This is a post of hope. Of promise. Of potential within our grasp if we have the courage to reach for it. The commencement discusses markets because they give a verifiable account of the slow reaction to the threat that COVID-19 posed to humanity. The latter discussion opens up to encompass implications and aspirations for humanity.
Being a professionally trained scientist and also having a passion for economics, especially socioeconomics, and investing, I was already thinking about the likely economic impacts and the investment implications of the COVID-19 pandemic – and note that was before it had even been named COVID-19 and well before it was named a pandemic – as Global stock markets reached their bull market peaks. The S&P500 index of US stocks reached a peak of 3,397.50 17 days after my first report detailing my views on the coronavirus outbreak on 3 February entitled “Social Cohesion: The Best Vaccine Against Crises” and still 8 days after I said the following in my 12 February Coronavirus update:
People outside of Wuhan may be confused by the concern. You need to imagine it like an enormous tsunami, like the one in the Indian Ocean a few years ago. There has been an event that has triggered a chain of consequences – for a tsunami it is often an undersea earthquake – in this case it was a virus “jumping” species, to humans. Because we have no previous exposure to the virus it is highly virulent to us. Like a tsunami emanates outward from the epicentre, so too has this virus. At the moment we in most countries are at the stage where the sea is calm, but we know that it will arrive soon. Scientists from China and all around the world will be working feverishly to try to develop some tools – medicines, vaccines, procedures to minimise spread – to mitigate the impacts. Everybody needs to remain calm but be alert and be prepared, in your mind and in what you do.
In “Politics vs Society in the Coronavirus Outbreak” published on 21 February I stated my frustration (perhaps a little too strongly, in hindsight) at market and media commentators and analysts and the general public for being slow to realise the threat that the coronavirus presented:
I have to admit to being flummoxed by the response of markets, the media and by most people that I speak with about this outbreak. I cannot understand why everybody is so slow to understand the rather obvious realities of the situation and the serious implications. It really does seem to me that the movie “Idiocracy” is not a Sci Fi but a work of non fiction and one would have to have travelled forward 50 years in a time machine to the present day to realise it. Is it that humans, when faced with a scary situation just cannot accept that it is real? Is it that our arrogance has reached such heights that we really believe nothing from nature can genuinely affect us until after the event?
Then in “Repeat After Me, This Is Not SARS: COVID-19 Is Much Worse” I broadened my discussion to help others to realise what a serious impact the coronavirus would have on markets, societies and humanity.
I can assure the reader that this event is unlike SARS in 2003 because the virus is all the more serious to humanity. Barring a miracle of nature, i.e. a surprising attenuation to lower virulence by the virus, or a highly unlikely rapid cure being developed, this virus will be with us for much longer than SARS was and its direct consequences on people will be far more serious (i.e. will produce greater numbers of mortalities) which will necessitate prolonged biosecurity measures.
…..The consequence to national and global populations of people should be clear to all readers. As the human cost of the pandemic becomes increasingly clear Governments will be forced to attempt to minimise those impacts in ways that I spelt out in my Coronavirus Outbreak update on 11 February, and these are increasingly in use in Japan, South Korea and Italy, which include school closures, discouraging/banning public gatherings, workplace closures, public transport curtailment, and/or further border restrictions. Besides the human costs, the direct impacts on national economies are obvious.
……If the reader considered me pessimistic above, then I am about to get down right depressing (pun intended).
For the last decade I have marvelled at how we have gotten so desensitised to extraordinary measures that Central Banks have taken to revive economies after the Great Recession or Global Financial Crisis (being an Australian I will use the “GFC” from hereon).
…..I would hope that a reasonable person having read the analysis above on COVID-19 would realise that this is no garden variety economic issue. This is undoubtedly a Black Swan event of nature’s making. This is a very, very big problem in a marketised world where everybody has been prepared to play the game of pretending that the central bankers are Gods while the profits and capital gains flow in.
All of that is going to be reversed, and because the natural event is characterised by exponential spread, this is going to happen a lot quicker than anybody can imagine.
….I understand that a financial panic on top of a growing panic about an increasingly obvious pandemic will be devastating.
I know that. And for that reason I do understand why Governments, even though they always prefer to egg on markets, will be right in trying to prevent it from happening. However, that propensity to always seek higher asset prices has led to great vulnerability in Global markets, and I think that the consequences of that are about to be revealed.
