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Ambrose Evans-Pritchard: Complacent governments will be torn to shreds as virus reshapes global order
By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, March 8, 2020
https://www.telegraph.co.uk/business/2020/03/08/complacent-governments-w...
The world’s geopolitical order will be unrecognisable once Covid-19 has done its worst. Long-standing regimes will be badly compromised. Political systems that have never fully recovered from the Lehman crisis will suffer a second body blow.
Those Western democratic governments that have been most complacent or incompetent will be torn to shreds by unforgiving electorates. Social media will see to that.
... Dispatch continues below ...
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Covid-19 is turning into a strategic contest between the social control model of China’s Communist Party and the unruly, free-spirited pluralism of the West. How that comparison plays out will shape the global order in the 21st Century.
In this country, Brexit scarcely matters right now. Decimal points of GDP are irrelevant. Boris Johnson will be judged on whether or not his administration allows avoidable decimation of the elderly -- and the not so elderly -- and whether the National Health Service buckles in catastrophic institutional failure.
Korea has six times as many intensive care (ICU) beds per capita, and Germany four times as many. What we know so far from Lombardy is that 13 percent of infected patients require ICU treatment, typically for two to three weeks.
The outbreak is already overwhelming the system in Italy’s best equipped region. ICU patients are being sent to Tuscany because beds have run out.
The Italian society of anesthesia and critical care says it may be necessary to reserve "very scarce resources" to patients with a "higher chance of survival and more years of life to come." The unthinkable is happening.
"Italy should be a warning to everybody, everywhere," says Professor Massimo Galli, head of infectious diseases at the Luigi Sacco hospital in Milan.
He is scathing about those still playing down the threat. "It was never anything like flu. People uttering such things are sowing confusion among those who wish to be confused," he said.
If the British government can buy vital weeks to "flatten the peak" and stretch the epidemic into the less contagious summer (we hope), it might have a chance of preventing a national disgrace -- starting with a shortage of respirators, one variable explaining why reported mortality rates in Wuhan are 5.8 percent, 2 percent in Beijing, and 1 percent in Shanghai, but rising everywhere as slow deaths come in.
Should the Prime Minister succeed in limiting ratios to "best-in-the-class" levels among the democracies, or close to it, he has some chance of political survival. The crucial choices will be made this week in Cobra session and on the Budget.
My advice is to opt for war-time measures and drastic contagion barriers, biting the bullet on economic trauma. The Government cannot dodge this trade-off, but it can use all powers to cushion the blow for business and "collectivise" the cost.
Data from China suggest a death rate of 15 percent for infected cases over the age of 80. It is 8 percent for those in their 70s, and 3.6 percent in their sixties (or 5.4 percent for men). No elected government in any Western democracy will survive if it lets such carnage unfold. Do we consign the disabled of whatever age, or the immuno-suppressed, or those with weak lungs, to Russian roulette? Of course we don’t.
Unfortunately, the early figures from Italy seem to be tracking Hubei’s epidemiology with a horrible consistency. The death rate for all ages is near 5 percent. While there may be large numbers of undetected infections -- distorting ratios -- Italy has tested widely, much more than Germany or France.
As I write, 366 have died in Italy. The average age is 81, and 72 percent are men. For whatever reason, the Italian system seems unable to save them. The death rate is six times the reported rate in Korea, even adjusting for age structures. Is it because the Italian strain has mutated into a more lethal form (we don’t yet have the sequence data) or because Europeans are genetically more vulnerable?
Is it because Italy’s nitrogen dioxide pollution is the worst in Europe (the UK is bad too), leading to chronic lung inflammation? Is it the chaotic administration that led to a catalogue of errors in the hotspot of Codogno?
Perhaps, but it may also be because Italy’s decade of austerity has been harsher than anything George Osborne ever imposed. Are we seeing the delayed kick from cut after cut to the Servizio Nazionale Sanitario, the budget paired to 6.6 percent of GDP, all forensically dissected in a report by the Fondazione GIMBE? If you think Britain’s NHS has been starved of funds, spare a thought for Italy, Portugal, Spain, or Greece.
Can one conclude that the eurozone’s ideology of fiscal contraction has come back to haunt? Certainly.
For now, premier Giuseppe Conte is riding a wave of national unity, but his drastic decision to lock down Milan, Venice and much of the Italian industrial core will -- while necessary -- have violent recessionary consequences that Italy cannot counter. It lacks the sovereign instruments to do so. Twenty years of depression have left the Italian economy itself immunosuppressed.
As this becomes clear, Covid-19 will chip away at the ruling coalition -- shoe-horned into office by the pro-EU establishment -- and play into the hands of Matteo Salvini, the Lega strongman. The spectacle of Rome pleading with Brussels for licence to defend its society in an emergency is the perfect foil.
