The government's latest policies, in response to the COVID19 moral panic, amount to closing down the economy for the indefinite future, and for at least the next 18 months. They are totally irrational, and unsustainable, and will lead to many more deaths than COVID19.
The government, in its latest populist response to the COVID19 moral panic, has basically closed down the economy. Its not alone, other governments have already done that. China closed down Hubei province when coronavirus had infected large numbers of people in the area, and there had been deaths of more than a thousand vulnerable people. China could do that, because its a police state, and the resources for Hubei could be provided from the rest of the Chinese economy. But, the strategy will not itself work in China either. The Chinese economy has contracted for the first time in decades, and the economic effects of that if continued will be far more devastating than COVID19. The 1 billion Chinese population remains susceptible to coronavirus, because it has no immunity to it, and no vaccine exists. A vaccine is not likely to be available for at least 18 months. Ironically, those in Hubei who did contract the virus, and survived, which is around 97% of the population in Hubei, will have developed herd immunity to it, so that they will be in a better position than the rest of China. Although, those spreading fake news and conspiracy theories, have responded to the strategy of developing herd immunity by saying that some people have been reinfected with the virus, there is no real evidence for that. There is evidence that those in Hubei and elsewhere, who contracted the virus and recovered, did produce the antibodies that are the means by which immunity is achieved, and is the way that vaccines work. But, if those spreading those conspiracy theories were right, then it would mean that economies would have to be shut down indefinitely, and there would be deaths in hundreds of millions that would have nothing to do with COVID19. If herd immunity cannot operate, because the virus can reinfect people, then no vaccine can work either, so that would mean anyone likely to suffer serious effects and death from contracting it is doomed. It would be impossible to isolate people in that category, which includes me, forever, from contracting it, and contracting it over and over again until we died.
Fortunately, that does not seem to be the case, and is just part of the kind of conspiracy theory that such people, in the past, have purveyed in relation to vaccination in general. Its likely that those cases where reinfection is supposed to have occurred are, in fact, cases where the original diagnosis was wrong. It could be that the original illness was simply a case of having come down with seasonal flu or some other such virus, rather than COVID19. Alternatively, it can be that the person's normal immune system itself is not functioning properly, which is what happens in the case of AIDS, and also occurs in cases where the immune system is being suppressed by drugs for chemotherapy and so on. All the evidence is that, for the vast majority of people, contracting the virus means no serious symptoms, whilst the body's natural immune system produces the required antibodies to create immunity to future infection from it, and thereby enables herd immunity against it to be developed, so stopping its further spread. From that perspective the response of governments to slow down the spread of the virus amongst that healthy section of the population is perverse, because it slows down the development of herd immunity, and so makes the virus a threat to the vulnerable sections of the population for a much, much longer period, which also means that it becomes impractical to protect that section of the population by isolating it.
The government says that its current strategy is driven by its computer models that suggest that 250,000 people might die, and that the NHS could be overwhelmed. But, that is facile. We know that 80% of the population have no symptoms or only very mild symptoms from the virus. So, there is no reason why they should impose any burden on the NHS. It is the other 20% that need to have been the focus of attention and resources, and yet the government has failed to do so until now. Of course, 20% of the population is a significant number of people. In Britain it amounts to around 13 million people. Many of those are already older people who are retired, and so the issue of loss of production from them does not arise. A proportion of that 20%, however, will be younger people in work, but who suffer from respiratory and other diseases that put them in the at risk category. It is necessary to allow them to also self isolate, and their household, to avoid being contaminated. Its to that end that the government needed to ensure that such people continue to get their full pay. But, for everyone within that 20%, its also necessary to provide resources for carers, to ensure that necessary supplies are delivered to the home, and that must be done in such a way that no risk of infection is created. It means that carers and health workers have to be provided with the equivalent of Hazmat protecting clothing, and particularly in relation to face masks, the current paper masks being next to useless. To do all that will require a large increase in resources, and shutting down the economy is the last thing you want to be doing when you need those additional resources, both physical and financial. If those of us amongst the 20% of the population who are at risk were effectively isolated in this way, there is no reason to introduce all of the social distancing measures, or to close down the economy, because the virus poses little or no risk to the other 80% of the population, which could, thereby, quickly build up the required herd immunity, in the absence of a vaccine. A vaccine is only an artificial means of creating herd immunity after all.