….To understand the ongoing impacts on people and thus on the economy we need to go back to the virus. Without the rapid emergence of an effective therapeutic treatment for COVID-19, amongst already developed treatments or those in the very late stages of development, the pandemic is likely to progress until either it spreads so widely that the majority of people have become infected or an effective vaccine is developed, produced and delivered en masse. This may take several years, so it is possible – probably even likely – that we will be living with this pandemic for a prolonged period.
Now, of course, almost everybody has caught up and the gravity of the challenge humanity faces combatting this pandemic has become patent to all. Almost, except for apparently the “followers” (the anti-leaders) of the major Anglophone nations, even if one of them is now infected. This post is not specifically aimed at these dinosaurs of a world we must leave behind.
I will, however, express again my disappointment at the lack of courage by the Australian “follower” Morrison to use our natural advantages and human capital in biosecurity to act earlier and more decisively as I implored him to do in “Australian Politicians Care More About the Health of Our Prawns and Bananas Than About People” which I published 28 February:
Australians need to wake up – your politicians right now are deciding between jobs and high house prices on the one hand, and a higher death rate amongst over 40 year olds on the other. Between economic activity and people’s lives.
In this time of global pandemic, Australia has a choice. Use our significant advantage of isolation and our adept biosecurity knowledge and skill to fight tooth and nail to minimise the impact of the rapidly spreading coronavirus pandemic on our citizens, thereby ensuring more of our parents and grandparents live out a full life. Or choose a “lighter touch” with lesser impacts on our economy while accepting that a consequence of that will be a higher level of mortality amongst our citizens and especially those over 40 years of age
…Australia’s isolation really is a huge advantage for us, and it is time that we made use of that very significant advantage. As COVID-19 begins to rage globally, we should strongly consider whether we should close our borders to people flows and tightly manage vessels carrying freight to and from Australia.
It really is as simple as that; we could close our borders and significantly cut down the opportunity to reintroduce the virus while we threw everything at containing the virus within the country. That would minimise the human cost while we wait for a vaccine to become available.
I repeated the same assertions in my open letter to PM Morrison after these opening comments:
Dear Mr Morrison
I am writing to inform you that I have left instructions for my estate to sue you personally if I die with COVID-19 before the term of your Government expires (if it serves the full 3 years).
As a 50 year old male with a pre-existing respiratory condition – asthma – I am in a higher risk category for suffering serious illness and death with COVID-19.
As Dr Tedros Adhanom Gebreysus, Director General of the World Health Organisation (WHO), said on Twitter on 29 February, “If you are 60+, or have an underlying condition like cardiovascular disease, a respiratory condition or diabetes, you have a higher risk of developing severe COVID-19. Try to avoid crowded areas, or places where you might interact with people who are sick”.
I note, Mr Morrison, that you are not in agreement with this advice because you are still encouraging all Australians to go about their business normally in order to delay or minimise the impacts on the economy.
The truth now is that if I was listened to, if the effective border closure and increased testing were implemented when I was imploring that to occur, then the following discussion about the economic bounce back from COVID-19 would be from a more favourable position than what will now be the case because a much lower prevalence and incidence of infection in the country would have allowed more of the domestic economy to remain open.
The following discussion on the way forward must necessarily start from where we are today, the last weekend in March with over 3,000 confirmed cases in Australia and certainly many more undiagnosed due to continuing restrictions on testing which preclude detection of asymptomatic infections and symptomatic infections not within areas of concern and where there has been no contact with a known case.
As shown above, early in this pandemic I stated my concerns about the economic impacts and made reference to the possibility of an economic depression occurring.
In the last week or two, after the violent reactions in the stockmarket to the human and consequent economic reality of this pandemic, more analysts and commentators are increasingly discussing the likelihood of a very severe recession globally.
Some journalists as well as some brave business and investment analysts are now even countenancing the possibility of a depression.
Unsurprisingly there is much mention in that context to the most memorable depression in Western Societies, the Great Depression that lasted from the collapse of stockmarkets in 1929 until World War 2 effectively brought it to an end.
