Fear and Loathing on Planet Earth
As a group, humans are bad at digesting really big and equally bad news. When faced with disaster, we seem to have evolved, at least collectively, a tendency to become tremendously optimistic. It makes a weird kind of sense, giving us a reason to soldier on versus doing what might seem logical and just give up.
Think of World War 1 or 2, with the mindless optimism on both sides at the start — “we’ll be home in time for Christmas!” — instead of something more realistic like “we’re about to get bombed and starved for six long years, and I might die”.
COVID-19 falls squarely into the same class of catastrophe as a world war: millions dead, global reach, huge and lasting economic impact, and years in duration. So, it’s understandable everyone is wishing it would go away quickly, especially the stock market.
To better understand what’s going on let’s do some near-term forecasting, with our crystal ball set to “medium rosy.” In this scenario the first vaccines get approved for general use by the spring of 2021. Production ramp ups quickly and smoothly, and citizens in most rich countries can easily get some kind of effective treatment by, let’s optimistically say, 12 months from today. People everywhere eagerly seek the jab, which works great, and by 2022 everything’s back to normal.
Unfortunately, the reality is not even close to medium rosy.
First, there will be real or imagined problems with any vaccine. Remember Desert Storm and complaints of side effects arising from the injections given to soldiers? Or consider the debunked rumors that vaccines cause autism, which are still believed by many today despite all the evidence to the contrary.
In a world which believes in chemtrails, a brand-new vaccine that’s rushed into production is going to be all too appealing to conspiracy theorists and anti-vaxxers everywhere. And even if nothing goes wrong, which it very well may do, it may not offer 100% protection. (Partial resistance is still useful as it reduces mortality or hospitalization rates, but people will still be dying in large numbers.) Shortages may arise, or production may be paused as unintended side effects emerge. Each of these has happened with flu vaccines before. In short, there are many other ways a smooth deployment of a vaccine to eight billion people can run into issues and delays.
Secondly, once we do have a vaccine there are many headwinds to getting to “herd immunity”, where enough people have taken it that the virus no longer spreads easily. The new vaccine will probably be taken first by front line workers, and then by those who are the most vulnerable (seniors, those with pre-existing conditions, and so on) as well as the 40% of adults who regularly get a flu jab. This still leaves us with about half the population actively delaying or refusing a vaccination. This somewhat understandable desire to avoid being a guinea pig will extend the time needed to get the planet to any kind of meaningful herd immunity.
Thirdly, decades of coronavirus research suggest that immunity may need to be renewed every year as the virus mutates in ways which make long term resistance a challenge. Consequently, even with a widespread uptake of an effective vaccine, we can still expect several years of outbreaks, shutdowns and scares as new strains emerge and local hotspots spread.
All of this will be going on in parallel with a once-in-a-lifetime recession. Twenty-five million Americans are currently without a job, and this is a number that is only going to increase as financial assistance to companies runs out and balance sheets deteriorate.
In spite of the crumbling economic outlook, many commentators act as if a recovery is already established and underway or will be just as soon as the vaccine gets here. This is a tremendously optimistic reading which flies in the face of common sense. In fact, a tremendous loss of wealth is underway as businesses and people stand idle.
For example, the idea that many of the jobs lost in the hospitality industry this year are coming back next year or the year after is simply ridiculous. Even if it’s totally safe to get on a cruise ship or go to a conference in 2021 (hint: it probably won’t be) there are just fewer people who are willing or able to spend in this category than there were a year ago. The confirmation of furloughed workers into permanent layoffs is on-going, and programs designed to reduce or delay evictions cannot continue indefinitely. Both of these will present serious headwinds even for areas of the economy that hitherto have not been directly affected.
With the top 25% of earners (at the time of writing) better off than at the start of the year, it’s too easy to lose track of the impact on the rest of us, many of whom were already living hand-to-mouth even before losing a job, home or business to the economic impact of COVID, or are rapidly exhausting reserves as each hopeful deadline comes and goes.
So, where does this all leave us?
A combination of a slower than hoped for uptake of the vaccine, multiplied by the effects of a long and deep recession will be a tremendous blow everywhere, and no country will be able to completely avoid the pain. Economic adversity will be a reality even for those countries which quickly and successfully tackle the COVID side of this pain equation.
The grim reality is that we may have to wait until 2025 or beyond to begin the healing, economically and literally, in any kind of meaningful way. Just like a world war, it will cost far more to “win” in terms of treasure and blood than we ever thought possible.
It’s not all bad news though, as there may be a silver lining to all this doom and gloom.
Historically, there have been unexpected benefits from major disasters and catastrophes. Many amazing inventions — the jet engine, the computer, spaceships and penicillin, to name just a few — can directly trace their inception to World War 2. COVID will probably be no different.
For instance, co-ordination to fight the virus is happening at an amazing pace and on a global level. And huge leaps are being made in many fields, supported by the spend-whatever-it-takes attitudes of governments and corporations when it comes to fighting the virus. Many amazing medical and technical advances will no doubt arise from all these dollars.
In industry, the trend to manufacture closer to markets, made possible by robotization, will be greatly accelerated by the logistics issues presented when countries close their borders unexpectedly. In even the most pessimistic scenario, we should at least be better prepared for any future pandemic.
There may also be less tangible benefits. Just as WW2 led to the end of European empires and a big push for social mobility, COVID may also lead to improved access to health care, and a realization that hating on each other has an unsustainable cost, particularly during times of crisis. This last effect would not be apparent at first, and if real, will likely gradually emerge in the coming decades as the Zoomers who lived through this era take over the reins of cultural power from Boomers.
It won’t all be jet engines and epiphanies. Many less momentous things will also be invented or improved. For example, it’s already a lot easier to have junk food and groceries delivered to your house. Working from home will remain easy and acceptable well after COVID has been brought to heel. And we will certainly appreciate vacations more once we are allowed to resume our jet-setting around the planet.
I realize that I am assuming the role of Debbie Downer, while also being a total Cassandra. I take this risk because without the right data we will make the wrong decisions. It’s important to measure accurately, doubly so when the data suggests things are this bad.
How does this affect us in the real world? Well, if we really think everything will return to normal next year then one appealing strategy may be to open another bottle of wine, put on a movie for the kids and hold on until the situation improves. Conversely, this would almost exactly be the worst plan if it turns out that 2021 resembles anything remotely like the predictions above.
For example, many families were optimistic that at some point schools would re-open in the fall. Now that cases are going in the wrong direction in most of the OECD, that looks unlikely to happen in 2020, and will probably continue for who-knows-how-long into next year. If you were able to join a learning pod or micro school over the summer because you shared our pessimism, well done, but good luck trying that today, when affordable and qualified teachers have become the equivalent of hoarded rolls of toilet paper.
Wrong decisions such as these have measurable real-world ramifications. In World War 2, the unwarranted optimism meant real chances to end the war sooner were missed. Today it could mean our children missing a year or more of education. It’s a huge cost, and totally avoidable.
So what to do? Well, when things are going badly, hoping for the best and planning for the worst is generally a good strategy, and if you don’t think things are going really badly right now I’d love to meet you (socially distant of course) and learn how you got to be so optimistic. I could do with a bit of optimism myself right now.
For the rest of us, emotionally preparing for the coming toil is an unpleasant but prudent thing to do. Let’s get real and try to make the best of it instead of putting our collective heads in the sand. Hopefully things will turn out better than we had planned for, and we will have made the best of a very difficult situation. And if it’s as bad as it seems it very well may be, we’ll be ready for anything.
Now where’s that bottle of wine?