"Companies need emergency aid to avoid closure and lay-offs. If there is no aid because of some accounting fanatics, it means the EU is dead. Paying to belong to a union that sticks two fingers in our eyes is no longer sustainable," he told the Italian Senate. Europeanism is a fair-weather attitude. In crisis, war and death, people revert to being national.
Germany is just days behind on a similar contagion trajectory as Italy, as is most of Europe -- and it too has been caught off guard. The trusting German public seem to think their fragmented health system has the virus under control. No doubt German efficiency and good kit will prevent the worst, but citizens have a surprise coming.
The hotlines are as jammed as in Britain. The testing bureaucracy has been Kafkaesque. The hotspot of North-Rhine Westphalia is short of doctors. Berlin seems to be tilting towards economic business-as-usual rather than contagion control. It will regret that choice.
My conjecture is that Covid-19 will trip up Angela Merkel’s Grand Coalition, ushering in an unfamiliar Germany fractured five ways with the Greens, the hard Left (Linke), and the hard-right (AfD) tearing into the flesh of a decaying political centre.
Medical failings will unfold in tandem with a deep recession across the eurozone, which has failed to take advantage of the Draghi Reprieve to rebuild monetary union on viable foundations with a fiscal backstop. The European Central Bank is exhausted. Interest rates are at minus 0.5 percent. The ECB can compress corporate debt yields further, or offer limitless free loans to banks, but this is just damage control.
Only fiscal stimulus on a New Deal scale can counter the shock and pull the eurozone out of a deflationary slide. Such a move collides head on with the EU's machinery of spending restraint, fixed in treaty law. Token flexibility on deficit targets is not going to move the economic needle. Brussels does not have the legal latitude to tear up the rule-book even if it wanted to. Europeans have built for themselves a structure that cannot respond to crises.
Of all the regimes, the Khomeinist Islamic Republic of Iran is the most obviously damaged. The cocktail of lies, corruption and ineptitude over Covid-19 may have shattered whatever remaining confidence existed in the self-serving revolutionary elites. Now it faces a collapsing oil price as well. So does Saudi Arabia. The Gulf petro-bloc is a step closer to its insolvency crisis.
The verdict on China's Communist Party is harder to discern. Xi Jinping has seized on the epidemic to tighten surveillance and build his personality cult, using totalitarian control over social media website Weibo to expunge any reference to the early Wuhan cover-up. He has launched a media blitz declaring heroic victory, with martyrs entering the pantheon like heroes of the Long March. Party officials are putting it about that the coronavirus did not start in China, insinuating that it came from the US. It is a propaganda war now.
It is impossible to judge claims that the epidemic is contained given the police state methods deployed to suppress any verification. There is persistent talk from the informal Samizdat network that the virus is spreading fast and furiously in Beijing itself. Much as I would like to believe the World Health Organisation, that underfunded body is out of its political depth in China and disturbingly prone to the Potemkin syndrome.
The Politburo’s frantic efforts to revive economic output and head off a financial Minsky Moment -- to the point of inflating electricity usage figures to confuse short-sellers -- cuts against virus control. This relaxation in containment is akin to "suppressing a forest fire, but not putting it out," says Prof Mike Osterholm, author of Deadliest Enemy: Our War Against Killer Germs. "It’ll come roaring back."
What we have seen so far in China may only be the "herald wave" before the virus returns, as it did with such ferocity in wave two of the 1918 Spanish Flu.
But the jury is also out on the US. It has allowed a surveillance failure. The fight is being led by a man who persisted in calling it a "hoax" long after it was already spreading in Washington state.
That infamous mantra will ring down through the ages as the defining epithet of the Trump presidency.
Barely in office, Donald Trump slashed the global health security funds of the Center for Disease Control (CDC) by 80 percent and closed the pandemic machinery at the White House. His first reflex when cases escalated was to try to spin the message. All must be well so long as Wall Street is rising. But the markets were wrong. On matters of science, it is better to heed scientists.
Whether cuts to the CDC contributed to the fiasco of a faulty reagent sent out to labs will be combed over in the political post mortem, as will the long delay before permitting others to step into the breach. The fact is that the US tested almost nobody until early March. By then it was too late. It was the fatal missed window. Call it "Wuhan II" -- American style.
The US is about to face its grim reckoning. It has the best health care in the rich world -- and the worst. Pandemics exploit the worst.
Mr Trump can still avert disaster if he invokes executive powers immediately to extend testing and care to the uninsured and illegal aliens (without deportation risk), and if he switches to lock-downs and war-time policies.
But that is not happening. So the crowded rallies go on and the contagion will go exponential before hot weather comes to the rescue. I fear that the coming news cycle and the footage from America’s busy morgues will be gold dust for the Chinese propaganda department.
As for this wet little island, we have alarming weaknesses but also strengths. Listening to the candid reassuring tones of Professor Chris Whitty and Sir Patrick Vallance, I feel at least that we are not being spun. The decisions taken will be judicious and in the common interest. It is the old British style. We may just muddle through with our national model intact, if we are lucky.
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