In my post entitled “Let’s Wage War on Climate Change” I discussed an emergent undercurrent of thought, that I had perceived, which suggested that the problem of persistent low inflation threatening deflation and consequent very low interest rates, negative in some major economies, which was reminiscent of conditions during The Great Depression, typically in human history had been resolved only by a reset that occurs during a major war.
Concerned that some hard-hearted right wingers – who Pink Floyd, senza Roger Waters, may refer to as “The Dogs of War, and men of hate” – may ruminate for exactly that, I proferred the reality that humanity already had a war to confront:
Are we not already confronted with a crisis of our own making?
Is there not a majority of our scientific community not warning us that we face a dire climate change crisis?
Of course the answer to both questions is an emphatic yes!
…If our Australian and other global political leadership decide to grow into capital “L” Leaders and join with the few authentic Leaders working hard to take on the climate change crisis with all of the pride, passion, and determined fervour of a populace facing truly challenging circumstances with an uncertain outcome, the reality is that we will never know the counterfactual. The small number of skeptics that remain will always be able to say that it was never necessary and it was an enormous waste of financial resources and human effort.
But the very great majority of us, and our descendants, will forever know that any “waste” that might have possibly occurred along the way can never be in any measure anything more than infinitesimally small compared to the enormous waste of human lives by a power-hungry few, and compared with the enormous gift that is a quality life on this wondrous planet that we all share.
It is noteable that the same “followers” inclined to deny the reality of the climate change crisis were the same ones seeking to downplay the threat that COVID-19 represented. The difference, of course, is that the absurdity of their position was very quickly revealed by the explosive nature of the COVID-19 pandemic.
I now suggest that climate change can be a continuation of the war to reshape our world for the better for humanity, where we are currently fighting a battle against COVID-19, which now sees many others referring to it in conflict metaphors.
If we wish to see The Great Depression as analogous to the current situation, then perhaps there is a way of looking at things a little more positively. It may be more appropriate to consider the stockmarket collapse of 2007-09 as equivalent to the collapse from 1929. The central banks have done a better job of supporting the economy since the initial collapse in 07/08, even if I do think that in the recent half of the decade they have been responsible for over-indulging markets seeking continual capital gains out of fear of a repeat of what occurred in the 1930s when the depression intensified.
If this analogy were accurate then we are nearer the end of this episode than the start. Yes, things do seem bleak right now. They also seemed bleak in Europe in the very early 40s. Just like then, there is much more pain to be felt before we come out the other side. But we know there is another side from which we will emerge.
Once this battle is won, however, we will be in a strong position to take on the even greater battle necessary for sustainable human life on Earth.
I believe that if the current most urgent battle against COVID-19, followed by the equally necessary and increasingly urgent fight against the climate crisis, is handled with adept leadership, we have every chance of having a very rare psychological reset which could set up the global community for the next half century. It will be a much more humane and equitable one if we follow the edict of FDR as brilliantly articulated in his 4th Inauguration speech, and if the lessons of needing to stand up to hard-hearted right wingers and imperialists is heeded from the record of FDRs loyal and loving son Elliot Roosevelt in “As He Saw It” which recounted events immediately after FDR’s all too early passing as WW2 drew to an end and in the immediate post-war period.
In “Social Cohesion: The Best Vaccine Against Crises” I stated:
I consider the climate change crisis to be the greatest challenge to humanity, and I can see no sustainable and durable response that does not involve a more cohesive humanity built on equivalent access to the same standard of living irrespective of where on Earth one chooses to live and raise a (typically small) family.
Depending on how the Wuhan coronavirus outbreak progresses in the next few weeks and months, and how successful are the scientific and pharmaceutical communities in expeditiously developing an effective vaccine, this disease may prove to be the most serious immediate challenge to humanity.
Moreover, if this outbreak is successfully contained and eradicated – primarily on the back of the impressive response by the Chinese authorities – it still gives an indication of the tenuous nature of our existence on this wonderful planet, and just how quickly the reality of our existence can be placed in danger.
Most significantly, it highlights that whether we are talking about acute or long-term crises, the reality of life on this Earth for humanity is that we have no choice but to face these challenges together.
Acting individualistically and with self-interest can not produce the sustainable effective response for which all people wish.
Clearly there is little chance of humanity coming together and working towards solutions to the greatest challenges if the groundwork to build mutual trust has been neglected.
Therefore, the best vaccine against crises is social cohesion within societies and across humanity.
