The political and economic impact of the coronavirus

Our Political Editor, Patrick Sullivan looks at the potential political and economic consequences of Covid-19.

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Patrick Sullivan, Political Editor
On 29 February 2020 13:41

At Tuesday night’s Democratic Presidential debate in South Carolina, the only candidate to bring up the threat of the coronavirus was former New York City Mayor, Michael Bloomberg. He was chastised by one of the moderators for doing so. Bloomberg’s fellow candidates Bernie Sanders, Joe Biden and Amy Klobuchar were asked how they would handle the crisis later on in the debate, but it was not the pressing issue it should have been.

The political class had not yet woken up to the chaos that could be caused by the coronavirus but by the week’s end the coronavirus would be at the top of their agenda. When I refer to the coronavirus, I am actually referring to the seventh strand of coronavirus; the one that is dominating the news at present.

This was a week where Wall Street suffered its worst week since the financial crisis in 2008. The Dow Jones Industrial Average shed 12.4%, a drop of 3,600 points. Additionally, the S&P 500 lost 11.5% and the Nasdaq fell 10.5%.

On Wednesday, President Trump appointed his Vice-President Mike Pence to lead the U.S. Federal Government’s response to the coronavirus. Pence is the right choice for this. With his appointment a clear line of command and accountability is established.

What the medical professionals need is someone in charge who can get things moving through the bureaucracy and effectively co-ordinate with all the relevant stakeholders in the response. Vice-President Pence is almost uniquely qualified to do that. Additionally, whilst he might be considered boring when it comes to the gladiatorial aspect of politics; in a situation like this boring can quickly turn into reassuring.

Vice-President Pence served in the Republican leadership in the U.S. House of Representatives between 2009-2011 and he has the ability to skilfully navigate the halls of Congress. This is essential as the Executive Branch of the U.S. Federal Government needs to carry the Legislative Branch along with it, if it is going to be able to deal with the virus effectively.

Vice-President Pence also served a term as Governor of Indiana from 2013 to 2017. The U.S. Federal Government will need to be in constant contact with local officials in those States reporting cases of the coronavirus. As a former Governor himself, he can empathise with those Governors from States effected and act as conduit between the Federal Government and State Governors.

 The person coordinating the response need not be a medical professional provided they are positively taking on the advice and suggestions of the medical professionals. The person coordinating the response needs to be the best person who can fulfil these two tasks; getting the medical professionals the resources and support that they need, cutting through red tape and bypassing time-consuming bureaucratic hurdles, at a time when time is of the essence and also acting as a spokesperson for the Government, providing the public with honest information, whilst at the same time, not fermenting a panic.

He also has credibility within the conservative media without being seen as a right-wing firebrand in the mainstream media. This has already proved vital in preventing the spread of misinformation.

Some in the conservative media believe that hysteria over the coronavirus is being whipped up by the left in an effort to fatally wound President Trump. Talk radio host and recent recipient of the Presidential Medal of Freedom, Rush Limbaugh told his audience that the coronavirus was the “common cold” and that the media “would love for the coronavirus to be this deadly strain that wipes everybody out, so they could blame Trump for it.”

This particular approach has been heavily criticised by medical professionals who believe that the coronavirus must be treated as a public health emergency and not an accuse for political point scoring. They are certainly right in this but in a world where everything is increasingly political, it is properly wishful thinking.

To his credit, Vice-President Pence appeared on Mr. Limbaugh’s radio show yesterday and significantly cooled the partisan animosity; praising the efforts of the Democratic Governor’s of New York and California. Vice-President Pence was assertive in making the point that, when it came to the coronavirus, Americans were all in it together saying:

“I spoke to Governor Newsom yesterday. Very good conversation. You know, as the president said at that press conference, Rush: We’re all in this together. The president said to me, “This is an all-hands-on-deck effort,” and I talked to Governor Newsom, because, frankly, California has been a great partner with HHS and CDC. They have worked very closely with us already, as we’ve repatriated Americans. We’re working very, very closely on the patient that was identified. And I think, obviously, there’s concern about this.

But I want to assure the American people that we’re going to make sure that, for our part, we set politics aside on this, and we work the problem. I, frankly, have been very encouraged, not only in my conversation with Governor Newsom, with the Democrat leadership of the House and Senate, with Governor Cuomo of New York. We are all going to come together as Americans and deal with this issue and put the health and safety of the American people first.

Washington is always going to have a political reflexive response to things. But we’re going to tune that out. We’re going to work the problem. We’re going to make sure that we have the resources necessary. But I want your listeners to know, as we sit here today, the threat of the coronavirus spreading in the United States of America remains low. With that being said, the president said — out of an abundance of caution — we’re going to continue to take very, very strong measures and to put the health and safety of the American people first.”

