Where is the pandemic stimulus money coming from?

The Economist / Otto Dettmer
CREATING MONEY OUT OF NOTHING

Governments around the world are spending up a storm. They have loosened their purse strings and are shovelling truckloads of cash into their respective economies. Collectively, it represents the biggest relief package in history – in excess of US$10 trillion globally. For most nations, every penny of their mind-boggling spendathon is borrowed.

In doing “whatever it takes” to combat the COVID-19 pandemic, governments have shown that they can sustain levels of debt far greater than previously thought. Consequently, the coronavirus has challenged orthodox economics in just a few weeks. The belief in balanced budgets has been thrown out the window. Public debt is no longer seen as a drag on economies but a critical lifeline.

Proponents of an unconventional economic framework – Modern Monetary Theory (MMT) – welcome the ramp-up in government spending. MMT posits that countries which issue their own currencies can’t go bankrupt as they can never run out of money in the way businesses and households can. That’s because governments with their own sovereign currency are able to “print” (or more precisely “create” with a few keystrokes) as much money as they need to pay creditors.

Not surprisingly, traditional economic thinking warns that such spending is fiscally irresponsible as the debt balloons and inflation skyrockets. Critics of MMT cite Hungary in the 1940’s, Brazil in the 80’s and Mexico in the 90’s as examples where easy money policies (governments creating piles of cash) led not just to inflation but hyperinflation.

But this has not deterred MMT advocates who argue that increased government spending will not generate inflation as long as there is unused economic capacity or unemployed labour. It is only when an economy hits physical or natural constraints on its productivity that inflation happens, because that is when supply fails to meet demand, jacking up prices.

This is what occurred in Zimbabwe in the late 1990s and mid-2000s. The economy collapsed, but not because Robert Mugabe printed ever-more Zimbabwean dollars. Rather, the economy nosedived when farming production plummeted by 60 per cent as Mugabe forced experienced white farmers off their land and gave it to inexperienced soldiers to farm.

The resultant decline in output caused a shortage of goods. At the same time, demand rose as Zimbabweans had more paper money. The combination of more money chasing fewer goods – the classic definition of inflation – caused a supersonic rise in prices. Wallets were replaced with wheelbarrows as hyperinflation peaked in the African nation in November 2008 at an estimated 89.7 sextillion per cent – an eye-watering number with 21 zeros after it.

Of course, Robert Mugabe’s gross economic mismanagement of Zimbabwe cannot be compared to Shinzo Abe’s savvy stewardship of the Japanese economy. A basket full of groceries in Japan in 2020 does not cost a bucket full of money as it did in Zimbabwe in 2008. That’s because Japan’s expansionary monetary policy has not been inflationary – spending has not exceeded the economy’s capacity to produce.

Despite having the highest public debt in the developed world, Japan has not experienced runaway inflation (in fact, it has been battling deflation for two decades!) and remains an economic powerhouse. Supporters of MMT cite Japan’s success as proof that their unorthodox ideas work. But critics – including world renowned economist and Nobel laureate, Paul Krugman – strongly disagree.

Both sides of this debate were outlined in a 2019 article published in The New York TimesModern Monetary Theory’s Reluctant Poster Child: Japan. Notwithstanding Japan’s hesitance to be labelled an MMT practitioner, proponents of the theory insist that Japan has been a testing ground. As explained in the article:

The country (Japan) is their (MMT’s) equivalent of Charles Darwin’s Galápagos Islands: a natural experiment that reveals a fundamental truth about the way the world really works. Since the country’s boom ended in the early 1990s, Japan has borrowed deeply. Currently, its debt level is approaching 250 percent of its annual economic output. Critics say it is an economic basket case. Despite all that, Japanese inflation and lending rates remain low. In fact, some bond rates are negative, meaning Japan can profit when it borrows money. Its standard of living remains competitive with those of the United States and other developed countries.

Bill Mitchell is a professor of economics at the University of Newcastle in Australia and one of the founders of Modern Monetary Theory. He has been closely studying Japan since the 1990s. “It is my laboratory,” he explains, calling the country “a really good demonstration of why mainstream macroeconomics is wrong”. He argues that Japan has established “the principles of MMT and the consequences of different fiscal and monetary policy initiatives”.

Japan has blurred the lines that traditionally divide fiscal and monetary policy. Other nations, including Australia, are currently doing likewise with their pandemic stimulus packages. Historically, governments have raised money to fund spending by issuing bonds which are bought by a range of investors. But some nations are now self-funding their stimulus packages by issuing and then buying their own bonds, thereby creating money out of thin air.

This funding mechanism bypasses the need to pay interest to investors on newly issued money and is at the heart of MMT – the fusion of fiscal and monetary policy. MMT links fiscal policy to monetary policy by using the central bank to buy the debt (bonds) issued by its government. If all of that sounds double Dutch, then let me share with you another explanation.

In a recent article in the Sydney Morning Herald, Don’t add government debt to your list of things to worry about, economics writer, Jessica Irvine, quite rightly points out that the Reserve Bank of Australia (our central bank which is responsible for monetary policy) has exhausted its traditional method of stimulating our economy (lowering interest rates). So, the RBA is helping the federal government (which has responsibility for fiscal policy) stimulate the economy by buying Australian government bonds.

In answering the question: Where does the stimulus money come from?, Irvine writes:

A large part of (it) … will come from the Reserve Bank. Weird, you might be thinking. Does that mean that one arm of government – albeit a statutory independent agency – is now lending to another arm of government, the executive branch? To whom, in such a situation, do taxpayers ultimately owe the money? Themselves? The answer is: well, yes. … And if we only owe the money to ourselves, what’s to stop us spending as much as we like? Another very good question, and one to keep in mind in the strange debates to come.

Irvine underscores that MMTers would prefer that the government simply print the money, rather than borrow it from the private sector in a money-go-round they decry as “corporate welfare”. According to MMT, government issued bonds aren’t strictly necessary. Instead of issuing $1 in bonds for every $1 in deficit spending, the Australian government could just create the money directly without issuing bonds.

The belief that governments do not need to issue public debt is supported by Dr Steve Hail, a lecturer in economics at the University of Adelaide and an MMT proponent. He sees no need to match public deficits with debt issuance for a currency issuing government. Such governments should gain the necessary political approval for additional spending and then be able to do it. “Spending is self-financing,” he asserts and “does not have to be funded”.

In a recent article Dr Hail wrote for the news and opinion website, Independent Australia, he stated:

… central governments like those of Australia, New Zealand, the USA, the UK and Japan face no purely financial constraints at all. Never mind a “money tree”, they have a money computer. They can create limitless amounts of their currencies when they need to do so. They are not dependent on the goodwill of the bond market, or of credit ratings agencies. They are monetary sovereign currency issuers.

It’s clear that MMT is a controversial idea that has detractors and admirers worldwide. The coronavirus pandemic has moved MMT from the fringes of economic debate to centre stage. It is receiving unprecedented attention now that policymakers are (knowingly or unknowingly) implementing some of its basic tenets. This is MMT’s moment in the sun and only time will tell if it works as advertised.

For the record, I do not believe that government deficits are inherently bad. Nor do I believe that government budgets, like household budgets, should always be in the black. So, my belief is that MMT should not be dismissed out-of-hand nor should it be approached with a pre-existing economic ideological bias.

Remember, the economics profession (it is jokingly said) is the only field where two people can win a Nobel prize for saying the exact opposite thing!

