Just in case any of us needed reminding, experts very rarely agree amongst themselves and there is usually no ‘agreed science’. As we teeter on the edge of another shutdown/circuit breaker/kick in the teeth, scientists are busily squabbling amongst themselves about what to do next.
On one side we have the Great Barrington lobby who argue for herd immunity and Focused Protection. You can see an excellent video primer here at Unherd – https://unherd.com/2020/10/covid-experts-there-is-another-way/
This group thinks that lockdowns will be counter productive and that we need to slowly but steadily build herd immunity alongside other sensible public health measures.
Ranged against them is another bunch of scientists, usually though not always of a more left wing variety, who argue for zero covid. The Indie Sage group have an excellent summary here – https://www.independentsage.org/independent-sage-on-achieving-a-zero-covid-uk-i-e-the-elimination-of-the-virus-from-the-uk/. Their moniker’s use of zero is slightly questionable as many of the most articulate exponents worry that getting to zero cases is incredibly difficult but that we need to build a suite of policy tools that aim to get as close as possible. Core to this argument is that we might need to consider border closures and a massive programme of testing and proper and thorough tracking and tracing.
On many things both schools agree.
Testing good, Track and tracing good.
Public health measures around social distancing good. The debate tends to settle around herd immunity and the ‘trade off’ between economics and public health, although more than a few economists debate whether there really is a trade-off. Experts like Simon Wren Lewis at Oxford argue that until we have squeezed covid rates to as low as possible, consumer spending won’t really recover.
There is though a worrying problem with these diverging views (on herd immunity) , and their converging thoughts on policy (testing and tracking).
It all requires rapid action state capacity. The latter term – state capacity – is a term used by the likes of Tyler Cowen, a US economist and libertarian, to describe the ability of states to deliver on their promises.
The Zero covid debate rightly point to Asian states – South Korea, Vietnam and Taiwan – and say “hey they got testing right, they got tracing right and their Covid levels are extremely low and their economy is rebounding fast”. That is an incredibly strong argument and one the lockdown suspicious libertarian right needs to take seriously. There is no doubt in my mind that if we had a really robust, agile public health system which real teeth – proper, draconian quarantining – we could get on top of this pandemic.
BUT we have a problem, State capacity. It is increasingly obvious to this observer that the UK symbolises a gaping hole in state capacity. Compared to many European states our testing capacity is actually very high although our track and trace system has been problematic, to put it charitably. Yet we are not even remotely near the levels required.
We need to test every care home, every hospital, every school, every university, every arrival at the airport on a weekly basis. That means millions of tests a day not hundreds of thousands. We also need to combine that with track and test staff – many tens of thousands more – who hit 95% efficiency levels.
If we got both of these lined up we could make Zero Covid work.
Honesty time – do you really think the UK government can achieve this within the next six months ? Are we agile enough ? Do we have the proper public and local authority sector leadership in place ? Are local authorities properly resourced to operate the tracking at local level? My answer is no to all of them. But even if a bottomless pit of money was found I have real doubts about truly making this work, especially at the level of people and skills.
Many of the Asian countries have had years to build up state capacity in public health following various spill overs from China. None of their expertise was acquired over night and I think we fool ourselves into thinking this can be switched on in a few months. Our state, and most other states, simply don’t have the capacity. Germany stands as a good example. It has an excellent public health system and it has done a great job but infections are rising across the board, and the country never ever remotely got near zero covid deaths. There’s also evidence that even Germany is not testing remotely near enough. So, if Germany can’t make it work, what hope is there for the rest of us?
Equally the Barrington argument though enticing has big flaws in it, not least from a) a humanitarian perspective and b) whether it will actually provide the reassurance to kick start economic growth. I also have my real doubts about the herd immunity levels required to be effective. Emotionally I find myself drawn to this argument but morally and rationally I have my real doubts.
So, where does this leave us? The problem with another local down or circuit breaker is that its proponents say it gives us time to get better prepared. In a few weeks. Make what you will of that argument but given my suspicions earlier you can sense that I don’t think that will work. Lock downs simply kick the can down the road, forcing us revisit our unpalatable policy options a few months later.
This leaves us with what I think is the messy reality. We try and increase testing capacity drastically and we make our track and testing system work a lot better. But we should be realistic that the quantum of growth in public health provision will not be remotely enough. Also, from an investor point of view we have to ditch the idea that even if a vaccine emerges Q1 next year, we’ll all be in the clear by the summer. Not going to happen!
Which means there is a good chance we’ll still be stuck Groundhog Day like where we are now this time next year but with prospects for rapid improvement shortly thereafter. It is worth repeating – lockdown simply pushes the ‘endpoint’ (a poor word to describe a slightly more optimistic situation) further into 2021.
But we also simply cannot run the risk of hundreds of thousands of extra people dying. We need to keep pressurising all governments to pull out the stops on frequent mass testing. It needs to be delivered – bluster or not – within a few months at maximum. If centralised public health systems can’t deliver it let loose the private sector. Throw everything at it, but do not spend all your political capital arguing with local governments. This also means that we don’t collectively fall for cheap policy gimmicks and think that there is an easy answer. There isn’t – we need hard graft behind the scenes (the business of state capacity) and, as my column last week suggested, much better sharing of information about risks so that citizens can make their own minds up about their daily activities.
Stepping back from this messy morass investors need to be ditch the pandemic recovery story for the next six to nine months and remain focused on a geographic diversification strategy. Start tracking the countries and regions you think will provide better state capacity to achieve the policy steps required. My sense is that markets will increasingly start to rate local securities in different geographies on the basis of that state capacity argument.