Through the fog and shock of the current battle, it is imperative that people of good character engage with what is occurring in domestic politics and geopolitics.
I realise that cynics will immediately ask for all of the answers from me on reading this, and obviously I cannot provide all of them or even many. But the “followers” offer very few answers of their own as their tactic is mainly to attack people who want better from society by referring to us as “do gooders” or inferring that we are foolish dreamers.
This is undoubtedly a “big picture” concept, and it is only possible because collectively we have all suffered an enormous shock and consequently perceptions of contemporary lives and indeed what is possible are changing. Already we are proving what can be achieved when humanity is determined and working collectively towards goals bigger than ourselves and bigger than any one nation or continent.
I offer two points on why we can significantly change our course to tackle the big issues confronting humanity, which I would proffer relate to inequality and xenophobia and to the climate change crisis as I have detailed in reports such as “Xenophobia Must Be Challenged For An Effective Response To Climate Change Inclusive of Human Population Growth” and “The Conundrum Humanity Faces But Nobody Admits“.
Firstly, economies are being idled right back to bare essential services. It makes absolute sense that we would give a great deal of thought to how we want economies to function after the crisis. It is not enough to suggest that we want to get it back to where it was before. As Greg Jericho spelt out in the report linked above, that is going to be extremely difficult to achieve and not likely anyhow. So, if it is going to take a great deal of effort and support, financial and otherwise, to bring back our economy, it would be an enormous pity if there was not a great deal of thought and then effort that goes into bringing back the economy in the best possible ways to enhance sustainable human life on Earth. This leads to the second point I will make.
Such a reset in the way economies function are rarely possible because the status quo is always the safest option and major reforms are normally undertaken iteratively and typically occur very slowly. There is a great deal of human capital that has thrown its collective force behind the effort to be constructive in the COVID-19 crisis by producing necessary goods directly for keeping as many people healthy as possible in the pandemic, for supplying necessities in difficult circumstances, and for providing vital Government services. But still there is a lot of human capital idled, in isolation and social distancing initiatives, some working in their normal jobs, and some of those working below their full potential if we are to accept the thesis of David Graeber in “Bullshit Jobs”, and others recently made unemployed. And we have to add the retired and the high school students, also, with very valuable contributions to make.
One of the comments made in the press by a young person who lost their job last Friday was “if this is how vulnerable we are with capitalism, then perhaps we had better “F”ing think of a better way of doing things”. I sincerely believe that this underutilised human capital, together with that of the public servants working at home, and not in vital areas who are currently working almost around the clock, can be harnessed to brainstorm on what we want from our society going forward. If the political class can loosen their hands of control to allow people to dream – and here I am thinking about Rudd’s silly 2020 Summit where he tried to control the flow of ideas from the local meetings upwards (which I experienced personally attending his local electorate’s summit) – then it could be a very positive contribution to getting through this crisis, especially for younger Australians who have been disenfranchised by the “smashed avocado” smears.
Sure, it might seem a bit like the 60’s revisited, but the world could do with that bit of that optimism and hope for the future right now. And I have little doubt that a politician that did this with sincerity, prepared to act on the outcomes, would set themselves up for post-crisis success.
The alternative will be depressing for many more than just myself.
Be in no doubt that there will be hard-hearted factions that want things to go back as closely as possible to the inequitable and unfair world that existed before this war because that is the game that they know how to win. That is exactly what was occurring in the post-GFC period. There will even be others who want to tilt things further to their advantage. These are the people that like to say that “a good crisis should never be wasted” and you just need to read Elliot Roosevelt’s “How He Saw It” to understand how that occurs.
Ask yourself this: Do we really want to get through all of this hurt, of the realisation that we are all humans, fearing and hurt by the same things, and come out the other side of this battle against COVID-19 to enter into the same petty argument of the reality of the climate change crisis with hard-hearted right wingers behaving petulantly not accepting that they are in the wrong?
If this battle against COVID-19 proves nothings else it shows that all our fates on this beautiful planet are inextricably linked. The only sustainable way forward for humanity is united and time and effort spent moving in the other direction is an utter waste and dangerous to us all.
Let this be the Great Reset that puts humanity back on the track that perhaps the greatest US President ever wanted for us all!
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© Copyright Brett Edgerton 2020
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