But, instead, the government has responded to the moral panic, and calls from the media to close down the economy. TV interviewers keen to get good headlines continually ask ministers why they are not closing down schools, for example, without there being any scientific evidence that doing so fulfils any useful purpose. Children, for one thing, appear immune to the virus, or else to suffer no serious consequences from it. So, the only things achieved by closing down schools is to deny kids of education, and to force their parents to also stop work to look after them, which means that another part of the economy is then closed down, as parents stay away from work unnecessarily. The only area of life that the media pundits appear to not want to be shut down is their own! In fact, we could probably all benefit from the TV presenters, and the sensationalist newspaper headline writers all taking an extended vacation, and self isolating themselves.
The only kids staying away from school should be those who themselves suffer from illness that makes them susceptible, or else who have others in their household who suffer such an underlying condition. On Channel 4 News, last night Cathy Newman asked one minister why they were telling people not to go to the pub, theatre and so on, whilst their kids were still going to school. Quite right. For everyone who is healthy, and who has no one in an at risk category in their household, there is no reason why they should stop going to the pub, theatre or whatever. Indeed doing so, and so facilitating the more rapid spread of the virus amongst the 80% of the population that suffers no serious consequences of it, is the best strategy for quickly building up herd immunity until such time as a vaccine is produced.
And, in the absence of a vaccine, building up that herd immunity quickly is the only rational strategy. If we are to provide the resources to enable the 20% of the population to quickly and effectively isolate, to provide them with the financial support to protect their incomes from being away from work, and so on, it is vital that the other 80% of the population continue to work, to produce goods and services required by all, and to provide the financial resources required to finance it all. But, even if that happens, it becomes more problematic to achieve that the longer it is required. Slowing down the rate of infection by social distancing, and thereby delaying the point at which sufficient herd immunity is created to make the virus no longer a threat to the other 20%, means that the period of isolation, for the 20%, becomes extended to such an extent that it is nonviable. Already, having been self-isolating for about a week, we are running out of fresh milk, and having to turn to our build up of long life milk. Getting online deliveries from the supermarket is already getting problematic. Sainsbury's have no delivery slots in the next three weeks, and Tesco only have delivery slots in about a week's time. Moreover, the amount of long life milk available is also quickly disappearing from supermarkets. As I said the other day, the only good thing from this is that it, at least, gives a glimpse to people of what life will be like as a result of Brexit.
The government announced in the Budget that anyone who had a cough or sniffle that might possibly be COVD19 could self diagnose, and get a sick note from its 111 service, to send to their employer, so as to qualify for SSP from Day 1 of their self isolation. I said, at the time, it was a stupid idea. It was essentially inviting everyone to take an additional two week's holiday by obtaining such a sick note. The only thing constraining that is that Britain's statutory sick pay is pitiful compared to that paid in most of the rest of the EU. Still, if you fancied a couple of week's off, and to get £94.25 a week for doing so, it might be an attractive option, especially if all of the moral panic over COVID19 had led you to want to avoid contact with your workmates. The government, in closing down the economy, has now extended this offer, and more or less made it compulsory, and indefinite.
The government says that, if someone in your household has a cough or sniffle, everyone in that household must self-isolate for a couple of weeks. The rationale for this is that if those symptoms are an instance of COVID19, it takes a week for the symptoms to subside, and a fortnight until everyone is no longer contagious. But, without testing, its impossible to know whether the cough and sniffle was a symptom of COVID19, or simply a normal seasonal cold, and so on. Yet, the government is not conducting the kind of blanket testing that would be required for that. Indeed, such testing itself seems pretty pointless, despite what the WHO says. For example, suppose someone in my household has a cough. We all get tested, and it turns out its just a normal cold. We all get a clean certificate of health, and are free to go about our business. But within literally minutes of being tested, anyone in the household could come in contact with the virus and become infected with it! We would then be going around spreading the virus under cover of the misapprehension that we were safe to do so, as a result of having been tested!!!
And, precisely for that reason, particularly at this time of year, the government's latest policy means closing down the economy indefinitely. Now, given the level of moral panic that has been created, and given the cover for it provided by the government in telling everyone to engage in social distancing, and self isolation, it is no wonder if large parts of the population seek to avoid becoming infected by all means possible, even though, for 80% of them, the virus represents no real threat whatsoever. So, now, and if the government does introduce sick pay equal to 100% of wages this will become inevitable, whether or not anyone in the household actually does have any symptoms of anything, people will announce that they are self-isolating for a fortnight, claiming that someone has a cough, a temperature, and so on. They will, thereby get two weeks off work at full pay, and, at the same time, assuage any concern they might have of actually contracting the virus from a workmate. In fact, the vast majority of their workmates can be expected to do the same thing, which means most workplaces, transport, energy production, the health and social care system, can be expected to quickly shut down, as workers stay away from their workplaces. Even if a minority of workers go into work, it becomes nonnviable for workplaces to continue to operate. If such a situation persists for long, many millions of people would die, far in excess of what COVID19 would be likely to cause.