 

A huge international event can change the trajectory of politics in an instance. Today is the South Carolina Democratic Presidential Primary. Former Vice-President, Joe Biden is expected to win and former Mayor of New York, Michael Bloomberg is not on the ballot in the State. It will be interesting to see how the increased awareness of the coronavirus effects the vote share of Senator Bernie Sanders. One school of thought is that as this is a public health crisis  and Senator Sanders has put public health, in the form of “Medicare for All”, front and centre of his campaign, voters will be more likely to turn the self-proclaimed Democratic Socialist for answers. The other school of thought is that voters will be looking for more steady and experienced leadership, which would make them more likely to turn in even larger numbers to former Vice-President Joe Biden, who has the experience of dealing with the Ebola virus, as part of the Obama administration.

When it comes to Super Tuesday, Democrats might just turn to that manager’s manager in the world’s ninth richest man, former New York City Mayor, Michael Bloomberg. His campaign is currently running an ad called “Fix the Chaos” in those Super Tuesday States, which decide a third of the delegates for the Democratic National Convention in mid-July.

The ad touts Bloomberg’s success in rebuilding New York City after the terrorist attacks of September 11th 2001. It goes on to rattle off some more of his achievements and make some broad brush campaign promises before closing with the key message of the ad “Fix the Chaos in Washington. Get things done.”

It is too soon to say the global economy is heading into recession. The coronavirus is essentially a biological crisis and not a financial crisis. What the markets need is a coronavirus vaccine and not an interest rate cut. This is not a problem that can be solved by central bankers.

At present, the market would quickly recover if it were to be announced that a coronavirus vaccine had been made. 

The coming days are likely to see more bad headlines relating to the coronavirus. The odds are that we will hear about even more cases of the coronavirus over the weekend. This means it will be another bad day for the markets on Monday; they still haven’t bottomed out.

New cases of the coronavirus are now increasing faster in the rest of the world than in China. Three quarters of new infections are now outside of China. The coronavirus has infected over 83,000 people and killed over 2,800 people worldwide. Yesterday, the 10th coronavirus case was confirmed in California; making 61 reported cases of the coronavirus in the United States. Additionally, the first British death from the coronavirus, in Japan, was reported yesterday and the UK Government reported its 20th case of the coronavirus.

British Prime Minister, Boris Johnson said yesterday:

“On the issue of coronavirus, which obviously is a great concern to people, I just want to reassure everybody and say that the NHS is making every possible preparation. As you can imagine, the issue of coronavirus is something that is now the government’s top priority.”

It was also announced that Mr. Johnson would be chairing an emergency COBRA (Cabinet Office Briefing Room A) meeting on Monday. COBRA is an emergency council most often convened as part of the Civil Contingencies Committee. Those in attendance at a CORBA meeting depend on the nature of the emergency.

Some have criticised the British Prime Minister for not acting with the appropriate urgency. It is a fair point that infectious diseases don’t take weekends off. If the coronavirus becomes unmanageable, Mr. Johnson’s lack of haste in convening the COBRA meeting is sure to be used against him. There are echoes here of Mr. Johnson’s response to the London riots in August 2011 when he initially refused to cut short his summer holiday in Canada to deal with the crisis in his city. The public outcry was so great that he did eventually relent and come home early. When back in London, he continued to show no sense of urgency and even turned up late to the emergency COBRA meetings convened to deal with the riots.

It is an unforced error on Mr. Johnson’s part to wait to hold an emergency COBRA meeting. Britons want to see their Prime Minister on top of a crisis and quick on the ball responding to changing facts on the ground.

A failure to manage a crisis can severely alter the trajectory of a Prime Minister’s political fortunes. John Major won a General Election, against all odds, on April 9th 1992 but five months later on Wednesday 16th September, which became known as “Black Wednesday”, he provided indecisive and in over his head as his Government tried and failed to keep the pound sterling in the Exchange Rate Mechanism as the value of the pound was collapsing. From that moment onwards, he became a Prime Minister with a very visible sell-by date. His Government continued until the last possible date for a new General Election, 1st May 1997, which saw the Conservative Party lose 171 seats, to be left with a presence of only 165 seats.

Mr. Johnson would be wise to remember that “arrogance breeds contempt” and if he fails to meet the moment with his response to this virus, the political paradigm could once again shift with the election of a credible Leader of the Opposition, who could portray himself as a “serious man, for serious times”  in contrast to an “out for lunch” Prime Minister.

With all due respect to Mr. Johnson, he does not strike me as the sort of leader who would take naturally to administering the minutiae of response to a pandemic. The strength of a true leader is being able to appoint the best people to offset your weaknesses. Mr. Johnson should be fully engaged with the process but as has to ensure the rest of government continues to function during this crisis, he will have to manage it whilst taking an aerial view and broader brush strokes.

What is need, in all haste, is the appointment of an official, colloquially know as a “czar”, to coordinate the Government’s response to this crisis and provide a defined line of command and accountable for that response.

If the coronavirus does become a worldwide pandemic; it might make it necessary for the British Government to put the Civil Contingencies Act 2004 into effect, for the first time.

