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Thursday,
November 12, 2020 / 11:44 AM / by FBNQuest Research / Header Image
Credit: Financial Times
As much of Europe and the US struggle with the second
wave of COVID-19 infections, it seems a good time to share a few opinions on
what their governments and their health practitioners have learned from the
first wave that broke in March.
The number of new cases has soared in these countries
in recent weeks, due in part to the continued growth in testing capacity.
Fortunately, there has not been a corresponding increase in the number of
deaths. This probably reflects lessons learnt by medics in treating COVID-19
during the first wave.
Unfortunately, we cannot be as generous with
governments in the West on their learning from the first wave. They have access
to resources beyond the dreams of their counterparts in low-income countries.
Before any recent measures, the additional fiscal stimulus in response to COVID-19
in the UK was estimated at 14.5% of GDP in August, compared with 1.5% for the
response to the global financial crisis in 2008. The comparable figures from
the same source for the US were 12.1% and 4.9%, and for Brazil 5.5% and 0.6%. With
the exception of South Africa and a few other states, the figure for African
countries would be less than Brazil.
Governments in Western democracies are admittedly spending
again in response to the second wave. They do not want to appear uncaring or
faceless, and are responding to pressure from the political opposition, the
media and the soaring number of policy units. Had it not been for the imminent
presidential election, the US Congress would surely have agreed on a second
fiscal relief package. Nevertheless, several of them have acknowledged that
their fast-disbursing loan schemes for business are targeted by criminals. In
the UK and US for example, there seems little doubt that taxpayers will be
footing a very large bill for fraud, yet given the circumstances we do not see
what else the governments in question could have done.
The reality remains that there is no standard official
response to the second wave. This tells us that the jury is out on what was the
best response to the first. Some have closed down hospitality completely, some
have closed down part of it and others have shortened opening hours. In some
cases, schools have been closed and in others they remain open.
Governments have limited the restrictions because of
the cost, and because of worries about compliance. A small minority of the
population are opposed to the controls on libertarian grounds and on the basis
of assorted conspiracy theories, but the far greater threat comes from fatigue
with restrictions. We must now question whether severe lockdowns on the scale
seen in France and Spain for example in the first wave are feasible a second
time. Are there enough police to enforce the controls, particularly in volatile
inner cities? If there are not, are the new controls warranted? The riots in
major Italian cities in recent weeks may provide an answer.
COVID-19 has given a huge boost to forecasting and
modelling in macroeconomics, medical science and behavioral science. But governments
are guided by at best average advice because to be very blunt, practitioners
simply do not really know. Perhaps we should not be surprised, because we are
in new territory with the first global pandemic in modern times. The best we
can expect is that, as events unfold, our medics and our leaders will learn
from experience.
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