March 29, 2020
If the headline appears to be shocking, there is no attempt to shock you. It is realistic about the nature of the trends in the spread of COVID-19 through modern society.
It is difficult to make this point more clearly. The only way to stop this particular virus is isolation. That is not happening, and this particular virus is spreading rapidly through every society that has not imposed a lock down. There is more about this point later, but the real focus here is what the world may look like when the world accepts that this virus is unstoppable.
Producing a vaccine for COVID-19 is a key goal, but that process takes time, and no matter how much Donald Trump offers false hope for this outcome, it is likely that such a development will take at least a year.
In the meantime, the objective of isolation is to dramatically reduce the spread of the disease. Epidemiologists refer to this as ‘flattening the curve’ and when done well, it will reduce the pressure on medical personnel and infrastructure. Reducing the demand for medical resources will increase the likelihood that more severe patients will have beds, ventilators and doctors available to treat them. If the system is overwhelmed, people will likely die without effective treatment.
Unfortunately in a ‘free’ society, recommendations, perhaps even orders for isolation measures are likely to fail within four to six weeks. This will result in outbreaks that roll through society over a long period of time until we achieve herd immunity or produce and distribute a working vaccine. At the time of this writing [March 29, 2020] the worldwide death rate is around 4%, with a heavy burden on the old and the chronically ill.
Using the assumption that the spread is now unstoppable, and that isolation will not work past late spring, human behaviour becomes a key driver of social and business activity.
- Expect social interactions to be dramatically reduced until there is a working vaccine. Even within low risk communities such as youth, the act of social distancing will be substantially greater than in times past. This could be a very difficult time for the elderly, people of all ages living alone, and those with poor social networks.
- Business activity will be significantly curtailed as corporations try to protect the people they employ from unnecessary risk. This will be particularly noticeable in retail, travel, food service and other areas of non-essential business activity.
- Expect significant death rates among the elderly and ill. This very high human cost will likely result in a drop in longevity. After a brief increase, there could be reductions in spending on services for the elderly, transfers of wealth, increases in housing and long-term care availability.
- Globalization will be less attractive and governments and individuals are likely to seek more control over the goods and services they consume. The need for employment and taxation will also contribute to more inward looking societies.
- Families will likely become stronger. Some may realize they are not compatible, but those that do are likely to benefit from spending time as a unit.
- Political change is a wildcard. With elections and transfers of power underway in many parts of the world over the next 12-18 months, political change is almost certain, but the outcomes will be difficult to predict.
- The economy will slow dramatically. We are just now getting a window into the effects of the China shutdown, and the drop in activity is startling. Similarly, unemployment in North America has provided a first glimpse of the free fall in economic activity.
- Debt levels will increase for individuals, corporations and government. The number of people and businesses who are unable to manage this higher debt to increase dramatically.
- Interest rates will rise. In these initial stages, government intervention is holding interest rates down, however the risk of default is rising rapidly while capital availability is declining even more rapidly. Ultimately rates will have to rise to accommodate that risk.
- Taxes will need to rise. Government debts were excessive prior to the contagion, but are now unsustainable, and taxes will need to rise just to service the debts (without any repayment!).
If the outbreak was contained and resolved quickly, it would have been possible to come back to a way of life very similar to what was put on hold. In the case of an outbreak that lasts for months or perhaps even years, behaviour will be altered permanently. It is difficult to characterize even a modest number of the potential outcomes, but change should be expected.
A Short Note Regarding Containment
While it is possible to write another essay on transmission rates, social distancing and the methods of calculating these things, visualcapitalist.com has an excellent article offering a comprehensive look.
Early in the spread, there was a great deal of criticism leveled at the Chinese government for their response, however they are currently the only major economy to have halted the spread of COVID-19. China placed Wuhan, the epicenter for the outbreak, under quarantine beginning on January 23rd and the entire province of Hubei within a few days after that. That was within four weeks of the identification of the first cluster. The lock down and isolation worked.
Many other first world countries have not taken similar measures, and the opportunity has probably been lost. The first US case was identified on January 20th and we are now nine weeks past that date, and containment seems unlikely.
By contrast, Italy identified its first two cases on January 30th, and instituted a lock down three weeks later, on February 21st. The growth rate in Italy is now half of that of the United States.
With total confirmed infections likely to hit one million this week, the spread is unlikely to be contained without a complete lock down.
There are currently 600,000 confirmed cases, with the US, Spain, Germany, France and the UK showing fast growth in large populations. Currently the rate worldwide is doubling every seven days and every four days in the US! Some densely populated countries such as India, Brazil and Nigeria are experiencing rapid growth in infections, but limited testing means the toll will likely rise.