PCC). Once this crisis is over we will need a new lens through which to view the world so that we can properly understand what we need to do. Of course, millions of others will also need to be engaged in this process.
The third thing that worries me is the scale of the loss we are suffering. I am not just talking of the individual personal tragedies, although they of course overarch all this. I am also mourning lost businesses. Lost jobs. Lost dreams, hopes and expectations. Ambitions thwarted. And intellectual capital lost.
These things matter enormously. As we are now told to expect lockdown of six months I worry for children with education that will be harmed. I also worry about people's mental health. Even as an introvert, happy to spend considerable time alone writing, I foresee the stress in this. But I can do little about these things, again. What I am worried about is the loss of economic capital.
Some of this is financial: the resources of many (and maybe most) businesses will be depleted or simply drain away as this crisis goes on. The business mortality rate from the simple failure of cash flow as inability to meet any costs at all increases will be staggering, most especially if lockdown is for six months. Any chance of any return to the BC (before coronavirus) world is impossible to imagine in that case. What this suggests is that the government is simply not doing anything like enough right now to prevent these failures.
But it's actually worse than that. It's not just the loss of businesses that matters. What we also lose is all the learning that is implicit in them. All the teams that will be shattered will take time to rebuild. All the systems that are lost will have to be recreated. And the networks that have underpinned the creative ability of many organisations will disappear as well.
Don't get me wrong: I strongly suspect that some brilliant new ideas will emerge from lockdown. But the most brilliant of ideas also need delivery mechanisms, and a functioning economy into which they can be launched. My fear is that this will not be possible.
Something quite horrible is now happening. It may be necessary but it is still horrible. And that horrible thing is that the human capital that has been invested in how our organisations work is being lost in too many cases. It will eventually recover. And when it does our ways of working will be different - which some organisations will seek to exploit, without a doubt - but what matters most is that we are going to suffer the most massive loss of knowledge of how a great many of us, in our various and different ways, work to make up the teams that make society function. And in many ways that worries me most of all right now.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
My main worry is the International aspect. (and one few are discussing)
The global single-source just-in-time supply chain has been shattered. I cannot see how it will reboot in less than 24 months.
The likely civil unrest in many places will make some supply items near impossible to source
The loss of International consensus on supply. e.g. Export bans of staple foods, PPE, Drugs and other strategic goods are rife.
The circulation of money in international markets is stalled, this may well result in refusal to ship goods
While printing money may be OK from a national perspective, What if another country CHOOSES to take a different view, Say they insist on being paid in Yuan, or wheat, rather than $ bonds
Some trading blocs look likely to fracture. e.g. The Euro countries were fighting over deficits before Covid. The crisis has ratcheted up the stakes
Absolutely right. We are now way past the point where large-scale easy movement of people can just restart. Politically that’s just not going to fly (and that’s not just in the UK). Health checks at borders will be very much back in vogue.
Equally populations just won’t buy the idea of countries not being more self-sufficient. That might not necessarily be a good thing from the perspective of economic efficiency but the politics don’t stack up.
All the principles underlying the single EZ currency are now gone. The EU is going to discover that the four freedoms are very much divisible.
I’ve no idea what the answer is. And maybe all things considered embracing it might be the least bad option.
But you are right that it’s almost as if no one has noticed the international side of this.
“Some trading blocs look likely to fracture”..got to agree re European union, this will prove the larger countries have used it for their own benefit over the years..when it comes to supporting the weaker southern states the concept of a federal europe becomes wholly unattractive for them. This is very obvious now..the Union was always going to fail at some point, its a flawed concept beyond just being a bloc that just facilitates trade and security across the region.
I very much doubt it will fall apart
But it may change radically
The EU is phenomenally good at compromise
What you are describing is a gigantic bonfire of sunk costs — the future that people imagined that they were going to have in a growth economy — their plans, their wealth, their work arrangements and relationships, the routines of everyday life — they are all breaking down. Of course the grief, the anguish, the terror is already enormous and will keep growing for some time. But grief is a psychological process of letting go of the past — and we need to do that in a hurry.