PS. Professor Stephanie Kelton is the public face of MMT and its foremost evangelist. Her recently released book, The Deficit Myth: Modern Monetary Theory and How to Build a Better Economy, provides a comprehensive and lucid explanation of MMT.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How will the world pay for COVID-19 stimulus packages?

Newsday.com: Cartoonist Gary Varvel
DEFICIT SPENDING ON A GIGANTIC SCALE

The economic damage caused by the coronavirus is mounting across the globe. In a frantic scramble to cushion economies, governments launched massive stimulus programs. These unprecedented fiscal and monetary interventions come with a staggering price tag. Sovereign debt is set to soar with governments around the world embarking on one of the greatest peacetime borrowing binges in history.

Most governments run annual deficits as they spend more than they collect. Few have spare surplus funds sitting around that can be redirected to support struggling households and businesses. So, countries are piling on more debt to fund emergency spending to help citizens cope with the economic ravages of the pandemic. Many people understandably worry whether the world can afford this avalanche of new borrowing.

The good news is that debt is incredibly cheap at the moment. Prior to the pandemic, the world was awash with savings which pushed interest rates very low. As global interest rates are now even lower, it has never been cheaper for governments to borrow. Governments are collectively borrowing trillions of dollars to enable them to spend trillions of dollars in a synchronised shock-and-awe response to the pandemic.

A classic way for nations to “print” emergency money is to borrow it by selling government bonds. This increases national public debt and is how governments have historically dealt with economic shocks such as recessions, financial dislocations and wars. During such crises, investors prefer the safety of government bonds in lieu of putting their money into the stock market, corporate bonds or real estate.

In Australia, the federal government is expected to fork out in excess of $200 billion to keep the economy afloat during the pandemic-induced downturn. The first federal response cost $17 billion, the second round cost an additional $66 billion and the third cash splash rang the bell at $130* billion. All up, Australia’s coronavirus stimulus packages are equivalent to nearly 10 per cent of the size of our economy.

As explained by ABC business reporter, Gareth Hutchens:

Essentially, the Government will pay for the stimulus package by creating the money and racking it up as debt. Officially, it will raise the money via the Australian Office of Financial Management (AOFM), which borrows money on behalf of the Government by selling Australian Government bonds.

Institutional investors (e.g. local and overseas banks, superfunds and foreign countries) will be buyers of the bonds. However, as noted by Gareth Hutchens:

The ultimate buyer of the Government bonds could be the Reserve Bank, because at the moment, the RBA is stepping into the market regularly to purchase as many Australian Government bonds as necessary to keep the interest rate, the “yield”, on three-year Government bonds around 0.25 per cent.

The yield on Australian government bonds is the interest rate we pay on our nation’s debt. Given that the current rate of inflation in Australia is around 1.8 per cent and is expected to decline further, we are effectively borrowing for free. This is good news for Australia, yet many Aussies are fearful of our level of sovereign debt.

A recently released paper by think tank, The Australia Institute, “The Budget Surplus Objective: An example of how economics is broken” highlights the folly of this fear of government debt. Citing the report, economics writer, Greg Jericho, states:

… given Australia’s nominal GDP is expected to grow at around 4.5%, if government borrowing pays lower than that (as is currently the case) debt levels will fall over time. This is because the economy is growing much faster than is the interest on the debt. … It means to quote Larry Summers, the former chief economist of the World Bank, that “public investment is essentially costless – the classic free lunch”.

One of Australia’s foremost economic commentators, Chris Richardson, from Deloitte Access Economics, has gone public to ameliorate fears that the government has saddled our children with massive debt. According to Richardson, the budgetary impact of the fight against the coronavirus will have a much smaller impact on Australia than many expect.

Notwithstanding the “jaw-dropping” size of Australia’s stimulus package, Richardson stressed that we have not sentenced younger Australians to a lifetime of higher taxes and sub-standard services.

Although the dollars are unprecedented, what’s even more unprecedented are the interest rates we’ll be paying on this new debt. Never in the two thousand years of recorded history of interest rates has it been cheaper for governments to borrow. Never. And markets aren’t fazed in the slightest: they reacted to the latest package by dropping the rate on 10-year Commonwealth borrowing substantially further.

Richardson went on to say:

Australia’s economy will grow again on the other side of this (COVID-19) war. So, here’s a simple suggestion: Let’s just let our debts from this new war simply become a smaller share of our growing economy over time. That’s what we did with the war-time debts of the past. And it’s probably the smart play this time too. Self-imposed flagellation rarely makes sense. The same policies that were sensible ahead of this crisis will remain just as sensible after it too.

As counter-intuitive as it sounds, government deficits can be very helpful to an economy. Nobel prize-winning economist, Joseph Stiglitz, has long argued that deficit spending can be a major stimulus to economic growth and can actually lower long-term government debt. When economic growth is restored and unemployment falls, tax revenues increase which eventually lessens the need for a government to borrow.

Another world-renowned economist and Nobel Laureate, Paul Krugman, has often observed that government finances are not like personal finances. While consumers on a spending spree ultimately have to pay the piper, a government’s borrowing strategy directly affects economic growth and this delivers social benefits.

All of this means that increased national debt from COVID-19 is not our enemy – it will not leave a deep scar on our economy nor will it result in a day of reckoning. This will be hard for many Aussies to accept as they have been conditioned to believe that debt is bad and that any political leader who does not pledge to lower Australia’s national debt is not worthy of their vote.

Even though Australia has long had one of the world’s lowest debt-to-GDP ratios, we Aussies display an irrational and emotive attitude to government debt. Hopefully, the pandemic will challenge some long-standing economic theories, including the idea that responsible government means having no national debt.

The notion that governments can sustain levels of debt far greater than previously thought is the centrepiece of an economic model called Modern Monetary Theory (MMT). It proposes that governments can spend freely as they can always create more money to pay off debts in their own currency. Orthodox economists see MMT as a fringe economic movement with some labelling it as “voodoo economics”. But it is worth exploring which I do in my next blog post.

For now, please do not be spooked by the debt bogeyman.

*It has since transpired that the government’s $130 billion JobKeeper program will cost only $70 billion.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How COVID-19 illuminated the flaws in Australia’s system of government

Source: ABC News – Premiers sling barbs at each other
DITCH THE MIDDLE MAN – NO MORE STATES

Around the world, millions of people have been medically tested for COVID-19, and we have been tested in other ways as well. National economies, political leadership and individual resilience have also been tested. Additionally, the pandemic has tested the integration and coordination of Australia’s three-tier system of federal, state and local governments.

While Australia’s multi-level law-making structure looks like a neatly layered cake, there are hidden overlaps which cause blurred lines of separation. History shows that whenever there is a crisis or issue in Australia which transcends state borders, the inherent weaknesses in our governance structure are laid bare. The latest example of this is the novel coronavirus outbreak.

During the height of the pandemic, it was not possible to secure a nationally consistent approach to schooling. Federal and state governments expressed differing viewpoints, leaving parents confused. The PM was blindingly clear in wanting kids to continue attending classrooms. However, the states undermined him by encouraging parents to home school their children.

While education is a state government responsibility, helping Australians weather the economic consequences of the pandemic falls largely to the federal government. That’s why Scott Morrison asked premiers to keep schools open so that parents could continue to work and “put food on the table”.

With no clear chain of command on this issue, simmering tensions between the prime minister and state premiers were exposed. It was impossible for the PM to get the premiers to fall into line. Rebellious states – led by NSW Premier Gladys Berejiklian and Victorian Premier Daniel Andrews – rushed to introduce remote learning so that parents could keep their kids home.

