We watched with disbelief how China, combating Covid-19, had incarcerated 50 million people and callously forced intrusive apps and spyware on another billion of their citizens. Female soldiers and nurses on the frontline had their hair shaved off, and factories, schools and kindergartens were closed until further notice. The country came to a complete standstill, inflicting unprecedented pain on its citizens, the world’s supply chains and on global trade.
Yet it did not take the world long to follow suit. Whoever came back from trips to China and, as the virus spread, from South Korea, Japan, Iran, or our Italy, was quarantined. Flight routes were cancelled, first by governmental order, but soon due to a lack of demand. Countries started to close their borders first for Chinese travellers, then, like Malta, to all foreigners lock, stock and barrel.
As cases were reported even from countries as removed as Iceland, most people considered their home environment safer than any other no matter what. Airlines were soon forced to ground a large part of their fleet and to fly the remaining planes often completely empty in order not to lose valuable airport slots due to inactivity.
Europe resembles a war zone, with nurses crying as their patients die without help. Millions are incarcerated, with soldiers closing highways, railway stations and airports. Everyone’s trapped, be they a resident or foreigner. Travellers are stuck and have to put up camp in isolation; foreign labour is downing tools and scrambling to get the last exit home; hotels, shops and restaurants are eerily empty, void of guests and workers.
Offices and civil service close down. Temps cannot show up for work and do not know if they will ever get paid. Supermarkets are raided. In Malta, judges stay at home and I wonder how long it will take for the police to stay at home too, claiming overtime! Businesses like people are dying.
Meanwhile, the flu-like virus is only as deadly as it is tested. As one can count the dead more reliably than people falling ill, mortality rates are test-related. Countries which do not, or cannot test systematically, like embargo-stricken Iran, will only know the sick who are hospitalised and those who die. In South Korea, which examined hundreds of thousands of its citizens, less than one per cent of people testing positive have died from the disease.
This makes the US a far more dangerous place than even China. As a tenth of America’s population has no medical insurance and dozens of millions are ‘self-employed’ on a no-work-no-money-basis, the reservoir of people who will fall sick unnoticed or spread the disease with abandon is larger than in many poor, developing countries. Soon the Trump government, always good for empty bravado, will have to decide if a wall along the Mexican border makes perhaps less sense than barbed wire around Seattle and New York. For once, Trump’s decision to lock out all European countries is an unintended blessing.
The concomitants of health policies striking fear and panic has not only severe economic implications, they might change the way we communicate with each other in a lasting way. Church services are cancelled, hugs are frowned upon, and kisses considered more deadly than AIDS.
Eventually politicians will have to decide how to strike a balance between fighting the illness and reviving the economy
The ‘Wuhan handshake’, where buddies were seen kicking each other’s feet instead of shaking hands went viral on You Tube, if this entirely intended pun is forgiven. The encounter of Chinese tourists made us feel queasy. Now it looks as if we are all Chinese.
The logic of quarantine is undisputable. If you ban human contact entirely, the coronavirus cannot spread. If you deny your body any liquid, your nose will stop running. Whether we can survive such blunt measures is a rhetorical question. Hoarding of dry food, toilet paper and hand sanitisers has emptied supermarket shelves and induced racketeering. Two weeks ago a bus from Turkey was stopped at the Austrian border attempting to smuggle garage-produced surgical masks into Europe.
Eventually politicians will have to decide how to strike a balance between fighting the illness and reviving the economy. If we had initially to fear unprecedented supply shocks from China, which delivers many of our consumer goods, chemicals, electronics and drugs, we have now to witness a complete breakdown of demand. People bunkered up in their houses stop to consume anything but food.
Airlines, retailers and the whole hospitality industry is clocking up losses which will soon lead to unprecedented bankruptcies, defaults and a credit squeeze, carrying the banking system yet again to the brink of failure. The sickest patients are US shale oil producers, driven to early extinction by the oil price fall.
Over a decade, borrowers could navigate foul ground because the interest rate burden was almost negligible. With revenues now falling over a cliff, many will struggle to service even interest-free loans. Meanwhile the resulting stock market rout is mortally wounding life and pension insurers, and exposing over-reliance on debt.
Solutions have to be political. People without regular employment will have to be paid sick leave if we want them to stay at home. Parents who have to look after their kids as schools and kindergartens are closed should be allowed to do so. Working from home will be the only realistic path for office work and government administration.
All work places should have obligatory hygiene drills. Hand sanitisers should be made mandatory for all outlets still open to the public. Civil society should get financial support for volunteering in hospitals and food logistics. Retirees willing to help should be given tax waivers for re-entering the work force. Companies looking into the abyss should be helped with corporation and payroll tax credits. Banks should be encouraged and supported to give leniency to borrowers at risk. Small businesses should receive emergency funding until arrested demand picks up again.
There should be political agreement that, for once, a balanced budget is not the order of the day. And central banks will have to take the plunge and bypass the banking system to finance such fiscal emergency spending directly. What this all means for the stock market, who will be the winners and losers and for how long, I will analyse in my next column.
The purpose of this column is to broaden readers’ general financial knowledge and it should not be interpreted as presenting investment advice or advice on the buying and selling of financial products.
andreas.weitzer@timesofmalta.com
Andreas Weitzer is independent journalist based in Malta