Covid 19 – Commentary
There are very few individuals alive today that have previously experienced a global flu pandemic. The last virus that had similar breadth was Spanish Flu which lasted from the beginning of 1918 to the end of 1920. Therefore, the few with any living memory of this event are likely to have been too young to appreciate the gravity of the situation at the time. Sticking with history for the moment, Spanish Flu is something of a misnomer, in that there is no evidence (indeed it is highly unlikely) that the source of the illness was Spain – the true source remains unknown. However, during the Great War, many countries chose to suppress information about the illness in order to preserve national morale. Neutral Spain was able to more freely report the extent of the virus’ infection through the press, and this subsequently created the appearance that Spain had been much harder hit than other countries.
Fortunately, suppression of information (outside of some limited and short-lived examples) does not seem to be a characteristic of the current response to the pandemic. As a result, sharing of information should be a significant factor in reducing the spread of the infection, the impact on our daily lives and the effect on the global economy.
It would be fair to say that until very recently, viral pandemics such as SARS, MERS, Swine Flu, Bird Flu and Ebola seemed to be things that happened elsewhere in the world and had a limited effect on the day to day existence of those living in developed Western economies. The aftermath of Covid-19, however, is already bringing about some considerable social, economic and cultural changes that are affecting us all.
The response to limiting the pace and breadth of transmission has had a significant global economic impact which has already seen corporate failures and job losses. However, a combination of social compliance with medical advice and development of treatments, coupled with monetary and fiscal support from central banks and national governments should provide the foundation required for an economic recovery. Hopefully, the shutdown will become an interruption in global activity rather than a permanent scar. There may well be some longer-term costs, though. Massive levels of capital have been pledged and delivered into economies and, as at the end of March, there is talk of much more to be provided.
In the UK (as elsewhere), this will undoubtedly have lasting effects on interest rates (lower for even longer), inflation (kept on the higher side in order to reduce the real value of debt) and taxation (on general wealth and on internet retailers that may have been even more profitable during this period). We also expect the government may fail to implement some of its pre and post-election promises. These will likely be the sources government administrations draw upon to rebuild their balance sheets. The future funding and structure of the NHS in the UK will no doubt become a focus as the question shifts from ‘can we afford to’ to ‘can we afford not to….’. Moreover, other countries may be forced to focus on the cohesion of their medical infrastructure and ability to cope with rapidly developing and acute levels of demand on their services.
Last, but not least, how will China continue to fit in with the rest of the world? If it is true that this current flu pandemic (along with previous outbreaks) originated in China and is a consequence of shortcomings in food production standards, then how do western economies engage economically? There is a significant imbalance between supplying attractively priced and sophisticated telecommunication infrastructure equipment and being the source of events that lead to global economic paralysis and thousands of deaths. If trade relationships with China were tense before this outbreak, then (like the virus itself) they could mutate into something much more serious.