Thinking of Maslow’s hierarchy of needs now the immediate priority during and after the healthcare crisis is that people are fed. That is a practical focus and it is by no means obvious that in the UK that it can be guaranteed. There is a real danger that food will rot in the fields while people go hungry — and people are already going hungry. Currently this is all in the hands of supermarkets. But one third of UK food which comes from the EU is in danger of not arriving – not only because of Brexit but because the pandemic in Spain, France, Italy is huge.
Millions of people are going to have to start again and lots of them need to start again in the fields helping farmers, many of whom are getting on in years and very vulnerable. They will need labour to get in the harvests. MMT is useful but so too at this time is Quesnay,s insight about wealth being produced by farmers.
Wage inflation may be needed in the agricultural sector this summer….
Bit more than that I’d think, the pickers will need to maintain social distancing so they’ll need more canteens, more dormitories, more showers than before, together with a whole lot more transport to the site from their points of origin and from there to the fields in question. I hear nothing about these facilities being designed and built or planned for. Further, paying for these extras may well make your meat and two veg beyond the price range of many, certainly those trying to pay bills and feed themselves on Sunak’s miserly £94 a week. Unless producers are granted massive subsidies by govt (and they certainly ought to be by any govt contemplating bailing out the likes of Branson) then we’ll have to be tightening our belts this year. In any population made largely obese by collective reliance on processed food and cheap carbs, reducing the amount of fresh fruit and veg available is clearly absurdly unhealthy policy. On that lamentable basis alone, then, we should probably plan for it.
Hi Richard,
Dr Harries said: “This is not to say we would be in complete lockdown for six months.” I took some hope from that, meaning the economy would be functioning at some level before that. I hope you continue to feel better.
I am hoping that’s right – but why say six months then?
Getting better – energy levels ae rising
Your lament of all that is being lost has inspired me, maybe this is one of the ideas that will emerge. You said that the current crisis is going to have a huge effect on people’s mental health, which you can do nothing about. My reaction is “we can”.
I chair a mental health collective advocacy charity. We work to ensure the provision meets the need within mental health. It has just struck me that our members are the leading experts in coping with the added problems this emergency brings to existing mental health problems. They are doing it right now. How they are learning to cope can and should, be shared across the country to help with the emerging mental health problems you have foreseen.
Richard, you may feel powerless to do anything about the state of peoples mental health Be assured just by highlighting it you have started something that will. Thank you.
Thanks
There will be suicides. There will be an increase in domestic violence and abuse. There will be marital breakdowns. There will be severe mental health problems. There will be a deterioration in the physical health of the nation. There will be interrupted education of the young. There will be bankruptcies. These problems will be worldwide, not just British problems. The effect on the developed nations will be severe. The effect on the poorer less developed nations will be catastrophic.
The problems are worldwide and the therefore, the remedies, the cures should be worldwide too. We must not think in terms of each country finding its own solutions: surely there must be a co-ordinated international effort. But I doubt whether there will be. It will be every country for itself. Make America Great Again will be the watchword in Trump’s USA. Johnson will press ahead with a policy motivated by British Exceptionalism. Who imagines Bolsonaro, Modi, Putin, Orban will become internationalist in outlook? And what of the EU?
Something I picked up by accident – it doesn’t seem to have in the news here – is that “Thomas Schaefer, the finance minister of Germany’s Hesse state, has committed suicide apparently after becoming “deeply worried” over how to cope with the economic fallout from the coronavirus” (on I think Saturday 28th). (See https://www.euractiv.com/section/economy-jobs/news/german-minister-commits-suicide-after-virus-crisis-worries/ ). He won’t be the last.
That is worrying
Poor guy
As I understand it, Hungary’s parliament has already given Orban the power to rule by decree for an indefinite period. https://www.theguardian.com/world/2020/mar/30/hungary-jail-for-coronavirus-misinformation-viktor-orban Let’s see if he lays down that power once the emergency has passed.