The conflicting messages from the states and the federal government about whether it was safe to send kids to class was seized upon by the media which had a field day reporting the jostling for power. NSW, Victoria and the ACT broke ranks by making unilateral announcements about schooling arrangements which put them at odds with their federal counterparts.

Gladys Berejiklian was also involved in another political football match – the Ruby Princess fiasco. Australians were treated to the unedifying spectacle of political finger pointing over who was responsible for allowing the ill-fated ship to dock in Sydney and for passengers to disembark unchecked.

Authorities passed the buck with NSW officials claiming that they were given permission by the Australian Border Force (ABF) to let passengers off the ship. The ABF returned serve by laying the blame at the feet of NSW Health. A Special Commission of Inquiry is underway to establish which authority ultimately gave the green light to passenger disembarkation.

Another area where Australian governments were not on the same page was lockdown rules. The nationwide lockdown announced by the PM was, quite rightly, accompanied by a warning that police would charge citizens who flouted the rules. But the raft of restrictions on activities varied, depending on where you live.

Individual state and territory governments decided the specifics of the lockdown in their jurisdiction. Each introduced differing measures to restrict movement and this caused confusion among the populace regarding the do’s and don’ts of going outside. For example, Victoria closed golf courses while NSW left them open.

There was a crackdown by police around the nation on “non-essential travel”. Drivers were told that they were required to have a “reasonable excuse” for leaving home. It was clear that popping out to buy groceries and medical supplies constituted essential travel. However, other reasonable excuses for taking to the roads varied from state-to-state.

The legality of driving lessons turned out to be a hot-button issue. In Victoria, a hefty fine of $1,652 was issued to a 17-year-old learner driver as her driving lesson was classified as non-essential travel. The fine made headlines around Australia and, following public backlash, it was withdrawn.

NSW Police took to Facebook to assure citizens of New South Wales that driving lessons were regarded as a “reasonable excuse” to leave home. Police in Tasmania also stated that driving lessons were permitted. South Australian authorities similarly gave the green light to driving lessons provided that they were supervised by a household member.

We also had to contend with state border closures which left Australia’s federal model in strange territory. While the prime minister closed our national borders to foreign travellers, many premiers took the unprecedented step of shutting their domestic state borders to segregate themselves from the rest of the nation. The premier of WA, Mark McGowan, summed it up this way: “In effect, we’ll be turning Western Australia into an island within an island – our own country”.

Of course, Australian states and territories are not independent sovereign nations but part of a single Commonwealth of Australia. This view is supported by George Williams, the dean of law at the University of NSW who opined that there is a constructional issue in closing a state border.

We have section 92 of the Australian constitution and it says trade, commerce and intercourse amongst the States shall be absolutely free. The idea is that we are one country, and a person should be entitled to travel around Australia as they wish.

While closing state borders caused ructions, re-opening them has created even more political drama. NSW Premier, Gladys Berejiklian, claimed that those states keeping their borders closed were “hindering” the nation’s economic recovery. WA Premier, Mark McGowan, hit back saying that he would not be “bullied” by a state (NSW) which allowed the Ruby Princess disaster to unfold.

The Queensland Premier, Annastacia Palaszczuk, was more diplomatic in her response to NSW saying that Queensland would be “seeing southerners return to our glorious sunshine state” towards the end of the year.

It is instructive to note that there was never national advice issued by the federal government recommending that states should close their borders.

In many parts of the world, the catch-cry for coronavirus is “we’re all in this together”. Yet, when it comes to Australia, each state and territory stands somewhat alone. This is the result of parochial decision making at a state level and the power struggle between different levels of government.

I acknowledge that the political actors involved in this life and death drama have worked tirelessly to stop the spread of the pandemic and are to be thanked. While mistakes have been made, my biggest criticism is aimed squarely at the stage upon which Australia’s politicians had to perform – a three-tier system of government which pitted authorities against each other.

There has long been debate in Australia about whether to abolish the states. Former PM, Bob Hawke, is one of many prominent Australians to have called for a federation overhaul. The complex nature of contemporary issues facing Australia – like climate change and now a global pandemic – is beyond the current three-tier structure as there is no express head of power for “the environment” or “pandemics”.

The inconsistencies between the states have long frustrated me. I once worked for an organisation which spent over a decade lobbying government for uniform credit legislation throughout Australia. I watched with anticipation John Howard’s efforts to secure uniform gun legislation following the Port Arthur massacre. And I’ve listened to upwardly mobile Australian executives with children complain about the lack of uniformity in school curricula around the country.

Let’s be honest – the only reason we have three levels of government is due to the burden of history (or path dependency). Australia started out as six independent colonies. The joining of these colonies into a federation of six states to form the Commonwealth of Australia was a good idea in 1901. Today, I humbly submit that the federal/state structure of government has passed its use-by date.

The Founding Fathers of our great nation would not have envisaged the buck passing, endless bickering and unnecessary duplication that have come to characterise federal/state relations. Blaming Canberra first is the default modus operandi for the states and my sense is that many Australians are sick of politicians playing the blame game. No system of democracy is perfect – but surely, we can do better than what we currently have in place.

It’s time to scrap the states.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How world leaders have responded to the coronavirus crisis

Credit: Forbes online
LEADERSHIP IN A TIME OF CONTAGION

The need for effective political leadership heightens during a national crisis. Citizens expect their governments to rise to the challenge and make wise choices. This puts the political judgments of presidents and prime ministers under the spotlight. The populace expects them to provide concrete solutions to serious threats.

The once-in-a-century COVID-19 pandemic has forced leaders to make diabolical choices, creating a watershed moment in politics. According to one academic, not since the height of the Cold War have the stakes been higher. Governments are making finely-balanced decisions which represent stark trade-offs between life, death and the economy.

This burden weighs heavily on political leaders and, for many, it represents their ultimate leadership challenge. Decisions need to be made rapidly and if you get it wrong, you will negatively impact the lives and livelihoods of millions of your fellow citizens. The COVID-19 mega-crisis has tested the mettle of all world leaders and some have failed abysmally.

Every drama needs at least one villain and four political strongmen stand out for special condemnation. The autocratic leaders of Brazil, Belarus, Nicaragua and Turkmenistan denied the threat that the coronavirus posed to their nations. This resulted in them being dubbed the “Ostrich Alliance” by a Brazilian professor of international relations due to their head-in-the-sand attitude.

As the dreaded COVID-19 ripped across the world, these shameful presidents showed disdain for coronavirus science and failed to take defensive measures against the pandemic. The coronavirus crisis has laid bare their collective incompetence with their flawed responses unnecessarily killing many of their respective citizens.

Standing above these four ostrich leaders is our archvillain, Donald Trump, who has also refused to take the pandemic seriously. He was castigated for his dismissive early response to the health warnings about an imminent threat. Trump’s contempt for science is no secret and his failure to implement a nationwide mitigation strategy has cost his nation dearly.

The US has the ignominious honour of having the world’s highest COVID-19 infection rate with over two million confirmed cases. As of this writing, over 114,000 Americans have died from COVID-19 and the death toll is expected to rise. These tragic figures are the direct result of Trump underestimating the virus’ contagion and deadliness.

While no one expected inspired leadership from the president, his disastrous handling of the crisis has put him in a league of his own. His presidency has turned deadly with many of his citizens dying needlessly due to his breathtaking denial and delay. Trump’s irresponsibility is almost criminal with his erratic behaviour proving that he is clearly out of his depth.

