Hyperbolic much? At this point, the burden of proof surely now has to be on the optimists, who’ve been alternately barraging us with “iTs JuSt LiKe ThE fLu”, and/or “it’s not going to kill non-East Asians anyway” (not that CNN’s Sanjay Gupta will admit it).
But with epidemics, it’s usually a case of go big or go home. It’s not going home. As of the past couple of days, we can definitively state that containment has failed. The proof of this is Italy. Consider:
- Italy has only a moderate level of air traffic with China – approximately comparable to Russia and France, lower than Germany and the UK, fivefold lower than the US.
- Italy was the only country in Europe to ban all direct flights from China on January 31. (This appears to have actually no less hard a response than Russia’s ban on Chinese citizens on February 20, which however excluded transit and business visitors).
- Belying stereotypes, the Italian epidemiological response has been highly competent (if by unexacting global standards), with most or all people displaying flu-like symptoms apparently being tested.
Even so, well over 200 cases in Italy have sprouted up in a matter of days, with deaths starting to tick up (seven as of the time of writing), a dozen cities under quarantine, and with no end in sight.
Coupled with the cluster in Iran, this means that COVID-19 now also meets the definition of a pandemic, even if the WHO has chosen this moment to erase this word from its lexicon.
It beggars belief that there aren’t similar or bigger clusters all over Europe, North America, and much of the world even outside East Asia.
To which one might rejoinder, why haven’t they been detected yet? Well, recall how COVID-19 works. Most cases are asymptomatic; in cases where symptoms do appear, which can happen as much as 2 weeks after infection, they are easily confounded with the flu. From the earlier days, it has been estimated – and repeatedly confirmed – that COVID-19 has only a 10% detection rate (BTW, Davide Piffer estimates it at 18%). Meanwhile, carriers need not be symptomatic to transmit. At such early stages, you are only going to identify these clusters by intensive testing, which as I understand nobody apart from Italy and South Korea is really doing yet. One might make a comparison to a tsunami. Undetectable when it’s out in the deep ocean, unless you’re specifically looking for it… until it comes to shore and crashes down on local healthcare systems.
At the global level, short of some late stage miracle, the cat is out of the bag and every country or bloc will now largely have to fend for itself. The one positive point is that China’s radical quarantine measures – now encompassing 10% of the world’s population – appear to have worked… at least going by official figures (e.g. only 11 new cases outside of Hubei this past day seems too good to be true – there have been some other oddities). Another obvious question is whether this stall will hold once the quarantines are eased and people are allowed to start going back to work – as they eventually must, if China is to avoid a full-fledged depression.
Nonetheless, there are many places in the world – probably the great majority – that are less functional and competent than China. Certainly there are very few countries with the political wherewithal to put half of their population under varying types of travel restrictions and basically implode their own economies. There are going to have their own outbreaks, time lagged ~2 months relative to China (note that the first death in Wuhan didn’t take place until January 9), and will then start catapulting the disease back into areas where it had previously been checked – at least short of a total shutdown of globalization on the Best Korea model.
At this point, probably the most efficient thing that most countries can do – bearing in mind that mortality with ventilators, drugs, doctors, etc. seems to be ~1% versus 2-3% for people left to their own devices – is to try to draw out the infections for as long as possible to prevent hospital facilities from becoming overwhelmed and so maximize the number of people who can be treated. Robin Hanson has some even more “powerful” ideas on how to minimize mortality rates, but I doubt there are any governments powerful enough to “consider controlled infection.”
Official China says its growth rate will be 6% in Q1 2020. Who knew that sitting at home mining gold on World of Warcraft could be so economically productive as to counterbalance the effects of a 25% reduction in coal production and CO2 emissions, a ~70% reduction in air flights, and a 90%+ (sic!) reduction in automobile sales.
— Justin (@Trumpery45) February 15, 2020
Nonetheless, the absence of any corresponding commotion in the markets had started to become puzzling to me. But it appears that today the dam is finally breaking, with betting odds on a US recession jumping from 25% to 32% in just the 24 hours.
I think the odds are way worse. The global economy is already on unsteady footing – a manufacturing recession in the US, zero growth in Germany, outright -1.4% shrinkage in Japan during Q4. More generally, the American tech sector has long given off signals of being a bubble.
This is going to have some important consequences:
(1) Conventional wisdom has it that Bloomberg is much more competitive against Trump than Bernie. However, in a scenario in which COVID-19 creates a real crisis, this may no longer hold true – especially if it is handled badly. Wall or no wall, COVID-19 isn’t crawling up north through Mexico, whereas being able to see a doctor without getting slammed by massive bills is actually a good thing in an epidemic. With Trump proposing to cut 16% from the CDC’s budget for 2021 – released just a couple of weeks ago – this would not even be undeserved.
(2) In Italy, it may well be Salvini who gets a boost. He was calling for a China travel ban since early January.
(3) Geopolitically, this will turbocharge what Trump’s trade war initiated: The Great Bifurcation of the world economy between the “Blue Empire” and the Sinosphere. I’ll do this in a separate post.
(4) Global recession will also mean a collapse in oil prices. I don’t expect Russia to be particularly badly hit this time, since it has spent the 2014-19 period doing fiscal and monetary belt-tightening at the price of very low growth. On the upside, it now has the lowest breakeven oil price of any major oil-producing state. But Saudi Arabia might be worth watching out for.
Although comparisons to the flu are a very “smol brain” take – a virulence differential of well more than an order of magnitude is nothing to sneeze at – it’s still, in practice, almost irrelevant to young people’s mortality profiles. Even if it increases the risk of a 20 year old’s death in that year by 50%, that would still just basically be equivalent to having to live that year as a 20 year old in the 1970s.
The effects on boomers and older generations are going to be much worse, since COVID-19 affects them much worse. Still, even this will just be a one-time “shock”. If you look at historical charts of life expectancy, you will see that before the universalization of vaccines, antibiotics, etc. in the 20th century, life expectancy jumped wildly from year to year, spiking in tandem with the virulence of the bugs going around in that particular year (and sometimes with failed harvests). Since the late 19th century, at least in the developed world, these graphs have become smoothed out.
All manner of COVID-19’s were a mundane thing a century ago and earlier. Today, they are a freak occurrence on whose mitigation China and much of the world seems willing to sacrifice a significant proportion of their GDP. That sounds almost Pinkerian.