EconVue Spotlight - Appointment in Samarra?

Last month, a bit past the peak of fall foliage, I went to Vermont to visit family. Along the way I decided to stop by one of the many small cemeteries that dot the state to see the only monument to the 1918 Pandemic in the US. Hope Cemetery was beautiful, graced with stone gates, on a shining autumn day and a place where the eternal and the impermanent exist side by side.

The monument was not easy to find but when I did I was surprised to see that it had been erected just a few years ago, on the 100th anniversary of the 1918 pandemic, by the descendants of a local family who had lost their grandfather to the Spanish Flu. It is dwarfed in size by Vermont’s most popular monument, the 306 ft tall obelisk dedicated to the Battle of Bennington in 1777.

The reason there are so few monuments to this cataclysmic event is clear from reading the engraving: “The Spanish Flu killed more Americans than all of the combat deaths of the 20th century”. In war there are victors, but in pandemics there are only survivors. As we are understanding painfully now, there is no one day when victory can be declared and the battle is clearly over.

It reminded me of the fatalism of the Somerset Maugham tale, “Appointment in Samara”. No matter what we do, we might still fail and only natural law will end the siege. Notwithstanding vaccines and better available treatments than in 1918, it is still not certain that we will be able to do much better than our forebears. As we see from the newest variant, the problem might be not that Covid vaccines are too strong, but rather they are too weak. Vermont in fact has the highest vaccination rate of anywhere in the US, and cases there have seen a sudden uptick.

Could it be that marshaling all of our defenses worldwide, including historic amounts of spending, research, lockdowns, masks, and social distancing will only forestall the inevitable? Some governmental measures might make things worse and prolong the agony we are now experiencing. Political opposition around the world to another round of lockdowns and vaccination enforcement might themselves become contagious in unexpected ways. New York has already cancelled elective surgeries.

We have seen the damage inflicted on children for example, who have been deprived of both school and social engagement. My key concern: school closures, bringing us back to the days of this extraordinary photo, impacting employment.

Each country must choose a path and deal with the consequences. China has retreated, all but closing its doors except for the flow of goods. As long as it maintains a zero tolerance containment policy, its isolation from the rest of the world can be expected to last far longer than 2022. If this continues, current fears about China projecting itself militarily might be replaced by the economic shock of a new closed door policy, as has happened before in Chinese history. It would be an enormous irony if a disease that began in China before spreading around the world resulted in a new era of isolationism.

What are China’s alternatives? A recent paper (h/t @YanzhongHuang) published by the Chinese CDC Weekly models what might happen if Covid were allowed to become endemic in China, and concludes it is too high a price to pay:

Given the harsh reality faced by the global effort to contain COVID-19 and the virtual impossibility of its worldwide eradication in the foreseeable future, global human coexistence with fast mutating SARS-CoV-2 may have to occur, for the time being, irrespective of the wishes and aspirations of our people... In this article, we found that even in a highly underestimated outbreak scenario under the most optimistic assumptions, once China adopts the control and prevention strategies of some typical western countries, the number of the daily new confirmed cases in China would likely rise up to hundreds of thousands of cases, and among which >10,000 cases would present with severe symptoms. Particularly, the number of standing severe cases would exceed the peak number nationwide in early 2020 within 1–2 days, which would have a devastating impact on the medical system of China and cause a great disaster within the nation.

Chinese-style containment however is politically unacceptable in other countries, and another round of lockdowns and children forced to stay home from school will not go down well. Our international institutions are powerless to bridge this gap. Over the last several weeks, I have (virtually) attended COP26, APEC New Zealand, the IMF/World Bank meetings and others, and have come away with the impression that they too are flummoxed and unable to eradicate the uncertainties we face. We can hope that Omicron’s transmissibility is balanced by very mild symptoms that create natural immunity and that will overcome the disease over time. In the end, the only thing that can be controlled is our response.

More on China in my next podcast with political scientist John Mearsheimer of the University of Chicago, out next week. Coming soon: my review of a new book by one of our first podcast guests, Kathryn Ibata-Arens of Depaul University, Pandemic Medicine - Why the Global Innovation System is Broken, and How We Can Fix It.

You will also find links below on the Covid economy, China, and as always, new writing by EconVue experts.

