Wednesday, 7 July 2021

Could the removal of restrictions prove economically counter-productive?


There is some doubt as to whether Einstein ever actually described compound interest as the most powerful force in the universe, but exponential growth, the underlying principle, is something that many people – including, it seems, many politicians – struggle to grasp. I remember Dr Phil Williams once doing a back-of-the-envelope calculation projecting forward the effects of a 7% annual growth of sales to arrive at the number of years it would take before the entire matter of the universe had to be converted into Mars bars. It was a very large number but it demonstrated the power of exponential growth (and, of course, the fact that, ultimately, there are limits to that growth).

On Monday, Boris Johnson told us to be prepared to see the number of new cases of Covid reaching as many as 50,000 per day by the 19th July. Given that there were already around 27,000 cases per day on Monday, and that the number is doubling roughly every 10 or 11 days, that looks, typically for Johnson, to be an optimistic assessment. Unless something changes, that number is likely to be exceeded several days before then.  Yesterday, the new English Health Minister said that the number may top 100,000 per day by an unspecified date sometime this summer. Perhaps he was just trying to avoid excessively underlining his boss’s message by being too honest, but that, too, looks like an optimistic scenario, even though it’s a number significantly higher than the peak seen during the second wave, of around 81,000 per day in late December. Again, unless something changes, current growth rates suggest it's about three weeks away. It is being widely reported today that the expectation is for around 2 million cases in the next few weeks, with around 10 million people supposed to be self-isolating. This, it seems, is now deliberate government policy. Encouraging people to go back to work by removing support for businesses by running down the furlough schemes and at the same time removing all those restrictions which have helped to control the spread of the virus is probably the most effective combination of policies anyone could devise to maximise the spread of the Delta variant and encourage the evolution of new variants. That too, it seems, is now the official policy of the English Government.

Telling people that they must take responsibility for their own safety rather than expecting the state to protect them through laws may sound good to the libertarians in the Tory Party, but the point is that mask-wearing, for instance, isn’t about self-protection, it’s about protecting others. Removing the requirement is like abolishing speed limits or drink-driving laws – the laws are there to prevent people becoming potential victims, not simply to restrict the liberty of perpetrators. In the circumstances, taking responsibility for our own safety means deciding how much we can depend on others taking actions to protect us, and many are likely to conclude that we simply can’t.

It’s being done in the name, allegedly, of reopening the economy. There is, however, at least a possibility that it will turn out to be a complete failure, even in those terms, since the effect may be to dampen spending rather than grow it. They seem to be assuming that everyone else will see the removal of restrictions in the same terms as they themselves do – as being about the restoration of freedom. For many in the population, it may turn out to be the complete opposite – the start of a new, voluntary, lockdown with no obvious end point or route out. People who have been cautiously starting to venture out, in the knowledge that other people around them who may be infectious are legally obliged to take the obvious precautions of wearing masks and keeping their distance, and that those actions have dramatically reduced the prevalence of the virus, may well decide that it’s no longer as safe as they thought. That would be an entirely rational response in a situation where people may well be infectious without knowing it, and where the number of people in that position in the population at large is increasing rapidly in accordance with what appear to be the new government targets. The chance of coming into close contact with an infectious person on public transport or in shops goes from having been very low just a few weeks ago to very high by the end of the month. If large numbers of people respond by taking more steps to avoid potentially dangerous social contact, then the impact on economic activity is likely to be negative rather than positive.

It hasn’t been easy for the UK Government to secure both one of the highest levels of deaths per head in Europe and the biggest economic hit, but it’s a record which they seem determined to maintain. The complete disregard for its citizens is may well be a good demonstration of what ‘Global Britain’ is all about, but it’s doubtful that many outside the UK will be as impressed as Johnson might wish to believe.

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