Read my lips – no new taxes. No redistribution either then? The effects of inequality are going to be profound.
I said no net new taxes
I’m entirely happy for social poliucy through taxation to continue
But we need no net new taxation
I will be surprised if the lockdown lasts much beyond Easter.
The ‘tests’ when widely deployed will ‘reveal’ that a large proportion of the population is already had the n-cov virus (or at least a n-cov virus) – are they accurate? That is not proved.
The expected epidemic has achieved what it was supposed to – be the black-swan excuse for the over inflated stockmarket bubble to burst, relieving many a ordinary saver of their savings – without them blinking an eyelid or raising any ruckus (it really is comical).
The crises has also handed unprecedented legal powers to the executive – more than when we were under threat of invasion!
It has achieved the final fragmentation of Society that was always the hotbed of pushing back against oppression.
Conditions are now in place to introduce massive AI and Robotics wherever planned with mass redundancies for that reason avoided. Productivity will leap! Corporate profits too! And they will pocket all of the gains.
As for these needing extra care and ventilators and such – the Wuhan experience shows it can be done fast, and guess what, they now have plenty of equipment AND trained experienced staff available to travel to anywhere in the world within days – i expect that emergency hospital in London will easily be provisioned.
Don’t believe me? They arrive as we are bam-bozo-lled!
https://twitter.com/samharveyrural/status/1244328444994949124
Better learn some Chinese – thankyou and please would be good manners.
DunGroanin’ – I hope you’re right. I’m watching on in horror as government’s across the world take executive power to a new level with no plans in sight to revoke them once this panicdemic is over. I see only the movement of wealth yet again to those least in need of it. We have “Covid-22” where it is impossible to get access to the very instrument the government has promised will help out SMEs with easy-access loans – deliberately worded by the government to exclude all but the wealthiest of companies. The odious Odey has harvested over £115million from the coronavirus market upheaval, and no doubt many more millions will be made by him and his ilk. Where is the opposition in all of this? Where are the voices of reason in the media? Where is the scrutiny? And for that matter, where is the science?
I’m confounded by the interchangeability of coronavirus/covid-19 testing. Are they one or the same, or is the former just a generic test for coronavirus dna, in which case, most of the population is likely to swab positive? And how many people have died from it, versus tested positive for it but died from something else? And how does the current death rate compare to what we’d normally have at this time of year? Where are the statistics that tell me how bad/normal/abnormal all of this is?
I’m facing unemployment because of this insanity, like millions of others. And when this is over, there will be no reckoning. The rich will pat their engorged stomachs, and the poor will clutch their empty ones. And those in Whitehall will stand, gleeful and bulging eyes, at the windfall largess of executive powers with which to play.
Miss N, As for the efficacy of the tests to be deployed in the UK – I haven’t yet seen what they are and where they were manufactured.
That’s why I say they will ‘show’ a widespread infection- not just because that may be true but because it is politically (to get hard brexit done with the mini-Winnie) and economically (people need to start earning properly again) necessary.
There are two main types of test – first a nucleic test that looks for dna fragments linked to the n-cov virus – it is not so accurate.
The other is a antibody type test which checks whether the specific immune cells have been generated in a person for the type of virus that is spreading. That is the most accurate.
Here is some science on it, there are many new studies daily there, it is impressive what great research is being done. Something to be optimistic about.
https://www.medrxiv.org/content/10.1101/2020.03.28.20045765v1
——-
The dual antibody test is preferable i’d say to determine these who have had it and are therefoe no longer vulnerable or infectious.
Though there are already multiple varieties of the virus as it changes a bit with each new cluster. So i don’t know whether one developed for Wuhan would be the same as the one for Italy or here.
