Sunday, April 05, 2020

The coronavirus recession will shift British politics – but not to the Left

The economy’s collapse will prompt profound and unpredictable changes to people’s political priorities

It is hard, for us moderns, to grasp what is happening to our world. We are the children of the most technologically advanced civilisation of all time, and yet are plunged into a pre-modern health crisis, forced to revert to equally pre-modern tools as the death toll spirals horrifyingly. Quarantines, lockdowns, field hospitals: as we wait for tests, protective equipment, high-tech tracing and vaccines, we are stuck with the medieval techniques our forefathers used to control the bubonic plague. We use Zoom and Houseparty, but otherwise are following a 1919 Spanish flu playbook, shutting down society to save lives.

This is also the first pre-modern recession since the Second World War. Downturns since the industrial revolution have normally been about monetary policy errors or bubbles going pop. The coronavirus recession is like a war or a crop failure or a natural catastrophe, events that, together with pandemics, have caused the most savage depressions in history.

Drawing on the Bank of England’s Millenium of Macroeconomic Data, Deutsche Bank reminds us that the worst ever recessions were in 1624 (GDP down 25 per cent the year Parliament voted for war against Spain) and 1349 (down 23 per cent during the Black Death). The current downturn – GDP down 6 per cent this year – will only be slightly less severe than those of 1919 and 1921, both connected to war and flu. No “modern” recession has come close. It is also an exceptionally concentrated collapse: the second quarter will be the worst three month period for the economy since records began.

In 1919, those US cities that reopened too soon suffered a worse overall hit to the economy – after the flu returned with a vengeance in a second peak – than those that waited longer in lockdown, according to Sergio Correia, Stephan Luck and Emil Verner. While the lessons are obvious, if we test and trace on a massive scale, we ought to be able to lift the lockdown more quickly than a century ago. But so far it’s not looking good, implying that this recession will be severe, perhaps continue into the third quarter, many firms and jobs will be permanently destroyed and that the bounce-back, when it comes, won’t be great enough to catch up all the lost output.

It is a golden rule of political economy that downturns of this magnitude have huge political ramifications. But while much will be different AC (After Coronavirus), this doesn’t mean that British politics will automatically shift Left-wards. That would be a lazy assumption.

The NHS was already untouchable and unreformable, and Boris Johnson was already planning to shower it with cash: it will merely get even more. The railways were already being renationalised: the crisis has accelerated this. Other bailed-out entities will be reprivatised.

It will be self-evidently unaffordable for the Government to continue paying for half the jobs in the country when the crisis ends, and some of the abuse of furloughing that can even now be detected will remind the public of the dangers of generous welfare. Rishi Sunak’s superstructure will be dismantled: extremely elevated levels of benefits essential during total war can’t continue in peacetime without massive incentive problems.

The greatest change AC will be to our culture, and this won’t help the Left: we will rediscover the advantages of economic growth and have to relearn to live with unemployment. The BC (Before Coronavirus) obsession with frivolous “first world problems” will be gone: there will be no interest in identity politics, just in hard-headed policies that can boost growth and jobs and put money in people’s pockets. There will be a cost of living crisis, and reduced support for taxes or green policies that hurt the poor and middle class, just as there was in 2008-09. It may delay but won’t derail Brexit: national self-interest is back worldwide. The EU is facing severe strains, with fury at how member states aren’t helping each other and Hungary going fully undemocratic.

Taxes may not go up either, at least not conventionally, despite the massive budget deficit (though the self-employed will be hit). The national debt may be “repaid” without explicitly hammering taxpayers: we may see higher inflation in the years ahead, eroding the real value of IOUs. We could even see actual debt write-offs: a rich world Jubilee.

And why would a Tory government be stupid enough to cripple an economy on its knees with higher taxes? A million businesses could easily have gone bust by the end of this, unemployment will be through the roof and asset values – including house prices – could have dropped by 20-25 per cent. Hurting the rich for populist reasons is something that governments can afford to do in the good years, not when they are desperate to attract entrepreneurs, capital and talent. Taxing wealth will be impossible when the price of mansions has collapsed, and hitting the middle classes politically suicidal. The Tories will have to rediscover their supply-side instincts, and do what it takes to encourage growth.

Any higher inflation caused by the monetisation of the deficit will also infuriate Middle England. Only Left-wing economists believe that inflation is popular: it never is. It always leads to a shift to the Right, sometimes to the poujadiste variant.

Many private sector businesses will have their reputations enhanced by their crisis, including supermarkets and even tech firms. Almost everybody blamed profit-making firms for the financial crisis; nobody is blaming them for the virus. There are some caveats: banks can’t pay dividends or bonuses anymore, which will limit the backlash, but they will face reputational damage unless the cheap business loans promised by the Government can be accessed easily.

Most important of all, Johnson’s plans for a big government conservative spending spree are in tatters. With the national debt at 100-110 per cent of GDP, it will become imperative to keep the finances under control, and only spend more on projects to prevent another pandemic.

Nobody can know for certain how politics will change as a result of this humanitarian and economic catastrophe. But as our shell-shocked society, stunned that it isn’t as advanced as it thought it was, goes back to basics, I wouldn’t bet on a Left-wing renaissance.



South Korea's Successful Pandemic Strategy

It effectively limited the virus's spread without shutting the country's economy down.