Three other heads of government have not covered themselves in glory in response to the threat. Mexico’s President, Andrés Manuel López Obrador, urged Mexicans to “live life as normal”. In Indonesia, President Joko Widodo peddled nonsense about “herbal remedies”. Meanwhile, Philippines’ President, Rodrigo Duterte, issued orders to kill (“shoot them dead”) quarantine violators.

Not surprisingly, the lack of transparency displayed by China has generated much disquiet. The Chinese government is accused of acting too slowly during the early stages of the outbreak. China was subsequently praised by authorities for implementing unprecedented measures including quarantining the entire city of Wuhan to slow the spread of the coronavirus.

European leaders do not escape criticism. In the grimmest of league tables, Britain has the second highest rate of COVID-19 deaths in the world while Italy comes in fourth. Boris Johnson and Giuseppe Conte both botched their initial responses. Johnson gave the virus insufficient attention as he was focussed on Brexit while Conte underestimated the potential spread of the virus.

It is instructive to note that many of the world’s inept leaders are populist politicians. According to two Australian academics, populist leaders – such as Donald Trump in America, Jair Bolsonaro in Brazil and Joko Widodo in Indonesia – have an incentive to mobilise fake news and information as:

… they are not capable of adopting evidence-based deliberation as a strategy. Their ignorance of science reaches a point where truth and lies have no clear boundaries. In catastrophes, the use of such ambiguity to promote a political agenda is magnified. … Populist governments are infamous for “silencing” science. This is because evidence-based policy is not compatible with their approach to public policy.

With regard to Sweden, its unique response to the novel coronavirus has been greeted with mixed reactions. Under the leadership of prime minister, Stefan Löfven, the Swedish government has taken a hands-off approach to managing the pandemic. Rather than declare a lockdown, Sweden asked its citizens to practice social distancing on a mostly voluntary basis while keeping schools, restaurants and most businesses open.

Swedish authorities have not officially declared that herd immunity (when more than 60 per cent of the population has had the virus) is their underlying goal. But many believe that augmenting immunity is part of the government’s strategy. With one of the highest COVID-19 mortality rates in the world, Sweden has been accused of playing Russian-roulette with citizens’ lives.

While the pandemic brought out the worst in some leaders, it provided a stage for many others to shine. This is particularly the case for the Global First Movers Group. This elite club consists of an eclectic group of countries – Australia, New Zealand, Austria, Denmark, Norway, Greece, the Czech Republic, Israel and Singapore – that adopted a “go hard and go early” strategy to limit the spread of COVID-19.

The club is led by Austria and all members have done exceptionally well in suppressing the coronavirus outbreak. Austria is one of the standout countries in dealing with the virus. Singapore too won plaudits for its aggressive testing and tracing campaign. The efforts of Australia and New Zealand have also been hailed with both nations recording a case-fatality rate below 1.5 per cent.

Another way to look at the effectiveness of political leadership during the pandemic is through the lens of gender. It is claimed that female leaders around the world rose to the occasion by acting boldly and swiftly in making the unpopular call to shut down life as we knew it. A Forbes article titled – What Do Countries With The Best Coronavirus Responses Have in Common? Women Leaders – provides a precis of how women have managed the crisis with aplomb. Forbes noted:

Angela Merkel, the Chancellor of Germany, stood up early and calmly told her countrymen that this was a serious bug that would infect up to 70% of the population. …

Among the first and the fastest responses was from Tsai Ing-wen in Taiwan. …

Jacinda Ardern in New Zealand was early to lockdown and crystal clear on the maximum level of alert she was putting the country under – and why. …

Iceland, under the leadership of Prime Minister Katrín Jakobsdóttir, is offering free coronavirus testing to all its citizens, and will become a key case study in the true spread and fatality rates of COVID-19. …

Sanna Marin became the world’s youngest head of state when she was elected last December in Finland. It took a millennial leader to spearhead using social media influencers as key agents in battling the coronavirus crisis. …

Norway’s Prime Minister, Erna Solberg, had the innovative idea of using television to talk directly to her country’s children.

Around 10 per cent of countries are led by women who preside over just four per cent of the global population. While the performance of countries with a female head of state is a very small category, it can be safely suggested that their performance has been quite positive. In the words of The Guardian, “Plenty of countries with male leaders have done well. But few with female leaders have done badly”.

It is axiomatic that not all heads of state have passed the COVID-19 crisis management test. The pandemic has exposed feeble leadership among world leaders with the US paying the highest price for its gross negligence. A combination of slow starts and mixed messages have seen many leaders erode trust and unleash unrest.

No wonder the coronavirus leadership test has come back negative for some.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How to prevent the next pandemic

ecan.govt.nz
COOPERATION IS THE KEY

Leaders have two responsibilities in any crisis – solve the immediate problem and stop it from happening again. Now that the world is slowly getting on top of COVID-19, we must look to the longer term and work out how to avoid a future global health emergency.

The world was caught flat-footed by the coronavirus and medical experts fear that if we don’t learn from our mistakes, the next pandemic will be a matter of when, not if. No one can guarantee a pandemic-free world as infectious diseases are a fact of life, but we can do better at minimising the impact on public health.

Stopping future epidemics morphing into pandemics will require unprecedented globally coordinated action. It is only through international cooperation – and not through nationalist rhetoric and policies – that governments will be able to protect citizens, according to the World Economic Forum. In mid-April, the Forum issued a report which stated:

The world that emerges from the coronavirus pandemic may be a warring collection of countries that are more closed off and nationalistic than before. But without rapid and effective global cooperation, the world may not exit this crisis safely at all. For now at least, heavy-handed nationalist responses predominate. Alongside curfews, lockdowns, and requisitioning, governments are closing borders and using wartime rhetoric to rally their populations. … Soon, however, governments will need to restart the global economy. And that will require international cooperation.

Many believe that COVID-19 is a creature of capitalist globalisation and that the only way to prevent further outbreaks is to build walls, restrict travel and decrease trade – in other words, to de-globalise the world. However, historian and author, Professor Yuval Noah Harari, maintains that the coronavirus crisis is a human failure caused by our inability to cooperate.

In a TIME article on 15 March, Professor Harari wrote:

… while short-term quarantine is essential to stop epidemics, long-term isolationism will lead to economic collapse without offering any real protection against infectious diseases. Just the opposite. The real antidote to epidemic is not segregation, but rather cooperation.

Professor Harari notes that epidemics killed millions of people long before the current age of globalisation. He cites the Black Plague which killed between 75-200 million people even though there was no intercontinental travel or megacities in the 14th century to fuel the spread of the disease.

Over the centuries, humanity has become better at combating diseases with both the incidence and impact of epidemics actually going down dramatically. In the words of Professor Harari:

Despite horrendous outbreaks such as AIDS and Ebola, in the twenty-first century epidemics kill a far smaller proportion of humans than in any previous time since the Stone Age. This is because the best defense humans have against pathogens is not isolation – it is information. Humanity has been winning the war against epidemics because in the arms race between pathogens and doctors, pathogens rely on blind mutations while doctors rely on the scientific analysis of information.

Professor Harari asserts that history teaches us two lessons for the current epidemic. Firstly, you cannot protect yourself by permanently closing your borders. And secondly, real protection comes from the sharing of reliable scientific data and from global solidarity. Professor Harari continues:

When one country is struck by an epidemic, it should be willing to honestly share information about the outbreak without fear of economic catastrophe – while other countries should be able to trust that information, and should be willing to extend a helping hand rather than ostracize the victim.

When politicians squabble, viruses double which is why the United Nations Development Program (UNDP) has added its voice to those calling for greater cooperation. In the concluding remarks to a report titled “Humanity needs leadership and solidarity to defeat the coronavirus”, the UNDP is clear:

We must rebuild trust and cooperation, within and among nations, and between people and their governments.

