We have found ourselves in a new reality, and it is less than cozy.
The global population is about 7.8 bln. If, presumably, the world is hit by a pandemic with a mortality rate of 3%, more than 230 mio people will die – almost 20 times more than the total death toll since the beginning of this year. About as many people live in a country that ranks 5th in terms of population, or in France, Spain, Italy and the UK taken together.
Fortunately, only 0.0015% of the world’s population has been infected so far, including those who died, who recovered, and the unconfirmed cases. These statistics do sound comforting. Whatever math you do on these big numbers, the vast majority is going to survive anyway. But the world is struggling to limit the toll the disease is taking on it to a percentage of hundreds of thousands, not of billions of people, and that warrants tough action. And the lives of those billions are changing dramatically before our very eyes.
This year, several billion people will serve one or more two-week terms as hikikomori – voluntary or semi-voluntary quarantine recluses. In Japan, where this tendency originated, it was initially viewed as just another youth subculture. But now, on a global scale, it is one of the most popular and very reasonable strategies for economic agents. Here are some of the obvious economic consequences of this practice.
On the demand side:
- new consumption patterns such as avoiding physical contact with the seller (online shopping, contactless delivery of consumer goods);
- individualized consumption of formerly “group” goods and services (online cinemas, e-sports);
- faster cash substitution by various types of contactless and distance payments;
- revival of demand in specific sectors (drugs, medical devices, zombie proof houses, etc.).
On the supply side:
- blockade, isolation, autarchy in certain geographical areas, countries or entire regions;
- decline or even complete collapse of production of goods and services requiring collective physical presence of workers;
- blockage, suspension and destruction of logistics chains;
- downfall and bankruptcy of a whole number of industries (air transportation, hospitality, restaurant businesses);
- unprecedented workload for courts, public health insurance funds and insurance companies (What is considered a force majeure? Where is the line between direct and indirect losses? Who pays and for what?).
Impact on the state:
- a tangible decrease in the revenue base;
- society’s demand for boosting digitalization of public services (online education in China became available to a country with 1.5 bln people within 45 days, which is mind-blowing);
- public meetings of government bodies (parliamentary sessions) along with traditional formats of collective attendance (church services, stadium games, factory workshops, concert halls, lecture halls, polling stations, etc.) are becoming flawed in terms of epidemic response creating a demand for their technological modification (where suspension of operations is a significantly worse alternative);
- affected taxpayers need state support (in various forms: for example, in South Korea it is 20K test kits per day and a state-run network of drive-in test centers across the country; in Hong Kong it is direct payments of $9 bln to the public and unprecedented individual income tax and business tax concessions, etc.);
- a new era of dirigisme in public administration within the framework of a mobilization economy (you, a pharmaceutical plant director, must provide a million doses of a vaccine upon a state order by September; you, a retail chain owner, will not hike prices on face masks higher than those set for this month; you, airline company management, will not fly to this and this country starting tomorrow, etc.).
Impact on the labor market:
- it looks like labor migrants (China alone had 220 mio people migrating inside the country) are now tied to their temporary locations for quite a long time;
- freelancers are used to work remotely and will not notice any changes in their workspace, while sellers and workers will be more vulnerable without their familiar counters or lathes if the lockdown continues.
As for human rights: beggars can’t be choosers. Person identification is now a blessing and salvation. We monitor people’s movements and contacts in order to save the lives of our children and the elderly. The temporary restrictions on movement, public gatherings, counteracting alarmists and fake news… However, I am not sure that each of these measures, taken separately, is not useful and not necessary. But I also see a hole in which the society will fall due to these steps!
This is not a merely Russian problem. The world in general does not have superpower or super wisdom to find an optimal approach to these legal and ethical issues the new reality is giving us. I will mention three notorious cases.
- The US makes a decision to evacuate its citizens from a cruise ship, those who agreed to it. Every one of them is deemed ‘clean’ because those with a confirmed infection have been already moved to a Japanese hospital. When the entire group arrives at the airport and is ready to board, their tests come back, 14 of them are positive for the virus. Then what happens? Then, according to the information by the US media, the entire group spends two hours in a locked bus, those in Washington have a heated discussion on what to do with them, the quarantine agency cannot win over the officials and revokes its signature on the communique while the officials insist on bringing the entire group to the country. Without notifying the rest of the passengers, they make those 14 poor things fly behind a plastic partition. Moreover, two of them were later tested negative for the virus.
- In a large American city, local doctors (this is probably irrelevant, but one of them has a Chinese last name) in early February asked their bosses (in Russia, it would be the municipal healthcare department) to let them double check the tests of flu patients for the past month for the coronavirus. The request is monitored. Doctors then take active efforts to double check them and find numerous cases of miscoding, with patients mistakenly diagnosed with flu instead of COVID-19. This largely changes the general picture and should basically affect development of a set of measures in the city with multi-million population. But then doctors receive a response from the healthcare department that says double-checking efforts should be immediately stopped as patients did not give their permission for this kind of testing, meaning numerous lawsuits could be filed against the department.
- In South Korea, a mobile application informs about new revealed COVID-19 cases, with brief description of territorial characteristics and a patient’s movements. Their personal data is not disclosed – yet, public chats started following each such case have plenty of users who are willing to receive a photo or the exact address of such individual. One case was made public when a woman’s full name was revealed by the town’s mayor. The woman made a post on Facebook asking not to spread this information.
There are also those who choose to play it safe – as Soviet poet Yevgeny Yevtushenko once out it, those who live by the rule “let’s hope nothing evil will come of it.” And foreign officials are often eager to ardently protect their ‘dishonored’ reputation, as in the second group of cases. Too bad it is done at the expense of human life – in moral, ethical and economic aspects of the issue. As regards people in the third group of cases, who keep shouting “Crucify him!” – it occurs regardless of time and location.
Dear reader, thankfully, we are yet alive. Let us learn to act reasonably in the new global reality, without losing our dignity and sober mind. Our top priority is the ethic and economy of creativity, not destruction.
We continue to follow the developments. Take care.
By Artem Genkin, Professor, Doctor of Economics, President of the Autonomous non-commercial organization Center for Protection of Bank Clients and Investors, founder of Invest Foresight online business magazine