CoVID-19 shifts power and influence from West to East

The CoVID-19 pandemic created an unprecedented global shock and killed hundreds of thousands
Nations responded by closing their borders, implementing stringent lockdowns and saying the world is at war with a common invisible adversary
Responses to the outbreak diverged in the different regions of the world
Asian countries responded rapidly and effectively
The US and UK responded slowly and ineffectively
Observers suggested that the divergent responses to CoVID-19 signal a shift in power and influence from West to East
National responses alone are insufficient to effectively deal with the coronavirus
Only by embracing effective international cooperation will governments protect their citizens and safely exit the CoVID-19 crisis

National leaders have described the coronavirus CoVID-19 pandemic as “the enemy”. In attempts to protect their citizens, nations turned inwards and closed their borders, implemented stringent lockdown restrictions and suggested that the world is at war with a common adversary it cannot see. The speed and effectiveness of national responses to the new coronavirus crisis differed, but not even the wealthiest, most advanced nations were able to protect their citizens. The global coronavirus crisis made millions seriously ill, killed hundreds of thousands, destroyed industries, bankrupted thousands of companies, caused economies to nose-dive and threw societies into turmoil. Only by avoiding nationalist policies and embracing effective international cooperation will governments protect their citizens and safely exit the CoVID-19 crisis.

Viruses are notoriously difficult to treat and cure

CoVID-19 has rapidly spread throughout the world with a scale and a severity not witnessed since the devastating Spanish Flu in 1918. So-called because Spain was neutral during WW1 and was one of the few countries where journalists were free to report on the outbreak. In an era before antibiotics and vaccines, the Spanish Flu claimed the lives of nearly 0.68m Americans, 0.25m Britons and between 50 to 100m people worldwide. Adjusting for population growth, that is equivalent to between 200 and 425m today.

At the time of writing - June 2020 - neither an adequate therapy nor a vaccine has been developed and CoVID-19 remains prevalent in populations throughout the world. Even with today’s scientific advances, infectious diseases are notoriously challenging to either treat or cure: an Ebola vaccine was more than two decades in the making; despite the first cases of the human immunodeficiency virus (HIV) presenting in 1983, we still do not have a therapeutic preventative vaccine for the disease; nor do we have a vaccine for severe acute respiratory syndrome (SARS), a killer coronavirus, which also originated in China and was unknown before its outbreak in 2002.

Recovery will neither be straightforward nor quick

Notwithstanding, governments have lifted lockdown restrictions in order to get their economies working again. V, U, W and L are letters of the alphabet used to describe the shape of a recovery following the economic crisis caused by CoVID-19. Stringent lockdowns forced economies into unprecedented cold storage, and no one knows what shape a recovery will take since professional forecasters have never encountered anything like the sheer magnitude of the current economic crisis.

The Bank of England’s Monetary Policy Report published in May 2020, warned that the coronavirus has caused the worst economic crisis in 300 years. So, emerging from this is unlikely to be either straightforward or quick. National responses to the coronavirus outbreak were mixed. Although it is too soon to know the longer-term effects of the virus, China, Singapore and South Korea are among the countries that responded early and effectively, while the US and UK, together with other Western European countries, responded late and less effectively. As of June 1, China, with a population of 1.4bn, had 83,017 confirmed cases and 4,634 deaths; South Korea with a population of 52m, had 11,537 cases and 270 deaths, and Singapore with a population of 5.7m, had 34,884 confirmed cases and 23 deaths.