Following the Global Financial Crisis in 2008, there was swift and decisive action by the G20 in leading a coordinated global response. In stark contrast, there has been a lack of effective international action regarding COVID-19.

Predictably, governments have been working to protect their own populations first by closing borders and imposing quarantines and lockdowns. “But in doing so,” warns Erik Berglöf, Director of the Institute of Global Affairs at the London School of Economics and Political Science, “they are often failing to see the bigger picture. That critical error of judgment, if not corrected, will come back to haunt us all”.

Berglöf explains that containing a pandemic requires strengthening the weakest links – in an individual hospital, a local community, a country, or the world. “That is why it is in everyone’s interest urgently to shore up weak health-care systems”, he implores.

Commenting on the inward-looking focus of most governments, economics professor, Lee Jong-Wha of Korea University, stated in an opinion piece on 25 March that:

Unilateral travel bans should be eschewed in favor of cooperative responses, including information-sharing and coordination in the development and delivery of vaccines and treatments. Public-health systems must be protected. Cooperation is in everyone’s interest. Yet, at a time of intensifying nationalism, weak political leadership, and rising political and economic tensions between the world’s two largest economies, effective international action is proving difficult to come by.

Berglöf believes that the G20 needs to listen and work with the World Health Organisation (WHO). He acknowledges the heavy criticism that has been levelled at the WHO but sees this as “misdirected, ill-informed and counterproductive”. He staunchly believes that “the WHO remains the only institution that can provide global health leadership and inspire the trust needed to intervene,” and that “we undermine it at our own risk”.

As outlined in a recent POLITICO article, the coronavirus has brought out the best and worst in world leaders and not everyone has passed the test of character. “Countries may not always get the leader they deserve, but the coronavirus pandemic has certainly revealed what kind of leader they’ve gotten,” said POLITICO.

At the end of the day, governments should be fighting the virus, not each other or the WHO. UN Secretary-General, Antonio Guterres, described the role of the WHO as “absolutely critical” in overcoming the COVID-19 pandemic. World leaders must work together, otherwise history will not judge them kindly.

A classic case of united we stand, divided we fall.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How the coronavirus pandemic will change the world

Earth image courtesy of NASA http://earthobservatory.nasa.gov/
READING THE TEA LEAVES

Right now, the degree of uncertainty in the world is immense, which is why thinking about what life will be like after COVID-19 is daunting. But that has not stopped futurists from taking out their crystal balls and making predictions about the type of society the pandemic will leave in its wake.

Will we revert to business-as-usual or will humanity have a changed worldview? Will the outbreak of an invisible virus redefine globalisation, causing nation-states to seal their borders or will we better understand that we share a single planet and need each other to survive?

No one, of course, can answer these questions with absolute certainty. However, one way to gain a sense of what might lie ahead is to look at previous crises. Other dark times in history have united people against a grave challenge and the hope is that this will happen again.

Throughout history, nothing has killed more humans than infectious diseases. Plagues and epidemics have ravaged humanity since the dawn of civilisation. Each global disease outbreak has taught us how to manage its spread as well as providing vital lessons for containing future outbreaks.

Our understanding of the need for social distancing comes from the bubonic plague. King Henry VI of England implemented one of the world’s first anti-contagion measures. He banned his subjects from kissing on the cheeks when greeting someone. To this day, Brits favour a firm handshake over a peck.

During this current pandemic, we have gone one step further – handshakes are out and elbow bumps are in. Many argue that handshakes will never return. My hope is that this everyday gesture – which establishes a positive connection between two people – will eventually become common place again.

History shows that major upheavals also leave their mark on geopolitics. This happened in the aftermath of World War II when the liberal world order was created. Liberalism is an international (as distinct from national) worldview which opposes isolation and protectionism.

The liberal vision looks for collective solutions to global problems by working co-operatively with the help of international institutions (such as the WHO) to make the world a better place. Liberalism as a political ideology is linked to globalisation whereas nationalism is driven by anti-globalist sentiments.

The liberal worldview is not embraced by President Trump and other right-wing politicians. During his election campaign, Trump declared that “Americanism, not globalism, will be our credo”. Until a few months ago, it seemed that the resurgence of this nationalist political ideology would define the remainder of the 21st century.

However, the pandemic has forced governments around the world into solidarity and co-operation. It has also demonstrated that a world without deep cross-border engagement is not tenable. The international system will certainly be challenged but will survive, whereas America’s go-it-alone policy will be found wanting.

While World War II devastated Europe and Asia, the US emerged in strong economic and military shape making it the undisputed world leader. Coming out of the COVID-19 pandemic, it is the US which is now being challenged – China wants to become the new hegemon.

China will accelerate its maneuvering for international leadership while the US continues to falter (unless Joe Biden wins the November election). COVID-19 has intensified the rivalry between the world’s two superpowers with both nations engaging in mutual recrimination in lieu of collaboration.

In times of great uncertainty, the strong dominate the weak and China has used the pandemic to cast itself as the global saviour. China has provided many nations, including Australia, with hundreds of thousands of test kits, respirators and face masks. Ironically, several countries reported faults with the masks and they were returned.

For over two decades, China has been known as “the world’s factory” as it dominates many manufacturing industries including the production of face masks. If nations do not want to be beholden to China post COVID-19, they must break China’s stranglehold on global supply chains.

Depending on one country to provide vital products for industries such as the pharmaceutical sector is a recipe for disaster. About 80 per cent of pharmaceuticals sold in the US are produced in China. This number, according to experts, hides an even greater problem: China is the world’s largest and sometimes only global supplier for the active ingredient of some vital medications.

The label “Made in China” will diminish in the coming years. National governments will intervene to force strategic industries to diversify their supply chains to reduce their dependence on any single country. By its very nature, a global economy will always be interconnected and interdependent, but this does not mean that one powerful nation should be able to hold others to ransom – no matter how attractive their price proposition might be.

Another thing that we will encounter when the dust settles on the pandemic is a massive increase in sovereign debt. The world is awash with stimulus packages as nation-states have raced to help people and businesses survive the economic contagion. Collectively, the various fiscal and monetary interventions are estimated to exceed a staggering US$10 trillion, according to the Council on Foreign Relations.

The pandemic is the biggest hit to the global economy since the Great Depression which is why the world has opened its wallet. But it is citizens who will be forced to pay the bill. The burden of reducing higher net public debt will fall on taxpayers, just as wartime spending did. In many nations, this payback will be via a combination of higher taxes and less government spending.

A final change that we will encounter is the same as that experienced post September 11 – citizens around the world will be required to sacrifice liberties for safety. Just as travellers are now searched before boarding a plane, the price of continued vigilance against new viruses will be some loss of privacy and personal freedoms.

The rise of mass surveillance after 9/11 offers a cautionary tale about the use of technology to keep tabs on people’s movements. During this current crisis, location tracking apps on mobile phones have been used by China, Singapore, Israel, Hong Kong, Taiwan and Thailand. These nations have kept a very close eye on people who have been exposed to the virus.

In the fight against COVID-19, civil liberties have been treated as a casualty of war. However, the right to privacy is enshrined in the Universal Declaration of Human Rights. Civil Liberties Australia recently warned that “a health emergency is no excuse for abusing secret powers” and that Australia must not use a crisis “to permanently implant more draconian security measures including excess surveillance”.

