This prediction has been the one most affected by the black swan even of lock downs imposed by governments that caused the greatest economic slow down in 300 years. In developed economies, it was the young, the least affected by COVID, that suffered the greatest harm from lock downs. Similarly, developing economies have suffered relatively lightly from COVID, and yet have been the worst affected by the lock downs imposed by developed economies, as that brought about a sharp slow down in global economic growth. This latter effect might be seen as confirming the point made by Dan Gay in his excellent guest post onthe ACFTA, earlier in the year, about the dependence of developing economies on the developed economies. In fact, of course, what it really shows is not dependency of developing economies on developed economies, but the existence of interdependency of all economies in a global economy. Sweden, for example, which did not damage its own economy by lock downs, still suffered economically, because of the fact of its interdependency with other European economies that did inflict damage on themselves by lock downs.
The reason that African economies suffered relatively little from COVID, and yet suffered more from the effects of the global slow down, are essentially the same as the reason that, in developed economies, the young suffered very little from COVID, but suffered most from the economic effects of lock downs. That is that COVID is a virus that almost exclusively affects the elderly. Africa has young populations, who, like their counterparts in developed economies, were mostly unaffected by the virus. Secondly, in developed economies, a large number of deaths from COVID came from people who were infected by it whilst being locked down in large institutional environments such as hospitals and care homes. In Britain, 25% of those being treated for Covid were actually infected with it whilst in hospital. Around 40% of COVID deaths in Britain are of elderly people in hospitals or care homes.
In Africa, not only are there proportionally fewer older people, and so fewer to die, but the less economically developed nature of these economies means that they do not have the same amount of large hospitals, or care homes acting as concentrations of old people ready to be infected with the virus, as happened in developed economies.
But, where Africa and other developing economies have suffered is from the consequences of lock downs. For one thing, the WHO, idiotically applying the same strategies of lock down it proposed for developed economies, encouraged governments in these places to engage in that damaging behaviour. But, the effects of sharp global slowdown was also bound to hurt the economies of these developing countries, many of whom continue to rely on the sale of primary products as a source of income to fuel their expansion. The result of this economic slowdown is estimated to have thrown a further half billion people into poverty world wide, and, in many places, this increase in poverty translates directly into a sharp rise in malnutrition, ill-health and death.
But, as I will set out in my predictions for 2021, I do not expect COVID to continue to be an issue beyond mid 2021. The roll-out of vaccines will assist in that, but that roll-out is relatively slow, amounting to only thousands per week, as against the tens of millions that need to be vaccinated. We see, in Britain, current reported new infections rising to over 40,000 per day, which means the actual number of new daily infections must be around 200,000 – 400,000, given that only a small fraction of those infected are ever tested. With the new strain of COVID being more virulent, this rise in infections is likely to accelerate, meaning that long before herd immunity is produced by such vaccination, it will have been produced by natural infection.
As that herd immunity is established and the virus lacks new hosts to infect, it will quickly die away, and economic activity will resume. That resumption of economic activity, with a large amount of revenge spending fuelled by large amounts of liquidity thrown into circulation by central banks, will fuel a sharp increase in demand, leading to production being ramped up quickly. The demand for primary products will fuel growth once more in developing economies, creating the basis for a rapid increase in their domestic markets, and growth of their economies. The creation of the ACFTA, and development of free movement within it, will facilitate this much stronger economic growth. The prediction has simply been put on hold for a year.
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