In this Commentary

This Commentary describes the divergent national responses to the CoVID-19 pandemic; in particular that of China, Singapore, South Korea, the US and UK. China’s more effective response might have been because Beijing benefitted from the lessons it learned after the SARS epidemic in 2002. Governments also differed in their approaches to lifting restrictions. China’s approach was slower than that of the US and more determined to make some of the unexpected benefits thrown up by the crisis permanent. Some observers perceive such variances as a difference between liberal and illiberal nations. Others view the divergences as a shift in power and influence from West to East. We suggest that the divergent responses and outcomes are a product of the capacity and legal authority of different states and reveal different mindsets and competing views about solutions. We also contend that the devastation created by the pandemic will only be resolved with effective international cooperation. However, it is difficult to see this happening in the near term as the pandemic has become a theatre for a wider political disagreement between the US and China, in which other nation states are being forced to take sides.

Asian nations won the battle against CoVID-19

China, Singapore and South Korea leveraged the collectivists mindset of their citizens, their centralised authority and digital infrastructures to quickly implement the gold standard “test-trace-and-isolate” strategy to reduce and control the virus. The reason for such prompt actions and the subsequent relatively low number of cases and deaths in these Asian countries is described by Byung-Chul Han, a South Korean-born German Professor of Philosophy at the Universität der Künste in Berlin. In an article published on May 22, in the Spanish newspaper El Pais, Han suggests that Asian nations won the battle against the CoVID-19 outbreak because their citizens, “have a collectivists mindset, which comes from their cultural tradition of Confucianism. Asians are less rebellious and more obedient than people in the West. They trust the state more. Daily life is much more organised, and Asians are strongly committed to digital surveillance. The epidemics in Asia are fought not only by virologists and epidemiologists but also by computer scientists and big data specialists”.

Confucian mindset rather than authoritarianism

Given Iran’s response to CoVID-19 has been less effective, it seems reasonable to suggest that the Confucian mindset, rather than authoritarianism, appears to provide at least a short-term advantage. In early March, at the Shia Muslim Masumeh shrine in the holy city of Qom, pilgrims licked and kissed its gates. Qom experienced Iran’s first outbreak of the coronavirus and became the country's worst-hit city. Shortly afterwards the government closed all major Shia shrines across the Islamic republic and reopened them again in late May. As of June 1, Iran with a population of 81m, had confirmed 154,000 cases of CoVID-19 and 7,878 deaths.

Smaller democracies appear to cope well

Small democracies such as New Zealand and Greece seem to raise some doubt about Han’s thesis because they too have effectively responded to the outbreak. As of June 1, New Zealand, with a population of 5m, had confirmed 1,154 cases and 22 deaths and Greece, with a population of 11m, had a total of 2,917 cases and 175 deaths.

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Notwithstanding, New Zealand’s lockdown only occurred after significant pressure was applied by civil society that suggested the government needed to change track. Both New Zealand and Greece have concentrations of political power, access for vested interest, a lack of public participation in politics and weak media. Further, Greece had no choice but to act swiftly and robustly to the coronavirus outbreak because the country has been in an almost constant state of austerity management since 2008, which has significantly reduced its resources to tackle an outbreak of this magnitude. In both countries the effect of stringent nation-wide lockdowns could further weaken already fragile civil societies, media and parliamentary systems by concentrating power in political leaders, curtailing civil liberties, adjourning parliaments and restricting the normal operations of the media.

The Swedish exception

By contrast to all other developed countries, Sweden exercised a radical laissez faire no-lockdown approach to the CoVID-19 outbreak. The architect of this was the Swedish State Epidemiologist Anders Tegnell, who argued that, “nothing [to do with lockdowns] has any scientific basis”, particularly decisions to close schools because there is no evidence that children are a major cause of coronavirus transmission. In Sweden, primary and secondary schools, day care centres, restaurants, bars, cafés, cinemas, theatres, shops and places of work all remained open as normal, with Swedish health authorities relying on voluntary social distancing and people choosing to work from home. Schools for over-16s and universities were closed, and gatherings of more than 50 people were banned. As of June 1, as the death toll has fallen substantially in other European countries, 4,403 people had died from CoVID-19 in Sweden, a country with a population of 10m. Its neighbours, Denmark, Finland and Norway - each with populations of about 5m - have recorded death tolls of 574, 320 and 236, respectively.