Please allow me to conclude by underscoring that a number of possible scenarios have been developed by scholars, analysts, columnists and other commentators to describe what society might look like on the other side of COVID-19. Many are predicting that the pandemic fallout will significantly impact all domains of life and will drive huge shifts in how we live and how governments govern.

I accept that some things will change, but reject the assertion of many commentators that the world will be unrecognisable. One assessment which I do embrace is by the influential foreign policy magazine, Foreign Affairs. In a recent article titled, The Pandemic Will Accelerate History Rather Than Reshape It, (a must read!) the magazine stated that “the world following the pandemic is unlikely to be radically different from the one that preceded it”.

Yes, the world feels awfully strange right now, but life on Earth as we know it will return. There will not be an upheaval of everything that we once took for granted, however, lifestyle patterns will experience some changes. My hope is that we will all be part of a more humane society and that we have all learned at least one lesson:

You don’t know how much you miss normal life until it’s gone!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

What lessons can we learn from the coronavirus outbreak?

Illustration: Andrzej Krauze/The Guardian
THE WORLD IS SICK AND IN DISARRAY

Everywhere you look, you see disruption. International markets are in turmoil with a recession in many nations almost assured. National governments are in crisis mode implementing unprecedented financial and social measures. And worried citizens are in a state of panic with fear causing irrational and unhelpful behaviour.

Welcome to the world of COVID-19. What confronts you is not a scene from a disaster movie but the brutal reality of a global health emergency. The coronavirus started as an epidemic in China and quickly morphed into a global pandemic. It has upended life as we know it and has reshaped how we work, learn, shop, travel and interact.

We are dealing simultaneously with a health crisis and an economic meltdown. Saving lives is killing jobs as governments make impossible choices between health and wealth. Epidemiologists and economists alike are unable to put hard numbers on the human and financial costs of this rolling calamity. What is clear is that infection rates globally have been rising while the job market has been in free fall.

There is no unanimity of opinion as to how long it will take to curb the spread of the coronavirus and how the pandemic will end. Predictably, many apocalyptic predictions have been made about COVID-19. If we ignore the doomsday scenarios, the best-case is that we will get it under control in the coming months and life will largely return to normal. The worse-case is that it may keep infecting people for some time causing outbreaks until there’s a vaccine.

In the meantime, the pandemic should act as a wake-up call for humanity. There are serious lessons to be learned for all of us. The ground is shifting beneath our feet and this will change the social and political landscape. Like the Global Financial Crisis, the coronavirus is an Earth-shattering event which will have far-reaching consequences.

Already, commentators are writing opinion pieces about lessons arising from the pandemic. One such commentator is world-renowned author and historian, Professor Yuval Noah Harari. In an article he penned for the London based international daily newspaper, Financial Times, on 20 March titled, The World After Coronavirus, Harari stated:

… the storm will pass, humankind will survive, most of us will still be alive – but we will inhabit a different world. Many short-term emergency measures will become a fixture of life. That is the nature of emergencies. They fast-forward historical processes. Decisions that in normal times could take years of deliberation are passed in a matter of hours. Immature and even dangerous technologies are pressed into service, because the risks of doing nothing are bigger. Entire countries serve as guinea-pigs in large-scale social experiments. What happens when everybody works from home and communicates only at a distance? What happens when entire schools and universities go online? In normal times, governments, businesses and educational boards would never agree to conduct such experiments. But these aren’t normal times.

It’s said that life is lived forward but evaluated backward. Put another way, in the thick of the moment it’s hard to see the forest for the trees, but with the benefit of hindsight things become clearer. Given this, it’s too early to draw definitive conclusions about the lasting impact of the COVID-19 saga. While there will undoubtedly be more to come, here are some early lessons.

The first lesson is that the coronavirus will force the return of big government. The pandemic is a stark reminder of the role governments play in our lives and how vital they are in times of crisis. A key duty of any government is to protect the well-being of its citizens which is why governments have been leading the battle against the coronavirus. Hearing the words – “I’m from the government and I’m here to help” – is no longer terrifying. The outbreak will strengthen nation states – the need for them has become infectious.

The second lesson concerns the illusion of borders. Global challenges have no national borders and viruses do not carry passports. No one is geographically immune to a virus as it easily crosses borders. Neither screening travellers nor banning travellers creates an impermeable barrier that absolutely protects a country from importing diseases. Undetected cases slip through – borders cannot be completely sealed and will always be leaky. This is the reality of living in a global village.

The third lesson is that we need to change our self-centered ways. Not enough of us have shown grace under pressure. There has been a lack of camaraderie. Panic has prevailed over common sense. Many have behaved like a marauding swarm of locusts stripping supermarket shelves bare. We needed to be at our selfless best but have been at our selfish worst. The crisis has unmasked who we really are and proved beyond doubt that individual behavior has a profound impact on society. Many of us have failed the civic responsibility test.

The fourth lesson concerns the role of the media and the dangers of using fear-inducing language. “Facts, not fear”, will stop the virus said the World Economic Forum. “Words matter” warned the World Health Organisation which urged the media not to use terms like “plague” or “apocalypse” or to describe people with COVID-19 as “spreading the disease”. These pleas have fallen on deaf ears. Sensationalist reporting is seen as a “bigger contagion” than the virus itself. The media stands accused of whipping people into a frenzy with irresponsible coverage. But will they be brought to account?

The fifth lesson comes in the form of an almost unspeakable question: Should we sacrifice the economy to save lives? Put another way, is the cure worse than the disease? Policy-making invariably involves trade-offs and governments have prioritised mortality risk over economic risk. But containment policies to “flatten the curve” have cost millions of jobs and trillions of dollars and some see this as too high a price to pay. I believe that governments were correct in not letting the pandemic play out unchecked. However, the policy of “do whatever it takes and whatever it costs” will be challenged as the playbook for future crises.

Undoubtedly, more lessons will reveal themselves as the pandemic unfolds. For example, is it possible to quickly resuscitate an economy following a “controlled hibernation” or is growth stunted for an extended period? Only time will tell the full extent of the damage caused by a microscopic, invisible enemy that has brought us to our knees. But one thing is clear:

The human species is not invincible!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

How to stop the pandemic and restart the economy

Source: The Economist
SAVING LIVES AND RESTORING LIVELIHOODS

Around the world, the hustle and bustle of daily life has come to a screeching halt. Cities have become ghost-towns and virtually every aspect of society has changed. Social distancing is the new catchphrase with elbow bumps replacing handshakes.

As governments double down on containing the fast-moving pathogen, the question on everyone’s lips is the same: When will life return to normal? While no one has a definitive answer, it’s clear that we need an exit strategy to lift the forced lockdowns and cease the curtailment of economic activity.

Any exit strategy requires input from both epidemiologists and economists as targeting coronavirus and reopening businesses are intertwined. We need to bring the contagion to heel and resuscitate national economies, but the public health response must come first – the wellbeing of citizens is paramount.

From a health perspective, the global imperative is to flatten the contamination curve. Every country is keen to join the few nations that have controlled the epidemic and are focusing on preventing a resurgence. Singapore is being held up as a model for achieving rapid control of the virus.

Arguably, the most important factor in the city-state’s fight against COVID-19 is that it had a pandemic response plan in place before the virus hit. This was developed in 2003 following the SARS outbreak and enabled Singapore to act pre-emptively and early.

Singapore did not impose drastic lockdown measures – schools, universities, workplaces, bars and restaurants remained open. Rather, the government introduced rigorous detection and strict quarantine of those found to be infected. It also moved early to ban incoming flights from the Chinese city of Wuhan, where the virus originated.