EconVue Experts

Sustainability Disclosure Marks Progress at COP26
Marsha Vande Berg

COP26 critics, step to the side. From the get-go, few of us expected that the two-week UN Climate Summit in Glasgow, which ends Friday, would deliver the ultimate solution to climate change tied up in a big red bow and marked for extinction no later than 2050. There are too many variables, timetables, individual government and private sector interests at stake. But that doesn’t mean we are not on our way. We are. 

China’s Strategic Military Advance in Argentina
R. Evan Ellis

The military component of international engagement by China has long proceeded cautiously, in support of the economic engagement led by PRC-based SOEs. Some have anticipated the imminent establishment of a base by the People’s Liberation Army (PLA) in Panama since the Chinese firm Hutchison Whampoa won concessions to operate two ports there in 1999, or in El Salvador, since the announcement of Chinese plans for a megaproject at La Union.

The Roaring ‘20s Then & Now: Insights on Healthcare’s Post-Pandemic Future
David W. Johnson

Today, for the first time in history, human beings must adapt to a rate of change beyond our natural capabilities. Weaving digital technologies into the fabric of daily life to ease adaptation, reduce stress and promote well-being is the challenge of our times. Big challenges require big solutions.

Why Your Mail Now Comes So Late
Robert Shapiro

The frustrating deterioration in on-time mail delivery has become part of the ugly partisan brawls that animate Washington these days.  From the left, many see it as part of a plot by Donald Trump and his hand-picked Postmaster General to depress mail-in voting by sabotaging the postal system.  On the right, many view the U.S. Postal Service as a prime example of a bloated, unionized public bureaucracy incapable of doing a decent job.

Why Nobody Invests in Japan
Richard Katz

Japan stands apart. In the rest of the world, countries seeking to boost growth encourage foreign companies to set up new facilities on their soil or buy domestic companies, ventures known as inward foreign direct investment (FDI).

World

No. 5, 2021/the World Bank
COVID 19: Debt Service Suspension Initiative

We are entering the danger zone. Expiring on December 31st: The World Bank and the International Monetary Fund urged G20 countries to establish the Debt Service Suspension Initiative during COVID-19. The DSSI is helping countries concentrate their resources on fighting the pandemic and safeguarding the lives and livelihoods of millions of the most vulnerable people. Since it took effect on May 1, 2020, the initiative has delivered more than $5 billion in relief to more than 40 eligible countries.

Oct. 10 2021/Keep Talking Greece
Anti-vaxxers bribe doctors for “vaccination” with water, end up with the real vaccine

Mass fake vaccinations have been taking place in dozens of vaccination centers throughout Greece. But then a funny thing happened: Doctors pocketed the bribe but administered real vaccine and not “water” in order to avoid getting into trouble should the fake vaccination come out.

Nov. 4 2021/Youtube
Video

Uneven Vaccine Distribution, Divergent Recovery, Policy Responses in Advanced Eco & Emerging Markets

Chief Economist Gita Gopinath and University of Chicago’s Raghuram Rajan talk about vaccines, the recovery, and policies in advanced economies and emerging markets

U.S.

September 9, 2021/Bankrate.com
Back to School Guide for Parents

If new restrictions include school closures, all bets are off in terms of employment and the economic recovery. This is the single point of failure.

Nov. 12, 2021 / Governor DeSantis
REPORT

S&P Announces Florida’s AAA Credit Rating Ranks Higher than the Nation
46th Governor of Florida

Standard and Poor’s (S&P) confirmed Florida’s AAA Stable rating on Florida’s General Obligation (GO) bonds, the highest rating available, and established that Florida has earned a rating that is higher than the nation. A rarity in financial history.

Nov. 8 2021/the Federal Reserve System
Financial Stability Report

This report summarizes the Federal Reserve Board’s framework for assessing the resilience of the U.S. financial system and presents the Board’s current assessment. By publishing this report, the Board intends to promote public understanding and increase transparency and accountability for the Federal Reserve’s views on this topic.

Nov. 6 2021/Twitter
dammit, please, use facts!! consumer prices rose 0.4%, NOT 5.4%, from August 2021 to September 2021
Claudia Sahm

Oct. 29 2021/Gallup
COVID-19 Vaccine Now Required for 36% of U.S. Workers
Jeffrey M. Jones

The latest Gallup COVID-19 tracking survey finds 36% of U.S. employees saying their employer is requiring all its workers without a medical exemption to be vaccinated against COVID-19. The percentage has steadily increased each of the last three months, rising from 9% in July.