Not only does Sweden’s no-lockdown approach enjoy significant support among its citizens, it also has the backing of Jonathan Sumption, an historian and a former Justice of the Supreme Court of the UK. Writing in The Times of London Sumption suggests that, “The lesson of CoVID-19 is brutally simply. . . . . . Free people make mistakes and willingly take risks. If we hold politicians responsible for everything that goes wrong, they will take away our liberty so that nothing can go wrong. They will do this not for our protection against risk, but for their own protection against criticism”.

At the beginning of June, Tegnell conceded that Sweden should have imposed more restrictions to avoid having such a high death toll.

The US and UK mindset

Compared to the responses described above, the US and UK were slow to implement testing, late to acquire essential equipment, gave confusing public health messages and delayed introducing stringent lockdowns and social distancing. For example, in mid-March, when borders were being closed and mass quarantines enforced across Europe, the US government was failing to establish a clear and focused response to the outbreak. By the time the US President declared a national emergency, several states had introduced lockdowns, universities had shifted to online learning and churches had begun to close. At the same time, schools in England largely remained open and the UK government was pursuing a strategy of exposing its population to the coronavirus in the expectation that citizens would develop a “herd immunity”. As of May 31, the US with a population of 328m, had confirmed 1.83m cases and 106,000 deaths, and the UK with a population of 67m, had 276,000 cases and 39,045 deaths.

Signs of danger ignored

Neither the US nor the UK government appeared to have been influenced by well publicised signals of pending dangers, which included: (i) CoVID-19 being a highly contagious ‘novel’ coronavirus without either a therapy or a cure, (ii) around January 23, after the discovery of the outbreak and before the lockdown of Wuhan, the city in China where the virus originated, some 5m people left the city and were potential super spreaders, (iii) by February 4, the coronavirus had spread to 24 countries, (iv) also on February 4, China had opened the first of two mega hospitals in Wuhan, both built from scratch in a couple of weeks specifically to cater for patients affected by the fast-spreading coronavirus. Together, the two hospitals had a 2,600-bed capacity and were staffed with over 3,000 health professionals.

Mixed messages

Inside the US messages about CoVID-19 were mixed. Main media outlets reported the acceleration of the virus internationally and state governors independently started to take emergency actions. Notwithstanding, on February 26, at a White House briefing, President Trump urged Americans to take the same precautions for coronavirus as they would for normal flu, and US Health and Human Services Secretary Alex Azar advised that the coronavirus only posed a low risk to the American public. On February 25, the Centers for Disease Control and Prevention (CDC) confirmed that there were 60 CoVID-19 cases in the US and warned Americans that “it's a question of when, not if” the virus, which had killed thousands, would spread within the US.

Convinced of a rapid V-shaped recovery

In late February, in tune with White House messaging, many US business leaders from sectors not seriously affected by CoVID-19, were convinced that the coronavirus outbreak would be a relatively short-lived regional issue, concentrated in China with some limited transmission through supply chains to other parts of Asia, Europe and the US. They believed the outbreak would only have a temporary impact on global GDP and trade and weigh modestly on US business activities in Q1 2020. Although it might be difficult to contemplate now, in late February some US business leaders were suggesting that their companies and the American economy would bounce back in Q2 2020 after a modest V-shaped dip.

Such optimism might have been influenced by the SARS outbreak, which also originated from China, spread to 37 countries, infected more than 8,000 people and killed about 800. The impact SARS was to reduce China’s GDP growth by about 1% and it only had a limited effect on world GDP and trade. Although the SARS epidemic did not register much with US business leaders, it prompted Beijing to overhaul its healthcare system and prepare China for another potential virus epidemic. After SARS China invested in systems for disease surveillance and reporting, as well as epidemic prevention and control. Centres for disease control were built across the country and public insurance programmes were expanded to provide affordable care for the rural population. Arguably, this strengthened China’s preparedness for its response to CoVID-19.

