The world simply can’t afford China-style coronavirus lockdowns

Mass containment has become the narrative of the coronavirus pandemic, but is it really the answer? From an economic perspective, it makes more sense to actively protect vulnerable people, and get everyone else back to work

Richard Harris

Published: 10:00pm, 26 Mar 2020

Why you can trust SCMP

My otherwise healthy 86-year-old mother was admitted to hospital in early 2015 with seasonal flu, and never returned home. Each year, seasonal flu viruses send 290,000 to 650,000 people, most of them elderly, to meet their Maker. Every year, nearly 1.25 million people die in traffic accidents. These are odds we happily accept.

The coronavirus pandemic has demonstrated the extraordinary importance of framing a narrative around a situation. At another time, with another frame of reference, governments might have been able to think things through and handle things differently.

In China, the first Covid-19 case can be traced back to November last year, when a 55-year-old from Hubei province contracted the disease. The cover-up of the ensuing outbreak in Wuhan, the capital of Hubei, would have begun soon afterwards. In January, when the secret got too big to hide from Beijing, the central government reacted with fear, anger and determination – and framed a draconian response.

Immediate mass containment became the narrative of the coronavirus outbreak; it was a communist solution with Chinese characteristics. China shut the stable door, with four provinces and about 50 cities going into some form of lockdown around the Lunar New Year holiday, and two months on, some restrictions still remain. (Nevertheless, the initial delays gave the virus plenty of time to quietly bolt and silently infect the global economy.)

China’s lockdowns were rigorously enforced by the strong state security apparatus, dissent was shut down, communication was censored, public panic was allayed, and only official statistics were published.

Within China, the measures have been a qualified success, choking the epidemic and allowing people to carefully return to work. There are only around 4,000 active cases in the country now, though it is reported that testing has been restricted.

If Europeans and Americans smirked at the Chinese government’s response to the novel coronavirus, well, they’re not laughing now. As the global pandemic widens, panicky politicians and nervous citizens in Europe and America have come round to the Chinese containment narrative.

Why I’d rather be in Hong Kong than anywhere else right now

However, in the West, it is much harder to suspend travel and sports, close bars and restaurants, and to make people adopt a new hygiene protocol – unlike in Hong Kong.

The costs of the pandemic are staggering. Knee-jerk financial packages from governments in the United States, Britain, China and so on are adding up to trillions. The MSCI World Index has lost around US$15 trillion in value, from the peak on February 12 to the latest trough. US corporate losses have so far been estimated at US$4 trillion. And I used to think a hundred million was a lot.

Some analysts expect the US economy to shrink by US$2 trillion next quarter – that’s about 70 per cent of the British economy. At this rate, total global losses as a result of the containment narrative could top US$25 trillion, around three-quarters of the current value of the MSCI World Index. The global economy can’t pay this price.

Traditional principles and values have been sacrificed on the altar of the containment strategy. Highly indebted private companies (in proudly capitalist economies) are being subsidised in a form of nationalisation, with all fears of “moral hazard” cast aside. It is accepted that costs, budgets and privacy can be ignored.

Is it even legal to get people off the streets? Policies are hastily formed and confused. The British government will pay 80 per cent of the wages of otherwise sacked employees; why not 20 per cent, or 50 per cent? Where will the money come from? No one knows and no one cares.

Should coronavirus prompt a global ban on short selling?

Every life is precious – but is it priceless? Stanford economists calculate that the average value of a year of quality human life is about US$129,000. Boeing (itself now close to bankruptcy) has put aside US$144,500 each for the families of the casualties in the two 737 MAX crashes. In the 1980s, traffic regulators in the US effectively valued a human life at about US$1.5 million; now, the US Office of Management and Budget puts the value between US$7 million and US$9 million.

In Italy, 99 per cent of coronavirus fatalities were elderly or already in poor health. Realistically, the value of a year of their lives would be less than that of, say, poorly equipped frontline medical workers risking their health, or newly minted Harvard MBAs. According to the US Centres for Disease Control and Prevention, the mortality rate is 4.3 per cent for people aged 75 to 84, and 10.4 per cent for those aged 85 and above – by the same token, around 90 per cent of them survive.

The only sound argument for containment is the lack of hospital beds. But the costs have mushroomed to massively outweigh the benefits. The non-containment odds are worth playing.

The containment policy is the perceived wisdom – and once a particular narrative takes hold, any counter-narrative is shouted down. It is foolish, heretical and unpatriotic to suggest another course of action, especially when politicians have become invested in one.

The British government went from a “herd immunity” policy to a herd mentality on the basis of one virus report. Yet, if policymakers are not to destroy a generation of global wealth, they will unquestionably have to adapt the containment narrative from China that has shaped their responses.

China-US tit-for-tat virus claims cast shadow over G20 crisis talks

The strategy should move from society-wide lockdowns to acceptance and management of infections. This would mean actively protecting and isolating vulnerable people, while maintaining hygiene but getting everyone else back to work. This would focus resources on the neediest and allow the rest of the population to (painfully) develop herd immunity through contagion or vaccination.

The current containment narrative is causing a global economic disaster and must change. That will be the time to buy the stock market. This is a wake-up call; the next epidemic might be truly deadly, and we need a new narrative about how to prevent epidemics and treat viruses. Such research is likely to benefit my generation, though it will be too late for my mother.

Richard Harris is chief executive of Port Shelter Investment and is a veteran investment manager, banker, writer and broadcaster, and financial expert witness

Purchase the China AI Report 2020 brought to you by SCMP Research and enjoy a 20% discount (original price US$400). This 60-page all new intelligence report gives you first-hand insights and analysis into the latest industry developments and intelligence about China AI. Get exclusive access to our webinars for continuous learning, and interact with China AI executives in live Q&A. Offer valid until 31 March 2020.

This article appeared in the South China Morning Post print edition as: The cost of containment

Post