Singapore has done everything right” said a former WHO infectious diseases expert. In contrast to Singapore, many other nations have had slow and fumbled responses and lost the ability to replicate Singapore’s rapid containment success. These nations must continue with their forced lockdown measures to break the COVID-19 transmission chain.

This begs the difficult question: When is it safe to relax these restrictions? Experts warn that easing shutdowns too early will inevitably result in the virus rearing its ugly head again. A second wave resurgence of infections might see the number of confirmed cases soar.

[NB: In early April, Singapore detected a potential second wave of infections and immediately cancelled mass gatherings and closed venues, places of worship and tuition centres.]

Governments and their health advisers are grappling with how to reduce social distancing measures and ease lockdowns without reigniting the virus and going back to square one. “We do have a big problem in what the exit strategy is and how we get out of this,” said Mark Woolhouse, Professor of Infectious Disease Epidemiology at the University of Edinburgh.

Canadian health expert, Assistant Professor Jason Kendrick of Manitoba University, cannot see daily life returning to normal until there is a vaccine and his view is supported by other experts. However, a vaccine is at least 12-18 months away, which is why Professor Woolhouse told the BBC that “waiting for a vaccine should not be honoured with the name ‘strategy’, that is not a strategy”.

A vaccine for COVID-19 will need to be administered to about 60 per cent of the global population to achieve “herd immunity”. This occurs when enough people have developed an immunity to the outbreak and vaccination is seen as the best way to safely develop herd immunity.

The policy of the WHO is to keep things clamped down until drugs and a vaccine are available. COVID-19 is too widespread and contagious to fade out on its own, so science will have to deliver immunotherapies. The pandemic has a firm grip on the world and there is no reset button that can make it disappear.

In the meantime, national governments are becoming increasingly concerned about the economic impact of keeping widespread restrictions in place. Economists fear that the worldwide economic downturn could be deep and lengthy. Commercial activity cannot return to normal while there are constraints on human interaction.

Authorities are caught between the urgent need to reboot economic activity and the ongoing need to contain the virus. With large swathes of the population unemployed and many businesses teetering on the brink of failure, rebuilding broken industries is a key economic goal of all governments.

China did not wait for a vaccine to be developed before it sent workers back to factory floors and construction sites. The majority of China’s workforce have returned to their jobs and manufacturing activity is beginning to ramp up. Malls and restaurants have re-opened to crowds.

The world is now watching to see if China can keep COVID-19 at bay. To date, China’s high-stakes experiment seems to be working – it appears to have successfully dampened the rate of new infections. But work life is very different in China’s post-virus economy. Fearing a resurgence in cases, the government – as reported in a TIME article – is taking a gradual approach:

Beijing’s city government is requiring that the number of people in each office be limited to no more than 50% of usual staffing levels. Protective face masks are required, and office workers must be seated at least 1 meter (3.3 feet) apart. Workers are not supposed to face each other when eating.

Similar measures have been implemented across China. As noted in another report:

… (office) workers enter in shifts staggered to minimize potential exposure. Infrared cameras and security staff check temperatures as they arrive, and their workspaces are decontaminated three times per day. Workers must wear masks at all times and are required to complete a daily health questionnaire. No more than six people are allowed in elevators; tape on the floor shows where to stand. Face-to-face meetings are discouraged, and people eat alone in the cafeteria using a cardboard “face shield,” to minimize risk when a face mask is removed.

Lifting lockdowns and getting people back to work is clearly a mammoth task and there is no one surefire way for it to be done. India is talking about a “staggered re-emergence of the population”. Other nations will undoubtedly have different road maps. Only time will tell which strategy proves to be the most effective.

Putting the COVID-19 genie back in the bottle will challenge every nation.

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why the COVID-19 outbreak has led to mass hysteria

Source: Jack Thomas/Getty Images
STOP THE Obsessive-compulsive coronavirus disorder

The reaction to the coronavirus has created catastrophic economic and social disruption. It has spooked investors causing them to wipe trillions of dollars of value from global financial markets. It has panicked consumers driving them to clear out supermarket shelves in order to fill household pantries. And it has besieged governments forcing them to impose travel restrictions, quarantines and shutdowns.

Volatility is now the new normal as the pandemic brings with it unprecedented changes to daily life. To break the chain of transmission, people are embracing a combination of hygiene measures (eg, hand sanitising) and social distancing measures (eg, remote working). We are all being asked – quite rightly – to change our usual habits to curb the virus and protect the most vulnerable in society.

Many of the disruptions that we are experiencing are not caused by the outbreak itself. Rather, they are the result of people’s panicked response to the coronavirus. Many believe that the media must take some responsibility for fuelling unnecessary alarm. The pathogen is dominating the news cycle with radio stations and television networks bombarding us with dire forecasts about the pandemic.

Media outlets around the world have been breathlessly reporting virtually every new diagnosis of the coronavirus. However, they rarely tell you that catching the virus is non-life-threatening for most people under 65 years. Many infected people never become sick and, of those who do, the fatality rate may yet turn out to be less than the number of deaths from the annual influenza epidemic.

Each year, according to estimates by the World Health Organisation and the United States Center for Disease Control and Prevention, up to 650,000 people die of respiratory diseases linked to seasonal flu. As of this writing, the number of coronavirus deaths worldwide, according to John Hopkins University, is 58,901.

In a recent press conference, Australian Prime Minister, Scott Morrison, said that for most people infected with the coronavirus it “will be a mild illness and it will pass”. He acknowledged that the most at-risk members of the community were the aged, which is why authorities moved to lockdown aged care facilities to protect vulnerable residents.

I commend governments and medical authorities around the world for being concerned and taking the coronavirus seriously. The outbreak has plunged us into the unknown. We know what to expect from the long observed seasonal flu and have a vaccine to treat it. But the coronavirus has taken us into uncharted territory – its novelty means that scientists aren’t sure yet how it behaves.

Understandably, many find this frightening and that’s all the more reason why reporting of the pandemic must be measured and balanced. The media has an important role to play in letting the public know the dangers without inciting panic. But they have hyped the outbreak with alarmist information such as worse-case scenario death toll predictions. This has driven fear rather than build an understanding about the illness.

US academic, Kalev Leetaru, is a senior fellow at the George Washington University. He recently published the results of an analysis which sought to identify the degree of scrutiny the media deserves for “fomenting” coronavirus panic arising from their “wall-to-wall, end-of-days coverage”. His conclusion is that the media has “played a measurable role in driving public attention to the virus and likely worsening behaviors such as panic buying”.

Of course, scaremongering by the media is nothing new. In his 2012 book, Sideshow: dumbing down democracy, former Australian federal minister for finance, Lindsay Tanner, described how the media manipulates the discussion of issues in ways that entertain rather than inform. He argued that media reporting is blatantly designed to manipulate the public’s emotions. Tanner cited a number of examples where the media created unnecessary panic including the Global Financial Crisis, the Year 2K computer bug and the swine flu epidemic.

The media reporting of these events produced a public response out of proportion to the threat. I vividly recall the exaggerated Y2K reporting. While technology legend, Bill Gates, saw the millennium bug as “a minor inconvenience”, less qualified IT commentators promulgated doomsday scenarios and were aided in their deception by the media who spun compelling but inaccurate stories.

A gullible public bought into the outrageous predictions about planes falling from the sky and missiles self-launching. But the bug did not bite and the New Year passed with nothing more than the expected hangover. Those who foretold of a global computer apocalypse caused unnecessary panic but were never brought to account.