By contrast, the US and UK did not appear to perceive a threat of a pandemic as serious. In May 2018, President Trump disbanded the US Global Health Security and Biodefense unit responsible for pandemic preparedness, which was established in 2015 by Barack Obama’s National Security Advisor. The UK did something similar. According to Professor Sir Ian Boyd, the UK’s Chief Scientific Adviser between 2012 and 2019, the nation’s biological security strategy, which Boyd partly wrote and published in 2018 to address the threat of a pandemic, was not properly implemented because of a lack of resources.

Commercial impact

As a consequence, on March 11, when the World Health Organization (WHO) declared the coronavirus CoVID-19 as a pandemic the US and UK were unprepared. The WHO pointed to Europe as the “epicentre” of the outbreak and, by the end of March, the outbreak had a significant effect on most industries in the developed world. Transportation, manufacturing and wholesale trade sectors were substantially affected by disrupted supply chains and travel restrictions. In many countries retail and hospitality sectors experienced sharp falls in demand and were closed. However, sectors differed in their ability to respond flexibly to supply disruptions and falls in demand. For example, business as usual continued for many professional services if their employees were able to work from home.

Impact on healthcare

The impact on healthcare was mixed. Demands on hospitals increased significantly as they shifted their resources and efforts to treating CoVID-19 patients. Policy responses were aimed at managing the increased capacity demands on hospitals by ‘flattening the curve’ of infection. The impact of the coronavirus outbreak on the MedTech sector was bifurcated. The vast and increased demand for critical care devices and personal protective equipment (PPE) significantly advantaged some manufacturers, while others, particularly orthopaedics, were disadvantaged as hospitals dedicated capacity to treating infected coronavirus patients and deferred non urgent surgeries. Sector forecasts suggested a reduction in medical device use in the Q1 and Q2, and a moderate recovery in the second half of 2020. But this hinged on successful efforts to halt the virus' spread. The global economic slowdown and the shift in healthcare resources toward fighting CoVID-19 dented MedTech sales and triggered a hit to their stock valuations.

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CoVID-19 weakens the ‘Western brand’

Some commentators perceive the CoVID-19 crisis as a test of the competing claims of liberal and illiberal states to better manage significant social and economic shocks. According to Stephen Walt, Professor of international affairs at Harvard University's John F. Kennedy School of Government, the slow and diffident responses to the outbreak from US, UK and some other European governments could potentially weaken the dominance of the Western brand, and “accelerate the shift of power and influence from west to east”.

China building on the response to SARS

Despite China’s endeavours to be ready for a pandemic after the SARS outbreak, CoVID-19 exposed cracks in China’s preparedness, which Beijing swiftly sought to fix. This included enhancing the nation’s healthcare system’s cost management by further centralizing procurement, purchasing drugs in bulk and implementing a two-invoice policy to eliminate layers of bureaucracy in the nation’s distribution channels. Beijing also encouraged product innovation from local and foreign companies by fast-tracking approvals for medicines and medical devices. And, like many other countries, China increased its digitalization strategies by accelerating the integration of big data, artificial intelligence, telemedicine, online pharma retail and more. The coronavirus impact in China and elsewhere in the world prompted a massive shift in patients and doctors using Internet-based options for diagnosis and treatment. This shift to digital necessitated by the coronavirus outbreak is well positioned to become the ‘new normal’, which could help healthcare providers, hospitals, health systems and clinicians optimise their use of resources.

G7’s response to CoVID-19

Between March and April, G7 nations (Canada, France, Germany, Italy, Japan, the UK and the US) injected US$2.5tn of new money into financial markets through quantitative easing and liquidity programmes to help nations recover from the economic crisis caused by CoVID-19. Notwithstanding, only about US$1 in US$10 lent by British banks went to non-financial service companies. Most of the new credit supported financial trading. A similar pattern occurred in other G7 countries. As these nations navigate their way out of the crisis, there is little evidence of any industrial strategy being linked the CoVID-19 shock. For economies to recover, they will need financial markets to do something similar to what they did following WWII when banks worked closely with governments and used the increased liquidity for committed long-term financing that created jobs, enhanced productivity and stimulated innovation.