South Korea only just now passed 9,000 total positive tests for the China Virus, and yet the East Asian nation was one of the earliest outside of China to report infections. Furthermore, South Korea did not engage in a nationwide shutdown to slow the virus’s spread, which has many wondering how it has been able to so successfully keep COVID-19 at bay.

The head of the World Health Organization’s Emergency Program, Mike Ryan, noted, “We’ve seen examples in places like Singapore and [South] Korea, where governments haven’t had to shut everything down. They’ve been able to make tactical decisions regarding schools, tactical decisions regarding movements, and been able to move forward without some of the draconian measures.”

The key, Ryan believes, has to do with widespread testing. South Korea quickly engaged in a vast testing regimen, which allowed it to essentially locate and then target those infected areas for isolation and quarantine, thereby slowing and limiting the spread of the virus to other areas of the country. Thus, those regions of the country free of the virus are able to operate more normally. As explained by South Korea’s foreign minister, Kang Kyung-wha, “Testing is central because that leads to early detection. It minimizes further spread.”

National Public Radio also reports, “Japan is another Asian country notable for its response. Although Japan has more than twice the population of South Korea and also has strong ties to China, it has recorded only a fraction of the cases that South Korea has. … Japan hasn’t been testing nearly as widely as South Korea, but appears to have fended off significant community transmission by quickly investigating any flare-ups of cases, identifying who exactly is infected and then monitoring their contacts.”

Finally, nothing helps like learning from past experiences. Back in 2015, South Korea was hit hard by a MERS outbreak that brought the nation to a near standstill. Lessons learned from dealing with that outbreak have proven pivotal in guiding its response to the COVID-19 pandemic.


Removal of navy captain 'poor judgment'

Democratic presidential contender Joe Biden says the Trump administration showed "poor judgment" in relieving the commander of an aircraft carrier who sought stronger measures to control a coronavirus outbreak onboard.

"Donald Trump's Acting Navy Secretary shot the messenger - a commanding officer who was faithful to both his national security mission and his duty to care for his sailors, and who rightly focused attention on a broader concern about how to maintain military readiness during this pandemic," Biden said in a statement to Reuters.

"And the Navy sent a chilling message to the rest of the fleet about speaking truth to power. The poor judgment here belongs to the Trump Administration, not a courageous officer trying to protect his sailors."

The commander, Captain Brett Crozier, was removed from command after writing a scathing letter to Navy leadership about conditions on the nuclear-powered carrier. The letter leaked to the public.

But acting navy secretary Thomas Modly said the ship's commander "demonstrated extremely poor judgement" in the middle of a crisis.

On Thursday, Mr Modly told reporters that Capt Crozier was being fired for allegedly leaking the letter to the media.

He said the captain copied too many people into a memo, which was leaked to the California newspaper and then quickly spread to many news outlets.

He said Mr Crozier should have gone directly to his immediate commanders, who were already moving to help the ship.

Mr Moldy said the letter "created the impression the Navy was not responding to his questions".

He also said Mr Crozier created a panic by suggesting 50 sailors could die.




We need an exit strategy: Weekly jobless claims double to a whopping 6.6 million (CNBC)

So about those declining numbers... Chinese county goes into lockdown amid fear of second wave (South China Morning Post)

In typical communistic fashion, Chinese doctor disappears after blowing the whistle on threat (National Review)

Coast Guard tells cruise ships with cases to stay away from U.S. ports (TPR)

Dr. Anthony Fauci given security detail after receiving threats (Washington Examiner)

Environmentally "woke" San Francisco ironically joins Massachusetts in banning reusable bags from grocery stores (Fox News)

California engineer ran train "off the end of rail tracks" in attempted attack on USNS Mercy in Los Angeles (USA Today)

Trump, in preemptive maneuver, says Iran planning "sneak attack" on U.S. troops, assets in Iraq (Fox News)

"There is a growing threat that ... malign actors will try to exploit the situation": Trump launches massive military offensive on drug cartels (The Daily Wire)

Rep. Adam Schiff drafting legislation to set up 9/11-style commission so Democrats can exploit coronavirus response (The Hill)

Rep. Matt Gaetz proposes commonsense bill blocking funds from Congress to China-owned businesses (Washington Examiner)

America's civilian arsenal grows by some 2.5 million firearms after record-shattering gun sales in March (The Washington Free Beacon)

Massachusetts governor infringes on the Second Amendment by closing gun stores (NRA-ILA)

Florida issues statewide stay-at-home order (Fox News)

Pennsylvania placed under stay-at-home order (NBC Philadelphia)

Policy: We can fight pandemics without the communist-allied World Health Organization (The Federalist)

Policy: Statewide lockdowns and the law (Hoover Institution)

For more blog postings from me, see  TONGUE-TIED, EDUCATION WATCH INTERNATIONAL, GREENIE WATCHPOLITICAL CORRECTNESS WATCH, AUSTRALIAN POLITICS, and Paralipomena (Occasionally updated), A Coral reef compendium and an IQ compendium. (Both updated as news items come in).  GUN WATCH is now mainly put together by Dean Weingarten. I also put up occasional updates on my Personal blog and each day I gather together my most substantial current writings on THE PSYCHOLOGIST.

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