Nothing had changed by the time of the Fukushima power plant disaster in 2011. Yet again, the media wheeled out instant experts who hyperventilated over the very modest amounts of radioactive fallout. Fears about radiation contamination were clearly overblown but made for dramatic headlines which trumpeted the dangers of nuclear energy. The same tactics are being used by the media with regard to the coronavirus.

During an address at a conference in Munich on 15 February, Tedros Adhanom Ghebreyesus, the Director General of the World Health Organization, said: “… we’re not just fighting an epidemic; we’re fighting an infodemic. Fake news spreads faster and more easily than this virus, and is just as dangerous”. Two weeks later, Dr Ghebreyesus ended a 28 February media briefing with a similar remark: “Our greatest enemy right now is not the virus itself. It’s fear, rumours and stigma”.

Another voice worth listening to is that of Clare Wenham, assistant professor of global health policy at the London School of Economics. In an article that she recently co-authored with two colleagues for online global healthcare knowledge provider, BMJ, Wenham wrote:

We conceptualise this as two different outbreaks: one outbreak of a coronavirus, and one of viral fake-news. This sensationalised panic and fear concerning the nCoV2019 outbreak is a consequence of the proliferation of sources of information which exaggerate the severity of this outbreak….

She went on to say:

… we need to consider the media’s role and responsibility in informing and shaping understanding and reaction to this outbreak. Are they aware of the public health impacts of headlines such as “killer virus”, “deadly disease” or a “killer coronavirus epidemic”? Alarmist headlines like these incite further fear among populations and communities (and) challenge the more measured public health communications from the government or WHO … The scarier the language and voice, the more this false narrative of coronavirus takes hold.

Every public health outbreak inevitably involves communication and panic prevention is an integral part of managing any pandemic. Panic is contagious and destructive and should be avoided at all costs. All new contagious diseases receive extensive media attention with the media coverage setting the agenda for public debate and concerns.

Media executives know that people are predisposed to fear what they do not understand. Dire warnings by news outlets of a “horrific” and “catastrophic” disease tap into our anxieties and play to our primeval fears. Care must be taken, therefore, not to use fear-inducing language but to employ a narrative which tempers fear and provides reassurance.

Let’s work together to stop the virus of fear.

P.S. The best article that I have read on the role of the media in fuelling coronavirus panic is by Professor Karin Wahl-Jorgensen of Cardiff University – a must read!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting

Why the coronavirus outbreak has driven panic buying

COVID-19 HAS EMPTIED SUPERMARKET SHELVES

Around the world, people have flocked to supermarkets and stripped shelves of household essentials. Panic buying has reached fever pitch with shoppers piling trolleys high with toilet paper and other items. Supermarkets have imposed limits on customer purchases to quell unnecessary hoarding. In some cases, police intervention has been required to contain the behaviour of stampeding customers.

The coronavirus has caused us to fret and this has brought out the worst in humanity. Irrational stockpiling has turned people’s fear of a shortage into a self-fulfilling prophesy. Pleas by public authorities for calm have fallen on deaf ears. Worry about the scarcity of supplies has driven panic buying which has bred more panic buying – a classic case of herd mentality. Illogical behaviour has become contagious.

Blindly following the crowd has created public unrest which, in turn, has led to pandemonium due to confronting reporting. Television and social media have whipped people into a frenzy by triggering anxiety and uncertainty. The rolling news coverage with minute-by-minute online updates have stoked public hysteria and induced panic.

Professor Karin Wahl-Jorgensen, a journalism expert from Cardiff University, stated that the coronavirus reporting is a “bigger contagion” than the virus itself. She expressed concern at media coverage which used “sensationalist and frightening language” such as “killer virus” and “deadly disease” and said that she found this “particularly problematic”.

One online media outlet, Euronews, ran an article which asked the question: Which is the real pandemic – coronavirus or the hysteria that follows? It answered as follows:

The world is clearly in the grip of not one, but two pandemics, caused by a new coronavirus, the “novel Coronavirus 2019” or nCoV-2019 for short. The first pandemic is the actual infection caused by this virus. The second is the panic, hysteria, threat inflation, associated racism and xenophobia that are exploding in the shadow of the viral outbreak. The latter pandemic may claim more lives than the first.

One Australian newspaper, Darwin’s NT News, made light of the loo roll hysteria. It printed several blank pages for readers to use if they ran out of toilet paper. “We’ve printed an eight-page special lift-out inside, complete with handy cut lines, for you to use in an emergency,” the paper’s front page cheekily read.

Consumer psychology experts have opined that herd mentality coupled with over-exposure to coverage of the coronavirus is to blame for stores being ransacked of groceries and long-life pantry staples. One such expert, Steven Taylor, is a professor and clinical psychologist at the University of British Columbia and author of The Psychology of Pandemics.

Taylor argues that panic buying is fuelled by anxiety and a willingness to go to irrational lengths to quell those fears such as queueing for hours or buying way more than you need. He says: “If everyone else on the Titanic is running for the lifeboats, you’re going to run too, regardless if the ship’s sinking or not”.

Many shoppers insist that they are only in a frenzy because everyone else is, not because they are scared of the coronavirus. So, fear of missing out is allegedly driving them to join the hordes of other shoppers whose self-preservation instincts have also kicked in. People argued that it is “only normal” to want to look out for themselves and their families. No one, it seems, wants to take responsibility for their own overreactive behaviour.

Outraged customers have vented their fury on social media at the chaotic scenes created by the reaction to the virus. “Just ridiculous” and “insane” and “outrageous” are some of the comments recorded. During the height of the run on paper products, the top trending topic on Twitter in Australia was #toiletpapergate. Clearly, people did give a sh!t that stocks were wiped out!

History shows that a consumer buying frenzy ahead of a potential crisis is not an uncommon phenomenon. For example, it famously occurred in 1962 during the Cuban missile crisis when nuclear war seemed imminent. Sensible American families stocked their basements with enough canned goods and bottled water to survive an atomic blast.

There’s nothing more fearsome than the great unknown and this describes the coronavirus. Many in the community see it as a dramatic event which requires a dramatic response – such as descending on supermarkets and stripping the shelves bare of toilet rolls, hand sanitisers and surgical masks. A much better response is something far more mundane – properly washing your hands.

Once a sense of normalcy and balance returns, we must examine our collective behaviour. It’s clear that we have to get better as a society in responding to the surprises and shocks of modern living. This requires us to take a more holistic approach by focussing on “we” rather than “me”. Our narrow self-interests must give way to the optimum outcome for all parties.

Trying to achieve the best for the collective rather than the individual led to the development of a branch of economics called game theory. This theory describes how the gain of one player is offset by the loss of another player, equalling the sum of zero (a.k.a. – a zero-sum game).

The best known example of game theory is the prisoner’s dilemma where two criminals are enticed by police to betray each other. The prisoner’s dilemma – to confess or not to confess – underscores how our choices affect others and how the choices others make affect us.

The Global Financial Crisis was a modern-day prisoner’s dilemma where the “every-man-for-himself” attitude saw markets crash as everyone tried to get to the exit door first. All the efficiencies of the free market flew out the window as institutions hid their bad loans causing credit markets to freeze as players did not trust each other.

The notion that someone has to lose for someone else to gain is narrow-minded. We humans must learn to modify our self-defeating behaviour, which is why game theory should be a compulsory element of the core curriculum of educational institutions. We all need to be taught the benefits of co-operation over conflict and this training should begin in the home.

After all, parents are the world’s first and foremost teachers. We can all play a part in making our planet a better place.

Let’s wipe out crap behaviour!

Regards

Paul J. Thomas
Chief Executive Officer
Ductus Consulting