Interestingly, on May 30, President Trump said he will postpone the G7 meeting planned for August at the White House. He called the current group’s format , “very outdated”, suggested that it does not properly represent "what's going on in the world" and said its membership should include Russia, Australia, South Korea and India.

The pandemic is not over

Compared with G7 nations, China has opted for a more strategic approach to its recovery from the pandemic. Beijing has put the prevention and control of the CoVID-19 crisis as the keystone of a national strategy. Significantly, Premier Li Keqiang, did not use his annual report to China’s National Legislature on May 29 to claim victory over CoVID-19. Instead he stressed that, “The pandemic is not over” and outlined Beijing’s plans for continued vigilance against the coronavirus, which, Li said, “is a core thread in determining everything from macro-level strategy to micro-level policy for the foreseeable future in China”. Beijing committed a ¥1tn (US$138bn) rise in its fiscal deficit and ¥1tn of special governments bonds to its CoVID-19 recovery strategy, which is dedicated to: (i) securing jobs, (ii) maintaining and increasing people’s livelihoods, (iii) developing businesses, (iv) securing food and energy, (v) developing and maintaining stable industrial and supply chains, and (vi) reducing government red tape.

CoVID-19 strengthens the US$

Beijing’s coronavirus recovery strategy does not guarantee that China will evolve stronger than the US from the crisis. Indeed, the US may surface in better shape than analysts suggest. This is because of the strength of the US$, which remains the world’s reserve currency and is perceived as a relatively safe asset in times of crisis. The CoVID-19 crisis reinforced the US$’s strength and therefore it seems reasonable to suggest that the coronavirus outbreak may not do as much damage to the US economy as some observers suggest. Walt’s prediction, mentioned above, that CoVID-19 will accelerate the shift of power and influence from West to East will depend on whether: (i) the US successfully restarts its economy and avoids a resurgence of the coronavirus, and (ii) the US maintains its ‘America first’ approach to the pandemic or changes to its natural global leadership position, which it assumed after WWII.

US suspends payment to the WHO

On March 26, after a virtual G20 summit, there were encouraging signs when a joint statement said that, “Combatting this pandemic calls for a transparent, robust, coordinated, large-scale and science-based global response in the spirit of solidarity. We are strongly committed to presenting a united front against this common threat”. Despite this pledge to cooperate, little cooperation followed, and the pandemic became a theatre for a wider disagreement between the US and China. On April 20, President Trump suspended US payments to the WHO in protest at what he regards as the body’s China-centric approach, reflected, by what he suggests is the WHO’s failure to challenge China sufficiently over the origins of the CoVID-19 outbreak. On May 29, Trump said, “We will be today terminating our relationship with the World Health Organization and redirecting those funds to other worldwide and deserving urgent global public health needs”. In the near-term, before the US presidential election in November, it does not look that the US will change its ‘America first’ strategy.

Takeaways

CoVID-19 has created an unprecedented global crisis. Governments throughout the world responded to the crisis by closing their boarders, implementing stringent lockdown restrictions and used wartime rhetoric to rally their citizens. While this temporarily lowered the rate of infection it is not a permanent solution. Two significant takeaways from the coronavirus crisis are: (i) not even the riches and most technologically advanced nations with state-of-the-art healthcare systems were able to protect their populations and (ii) only by turning outwards and embracing effective international cooperation will nations protect their citizens and safely exit the CoVID-19 crisis.

#coronavirus #coVID-19 #pandemic #coVID-19outbreak #lockdown

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CoVID-19 shifts power and influence from West to East

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