Mark Potter

No, this is not about the US President’s recent remake of Driving Miss Daisy because if it was the word ‘or’ would be inappropriate.

I am referring to the way in which many governments of the developed world are dealing with the pandemic. Any one who has spoken with me over the last few months will know that I believe the phrase “second wave’ is unhelpful and probably a mispreprestation of the facts.

It implies, I think, that the course of the pandemic is predictable based on what has been observed in the past with other viruses. That is possible, maybe even a reasonable way of preparing, but should not be an excuse for failing to observe what is actually happening and acting decisively.

Some facts

Here are what I think are the facts as we know them now and which are not being bluntly (honestly?) put in front of the public of many of he world’s most developed nations. Especially those where politicians raise a lot of money from vested interest groups on all sides of the political spectrum.

• The virus spreads virulently between people in enclosed spaces who are not widely separated. Like workplaces, nursing homes, police stations, party function rooms, packed baseball stadiums and I guess hermetically sealed presidential cars.

• Full lockdowns slow the virus spread to a very low level. These are psychologically difficult for many people and severely restrict normal life for part of the population.

• When the virus is spreading at a low level, contact tracing is easier and helps keep the lid on things.

• A relaxed attitude to containment is possible in rich countries with well resourced health services and an educated, socially responsible population, but at a cost of more deaths, especially of older people.

• At this stage the long term impact on those who have recovered from the virus is not well understood, nor is the transmission rate amongst children.

Economic consequences

Those are some of the established facts about the virus. Other facts that are pretty obvious relate to the economic consequences:

• Complete lockdowns will quite quickly (in a matter of months) wipe out whole sectors of the business community. A few businesses will benefit.

• Government money pumped out to keep businesses solvent is putting future generations into ‘hock’ by gigantic amounts.

• Government bail out money is going to sometimes be fraudulently used, will in many cases be only a sticking plaster and will eventually drain into the ‘pots’ of investment speculators.

What is an honest assessment?

A sensible person would conclude:

Governments must admit that there is no feasible balancing act in which the maximum number of lives are preserved and an economic shock is avoided.

There are really 2 options only:

1. No lockdowns (the Sweden option and apparently what is happening in some US states and maybe the default in large less developed countries in Asia). That will result in more deaths, especially of the elderly, but limited economic damage locally. In many countries, this may see extreme stress applied to health services and that may have unpredictable consequences in itself.
2. Full lockdowns and tight control of the population (the New Zealand and China examples are obvious ones). This will have economic effects that will be painful in the short term, but which richer countries may be able to tolerate in the hope of a much faster return to normal.

Any other approach is a fudge, a pretence that some sort of half baked lockdown, switched on and off, revised, dropped, localised and so on after a crisis has arisen will save the most lives and keep businesses open. Anything that is not option 2 is option 1 with a misguided attempt to fit some airbags and crash impact zones.

Those countries that opted for option 2 for just long enough to see their numbers improve and then relaxed have really just wasted all the advantages they built up and reverted to option 1 without telling anyone. During that time, the populations of those countries have become disillusioned and are less likely to do what they are asked.

OK, it’s only my point of view….

Maybe you disagree, or maybe you would say you know all that already.

My point would remain that the politicians in the Western world that I hear from via the (now broadcast and electronic) news media are not displaying leadership, are pretending that all will soon go away magically (especially Trump but also many others) and in the meantime policy making is shambolic, confused and ineffective, frequently reacting to events.

That is like crashing a car in the rain because all four tyres were bald and just replacing the airbags and driving off again.

This matters firstly because more people will get ill and die without any obvious gain. It is tough to suggest that there is any gain in more people dying, but wars have taught us that the process of human existence means that at times some people die because humanity is fighting for a civilised future. What adds to the pain is if they die because of totally incompetent leadership, rather than in the pursuit of the general good by the most effective means.

For us as investors, this matters a great deal as well.

The feeble, half-witted, misdirected and plain dishonest management of the pandemic response in countries accountable for a very large proportion of global economic activity will in due course feed through to a recession that will compare with the one between the Wars.

I started by saying this was not about the US President, but he features!

As then, the very rich will come through in pretty good shape, but I doubt if the rest of us will avoid some severe pain if we are not prepared.

Rant over!