How Covid-19 will change the world

The hustle and bustle of daily life has ground to a halt, large parts of Europe have become like ghost-towns with massive restrictions put on our lives, from lockdowns and school closures to travel restrictions and bans on mass gatherings.  Pubs and restaurants are closed for the duration.

But what will the duration be ?  When will we be able to get on with our lives ?

In his daily press briefing yesterday Prime Minister Boris Johnson said he believes the UK can “turn the tide” against the outbreak within the next twelve weeks and the country can “send coronavirus packing”.

But even if the number of cases starts to fall in the next twelve weeks that won’t be an end to the crisis.  The current strategy of shutting down large parts of society is not sustainable in the long-term.  The social and economic damage would be catastrophic.

But the coronavirus will not have disappeared in twelve weeks time.  If you lift the restrictions that are holding the virus back, then cases will inevitably soar.  That is the problem.

The UK’s short-term strategy is to reduce the number of cases as much as possible to prevent hospitals being overwhelmed, when you run out of intensive care beds then the number of deaths rise.  If we have reduced the number of cases then it may allow some measures to be lifted for a while, but then the number of cases will probably rise and another round of restrictions will be needed.

Taking this strategy will eventually lead to herd immunity as more and more people have survived the infection and developed immunity.  But herd immunity could take years to build up.

Developing drugs that can successfully treat a Covid-19 infection could make the disease less deadly and reduce pressures on intensive care beds and ventilators. This would allow countries to cope with more cases before needing to reintroduce lockdowns.  Increasing the number of intensive care beds would have a similar effect by increasing the capacity to cope with larger outbreaks.

Really the only long term practical solution is the development of a vaccine.  A lot of research is currently being done to develop such a vaccine but it could be a year or more away.

There has been an unparalleled global response to the disease.  But after it is over the world can’t ever be the same place again.  We cannot allow ourselves to be this vulnerable again.  We have to learn some hard lessons.

Universal Basic Income (UBI)

I’m not expecting the Government to announce a Universal Basic Income anytime soon.  They couldn’t afford it and it would be a bad idea to do anything so bold and far-reaching without a lot of thought and a lot of public debate.

The benefits system we have at the moment is not fit for purpose, Universal Credit was a good idea in theory, replace many different and complex benefits with one universal benefit which takes everything into account.  But the way it has been implemented is bad, unfair and ineffective.  It was implemented as more of a cost saving exercise than an attempt at a fair and equitable benefit system.

I think even before the virus crisis the government was starting to get the message that Universal Credit was broken and needed fixing.

I hope that the government have become aware of the economic insecurity caused by the pandemic fallout, and this might lead the Government to start at least thinking about UBI, or perhaps the less radical-sounding but similar idea of a ‘negative income tax’ (note that historically these ideas have had supporters on the right as well as the left).

During the financial crisis of 2008 the government injected huge sums of money into the banks in the form of ‘Quantitative Easing‘ which was meant to stimulate the economy but in actuality all it did was make the banks and big businesses richer.  It did not have much of an effect outside the rich elites.

UBI would put money into the pockets of ordinary people, they would not keep that money in their pockets, they would use it to buy things or put it into a bank.  The money would circulate in the wider economy.  In my opinion this would be a much more effective stimulus to the economy than ‘Quantitative Easing’.

Workers Rights

The virus crisis has exposed the precarious position of many workers who are on zero hours contracts and those who are self employed.  Many of these workers have no security of employment.  A lot of organisations are tempted to misclassify workers as self-employed because they cost less to employ and there is little or no provision for sickness benefits.

I read of an Amazon delivery driver who is classified as being a self employed contractor.  What if he gets the virus, he cannot afford to self isolate, if he doesn’t make deliveries he doesn’t get paid, simple as that.  It isn’t just Amazon there are many companies who use these practises to cut their costs.

The Government has made some response to this in the form of easier and faster entitlement to sickness benefits but it is not enough.

What is needed is to give all workers full employment rights and get rid of zero hours contracts.  The negative consequence for the self-employed is that their labour is undertaxed so many of them would end up paying more but they would get the advantage of sick pay and other rights.

If all labour was taxed at the same rate it would be much simpler and hugely reduce non-compliance and the costs of enforcement.  The revenue raised could be used to extend sickness cover to the self-employed and to encourage them to save for their retirement.

Business Travel

One thing which is obvious to me is that we will learn that we don’t need to travel as much.  I think this change has been coming for some time but the virus crisis will accelerate the change.  The biggest uses of air travel are business travel and tourism.

Long distance business travel was already challenged by high costs, the improving quality of video conferencing and the desire of organisations to appear to be taking action on climate emissions.

Psychologists tell us it takes just over eight weeks to form a habit.  After an extended period of being forced to use video conferencing, video phone calls and e-mail businesses might learn that face to face meetings are not as necessary as they once thought and this could lead to long term decline in business travel.  After the crisis is over this will have big consequences for those airlines which have not gone bankrupt.

Economics

The virus crisis and the reduction in travel which has ensued have caused a reduction in the price of oil.  The reduction in oil prices makes it more competitive against renewable energy which is a bad thing but the falling price is bad for fossil fuels as well.

However there is rising public concern about climate change.  The falling cost of renewable energy is a long term trend and will most likely continue after the virus crisis is over.

It is probable that the coming months will see a recession much more devastating than the financial crash of 2008.  The economic downturn is being exacerbated by the oil-price war which is going on at the moment.  Saudi Arabia is wanting to keep the price of oil low in order to sell as much of their reserves as possible before the world moves on to renewable energy.

After the virus crisis is over is likely that the fossil fuel sector will have much less influence and this could accelerate the shift towards more sustainable energy systems.

Government

The central ideological battle of our time is whether we need to plan and manage our societies to reflect our goals and values, or whether that task can be left to the magic of the market.

The magic of the market is an illusion, free market capitalism optimises for maximum profit, all else is secondary.  It is utter madness to leave such important issues as the welfare of the environment or public health to the ‘magic of the market’ or ‘shareholder value’.  Of course we need to plan and manage our societies to reflect our goals and values.

The virus crisis seems to have brought about a change of heart in the Conservative party (at least temporarily) as they become enthusiasts for extra spending and quietly drop their commitment to shrinking the national debt and the public sector.  I hope it won’t be too little too late.  The NHS has suffered more than a decade of tory austerity, underfunding and mismanagement.  It is now in a parlous state barely able to cope with the surge of cases from seasonal flu.  The effects of this sort of chronic underfunding cannot be reversed in a short time just by throwing a lot of money at it.

What we need is a health service which is maintained in a good condition by a government which actually cares about it and with enough spare capacity to cope with occasional shocks to the system.  Unfortunately this will cost a lot of money … but it would be worth it.

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