But, on the basis of the government's latest strategy such an indefinite shut down is exactly what is likely to happen. At the end of my two weeks self isolation from work, I would simply announce that another member of the household now has a cough, and so we all need to self isolate for another two weeks, and so on. And, because there is no testing of whether anyone with a cough or sniffle actually has had COVID19, or has antibodies against it, its possible to simply keep going round this circle ad infinitum. Having had a couple of months off work at full pay, on the basis that different members of the household had a cough, its possible to say that the first person now has a cough again, and so the first cough was probably just a common cold, not COVID19 after all. So, essentially, and particularly if everyone is getting full pay, for the duration, everyone will just stay away from work, and continue to enjoy getting their wages for nothing. It will be like an experiment in paying everyone a Minimum Income on a vast scale. It will, of course, fail, because simply continuing to put money tokens into the economy when no one is producing anything that can be bought, will simply result in rampant inflation.
The only time when the government's current strategy could end, and so the closing down of the economy by it, be brought to an end, would be when a vaccine is produced, and can be rolled out extensively. Currently, that looks like being at least another 18 months away. Its impossible for the economy to survive for that long without workers being at work producing goods and services, and distributing them. Already, shelves are emptying in stores. Government polices around the globe, responding to populist demands and moral panic are leading us towards disaster, a disaster that will cause many, many times more deaths than would COVID19 itself. Its an indirect symptom of the economic theories that have dominated for the last 40 years, where production was disregarded, and the basis of wealth was seen to reside purely in speculation and exchange.
As Marx put it in his Letter to Kugelmann, setting out the basis of The Law of Value,
“Every child knows that any nation that stopped working, not for a year, but let us say, just for a few weeks, would perish.”
In fact, nowadays, because the rate of turnover of capital has been increased so much since Marx's day, its not a matter of weeks, but of, at most, a couple of days. On one news programme, yesterday, one interviewer bemoaned that Virgin were telling their workers that they would have to take unpaid leave. Surely Virgin has deep pockets to be able to pay these workers to do nothing, the interviewer said, ignorantly. Of course, as Marx showed, businesses do not actually pay the vast amount of wages, or for the rest of their circulating capital out of the capital they advance. They pay those wages, and for the materials and so on out of the money that flows back to them from the sale of their goods and services. McDonalds, for example, does not have a huge pot of money sitting in its bank account out of which it pays the wages of its workers for the year. It pays those wages out of the money it takes in, every few minutes, from selling Big Macs and so on. The same is true with Virgin. It does not have a big pot of money out of which it pays the year's wages, but pays those wages out of the money it takes in in fares every day. McDonald's circulating capital turns over every few minutes, that of Virgin at most every day.
If businesses are not functioning, if they are not taking in money from the sale of goods and services, they have no money to pay wages, or to buy the raw materials required to replace those consumed in production. As Marx describes, that is precisely what happens in a crisis. Firms do not have this flow of money coming in, and so cannot pay their wages, or the bills to their suppliers. But, they need to try to stay in businesses, hoping that, on the other side, it will be their competitors that have gone bust, leaving them free to hoover up the market. So, they borrow like mad during such periods simply to stay afloat, and it is this desperate borrowing, which then causes interest rates to reach their highest levels. That is what is being seen now.
Firms will have to borrow money to stay afloat, as their cash dries up. The more they are encouraged to pay their workers, whilst those workers produce nothing, the more they will have to borrow. If firms do not do that, but the responsibility is taken on board by the state, then the state itself will have to borrow more. That is currently what the Tory government is proposing to do, and similar policies are being adopted elsewhere. It has only been constrained borrowing by governments, over the last 30 years, that has kept bond yields low, along with money printing by governments. But money printing could only keep bond yields low, and inflation low, if the printed money went into buying bonds, not into financing real demand for goods and services in the economy. What is now being proposed is the opposite of that. What is being proposed is additional government borrowing with the resultant money paid out to citizens and businesses so that they can continue to demand goods and services, but at a time when the production of goods and services is being deliberately cratered by government policy, which is instructing people not to go to work!
If you want to see the effect of that look at what happened when the demand for bonds, shares and property was inflated, as part of inflating asset price bubbles, at a time when the amount of supply of bonds, shares, and new property was being constrained. It created hyper inflation of bonds, shares and property. Pumping up demand for goods and services by money printing, and helicopter money, dropped on the population by the state, at a time when the production of goods and services is being constrained, is a recipe for the kind of hyperinflation that was seen in the Weimar Republic in the 1920's, and has been seen in places like Argentina, Zimbawe, and other failed states. It is again a recipe for economic disaster of a kind that will result in many more deaths than COVID19.
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