Sep. 8 2021/U.S. Bureau of Labor Statistics
Productivity Dispersion, Entry, and Growth in U.S. Manufacturing Industries

With today's labor productivity data you might think the productivity revolution is over. It is not. This was expected. The surge in wages are likely to promote increased productivity dispersion. - Constance L. Hunter via Twitter

Oct. 14 2021/Forbes
The U.S. Economy May Be Facing Another Recession, New Research Suggests
Pedro Nicolaci da Costa

The U.S. economy may be heading for another downturn within the next six months if sagging consumer expectations are any guide, according to new research from ex-Bank of England member David Blanchflower.

Nov. 10, 2021 / Bloomberg
NEWS

Biden’s Infrastructure Bill Will Lift Up China Inc.
Anjani Trivedi

Chinese companies that are already an integral part of the U.S. supply chain are set to get a boost — just when they need it most.

No. 8 2021/Twitter
The scale of US versus Chinese infrastructure spending
Simon Rabinovitch

A thread on the scale of US versus Chinese infrastructure spending, following the big new US bill.

China

Oct. 1 2021/Caixin
Foreign Investment in China Hits Record Amid Strong Post-Covid Recovery
Lin Jinbing

Nov. 14, 2021 / the Wire China
NEWS

Shaping Up and Shipping Out
Anastasia Carrier

Thanks to the supply chain bottleneck, China's shipbuilders are in high demand — a potential boon to the country's Navy.

Nov. 12, 2021/Asia Maritime Transparency Initiative
Nervous Energy: China Targets New Indonesian, Malaysian Drilling

Over the last four months, Chinese vessels have been contesting Indonesian and Malaysian oil and gas activity in the South China Sea in the latest instance of what is now an established pattern.

Nov. 8, 2021/the Economist
Rivalry between America and China will shape the post-covid world
Zanny Minton Beddoes

In the past five years the relationship between the world’s superpower and its Asian challenger has deteriorated in a manner that suggests few are paying heed to history. Under Xi Jinping, China has become more aggressively assertive abroad and more authoritarian at home.

Nov. 10 2021/the Sydney Morning Herald
Paul Keating says defending Taiwan is not in Australia’s interest
Anthony Galloway

Former prime minister Paul Keating created a media storm by saying that Taiwan is not a vital Australian interest and has urged the nation to avoid being drawn into any military engagement with China over the island.

Oct. 18 2021/AEI
Is China quitting the economic race?
Derek Scissors

What we can see from China’s third-quarter GDP numbers.

Nov. 8 2021/SSRN
China’s Changing Perspective on the WTO: From Aspiration, Assimilation to Alienation
Henry S. Gao

This paper fills the research gap by providing the first systemic review of this important yet ignored question, which in my view, would be the key to address the China challenge. The paper argues that the Chinese perspective on the WTO has changed from viewing it as the symbol for its aspiration to integrate into the world economy, to trying to assimilate the Chinese economic system with that of the market-based multilateral trading system, to increasing alienations with the core values of WTO in response to the attacks on its economic system.

Nov. 5 2021/Vice
China Wants People To Buy More Stuff. These Chinese Millennials Say ‘No More.’
Viola Zhou

We talked to members of China’s anti-consumerism community about why they are quitting shopping.

October 2021/National Bureau of Economic Research
The Economic Consequences of the Opium War
Wolfgang Keller & Carol H. Shiue

The development of China was not simply propelled by its own pre-1800 history, or by post-1978 reforms. The nearly 100 years of semi-colonization have shaped China’s economy today as one focused on coastal areas.

Nov. 3 2021/Conversation Six
Discussion
Chinese state Key laboratories and the role they play within China's innovation ecosystem

Channing Lee & Emily Weinsteing

The common narrative is that China steals IP and doesn't innovate. However, as Emily and I have found in some upcoming research on Chinese state key laboratories, this is no longer the case.

Recent Podcasts

EPISODE 21  |  72 mins

Post-election, Japan could regain its footing in the race for innovation
Richard Katz

In Episode 21 of the Hale Report, Richard Katz, a long time observer of Japan’s economy and politics, is now enthusiastic about the prospects for Japanese growth and innovation.

EPISODE 20  |  65 mins

Positive Energy: Is Geoengineering the Answer to Climate Change?
Albert Bressand

In Episode 20 of the Hale Report, energy economist and governance expert Albert Bressand discusses the consequences of abandoning carbon energy in favor of electrification.

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