That is why i have little faith in the government and media narrative – it is controlled messaging and everytime Laura or Robert or Krishnan speak they and their presstitute colleagues are almost certainly repeating lies as opposed to independent journalism. Best not to pay any attention to them and make up your own mind.
Anyone who tries to pump me with an untested fast developed vaccine or a snake oil medication is going to have to do it forceably against my will!
I’ll only believe any test if the correct full genome sequence is used or a proved antibody research as in the article above has been done on the British patients here.
Chin up. The science is fast on this. It is not a plague. There is plenty of unnecessary hype for reasons I have wrote about. Hope you manage, all best.
My biggest worry is in a wider context.
This is not the first novel virus to have hit us and we need to find ways of preventing this from ever happening when the next ones come along.
Patient 1 of this current virus was identified in December, and here we are only 4 months later with it spread worldwide. I saw it coming because nothing was done to contain it. People flying all over the world carrying it with them. The Chinese managed to limit the damage internally and built up their facilities quickly. When it hit Italy they were completely unprepared for it, and the UK was even worse prepared despite having a head start on most of the rest of the world. The NHS has been bled dry over at least the last 10 years, and in fact the last 50 apart from some improvement under the last Labour government. It should have been possible to plan for an event that was inevitable and predictable. Indeed a “war game” was carried out in 2016 as I understand it, and the report was hushed up because it showed that exactly what is happening now would do.
What must happen is that the world learns from this wake up call and institutes systems whereby once a novel virus is detect it is isolated with immediate effect at source. Do we have the political will to do it I wonder?
Even if we still have airlines the days of mass people movements are now probably gone. I think maybe some people have forgotten just how recent such mass movement is. In 2001 when my wife first came to the UK she had to have a full health check.
We can debate the merits but the politics won’t stack up (and not just in the UK). The limits China has just imposed are a sign of what’s coming.
We may yet see a very different NHS emerge from all this.
For us in the third worlds, our culture, which largely underpins many economic decisions will see enormous changes.
We likely will no longer take it lightly if monies meant for the provision of such facilities as toilets end up in the pockets of known but difficult influential sons among us. Fact is, our two weeks partial lockdown to fight COVID-19 in Ghana had to allow people to step out so they can attend to something as basic as nature calls, and our president announced that on national television.
The lockdown is showing us how we must look beyond our culture of worshipping the very people who milk us, and our social links to these people in high places, (which greatly hinders the fight against corruption) and demand that monies in public purse are disbursed to build basic quality systems as provision of water and public places of convenience for us. Afterall, COVID-19 has exposed how weak (and in many cases, what is not there, but is made to appear so) to all of us.
We in Ghana (2nd largest producer of Gold in Africa) did not have national contingency fund of $100,000 that we’ve had to tend to the IMF for loan, shows that there is a lot of questions to be answered about how we manage our extractive resources POST COVID-19.
Agreed – and this issue has to be on all our horizons – and not just yours
I can’t fault the breadth of your thinking on this issue but I still think the biggest elephant in the room even now is the ‘How are we going to pay later for the help that this Government is saying it wants to give?’ problem.
Even in Sunday’s Observer, there’s Torsten Bell – CEO of the Resolution Foundation – bleating on page 46 in a little column called (wait for it) ‘Insight’ about how the markets do not have an unlimited capacity to absorb debt and that taxes will have to go up. Perhaps CEO in Torsten’s case means ‘Continuously Excusing Orthodoxy’?
I spoke to a meeting with his team today – and made my point loud and clear!
I wish I’d been there.
Did you film it?
No…..
Off topic, although you did say you were covering ground for new readers, could you recommend a book (or two, or …) about economics for people.. who know nothing about economics?
Can you be more precise as to what aspect of economics you are interested in?
That will help!
I am shame-faced at not having read The Joys of Tax, but will do so whilst I am imprisoned. For my money the absolute first port of call has to be L Randall Wray’s Modern Money Theory. That’s where I got into it.
For somebody with no knowledge of economics, try the Joy Of Tax
I couldn’t say it myself!