The Act was passed by the Blair government in the wake of the Foot and Mouth Disease outbreak in 2001; after deeming the existing legislation for dealing with such national emergences, the Civil Defence Act 1948, insufficient. In 2013, the Cabinet Office produced a briefing note on “How the government prepares and plans for emergencies, working nationally, locally and co-operatively to ensure civil protection in the UK”. It is worth reading.

Medical professionals in Britain have been putting measures into place to ensure people can be tested for the virus. Central London Community Healthcare Trust is having the Parsons Green Health Centre act as a drive-thru swabbing hub for Covid-19 (as the coronavirus is also known). Those who cannot drive are being visited in their own homes to have their test. The Gloucestershire Health and Care NHS Foundation Trust is today setting up a drive-thru testing facility at their facility at Edward Jenner Court. NHS Lothian have announced a drive-thru testing centre at Edinburgh’s Western General Hospital. It strikes me looking at these announcements that some of the “internal market” reforms in the NHS made over the previous two decades might have hindered the Health Service’s ability to have a “joined-up” response to the threat of Covid-19. If that proves to be so, it would be worth reviewing whether an ideological fealty to free markets has got in the way of smart governance when it comes to our national healthcare. An ability to co-ordinate an effective “joined-up” nationwide response to the threat of a pandemic should be one of the advantages of having a National Health Service.

The Italian Government has reported the total number of deaths from the coronavirus, in their country, had risen to 21, whilst the number of those testing positive for the coronavirus had risen to 821. Outside of Asia, Italy has seen the biggest outbreak of the coronavirus. The normally vibrant streets of Venice and Milan have come to more resemble those of ghost towns.

As of last night, the streets of London were full of life; it would be very sad if the coronavirus were to turn the streets of Great Britain into big empty spaces. It would be much worse if we were to see rising casualties.

I am in favour of civil service reform and not hugely enamoured with the Administrative State, however, politics requires that you turn on a dime, if the reality you are faced with suddenly changes. That is not lacking principles, that is just being smart.

Until this crisis has passed, a pin should be put in all efforts to overhaul the bureaucracy. It should still be done as it is not fit to withstand the coming challenges of the Fourth Industrial Revolution. But the fierce urgency of now requires we keep this virus as contained as possible until, hopefully, a vaccine can be developed. That requires the Administrative State currently in place work as efficiently as possible. Now is not the time for revolution or inspiration rhetoric; the needs of the day call for good management and administrative competence.

The coronavirus might not have a higher mortality rate than the flu but it is worth bearing in mind that the flu pandemic of 1918-1920 managed to infect over a quarter of the world’s population at the time and was responsible for more deaths than the Great War.

The death toll would have been much larger had it not been for the efforts of Herbert Hoover. During the Great War, Mr. Hoover, as he was then, created the Commission for Relief in Belgium which helped to provide aid to the victims of the famine that the war had precipitated there. Mr. Hoover was uniquely up to the task as, in his own words:

“It may be recalled that for eighteen years before the First World War I had been an administrative engineer, managing large industries in Russia, China, India, Australia, New Zealand, South Africa, Canada, Britain, Belgium, Mexico and the United States. These projects required for their successful conduct some knowledge of their governments, their economics and their history. My relations with their peoples were not as a tourist or a diplomat. I participated in their daily life and work.”

When America joined the Great War in 1917, President Woodrow Wilson appointed Hoover to head the U.S. Food Administration.  Hoover was able to avoid the imposition of rations upon the American people, whilst simultaneously managing to ship 23 million tons of food to America’s European allies. Given that the naval blockade of Germany was key to their eventual surrender; Hoover’s efforts in keeping the Allies can be credited with having outsized importance of bringing that tragic conflict to its end.

After the war, malnutrition and poor living standards contributed to the lethality of the flu pandemic. President Wilson appointed Hoover as Director-General of the European Relief and Rehabilitation Administration. In this role, Hoover was able to provide the war-torn nations of Europe with 34 million tons of U.S. food, clothing and supplies.

In 1919, Hoover established the European Children’s Fund, which was set up to provide relief to the children of Europe suffering, many from malnourishment, after the Great War. It operated for five years until 1924.

UNICEF considers Herbert Hoover to be one of its founding fathers, recognising in its official history that “In parts of Europe, a generation of children grew up regarding Herbert Hoover as their saviour.”

When he came to Presidency, Herbert Hoover was unlucky to be almost immediately be faced with the Wall Street and though he tried valiantly; the nation was looking for a father figure and nor a technocrat. All the evidence of his life’s work shows he cared deeply about people; he was not the sort of man of man to showboat about feeling one’s pain.

Boris Johnson is excellent at the performance art of politics and in this media age that is a necessary component of being a successful political leader, however, he is no technocrat. He should take a page out of Woodrow Wilson’s book and find his own Herbert Hoover.

 

Patrick Sullivan is the Political Editor of The Commentator @PatJSullivan

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