Holidays season: Take the 30.000ft view

Part 1 - Reflection (Part 2 - Vision will follow for New Year’s)

“20/20” is the American term for perfect vision. It cannot have been meant for the year 2020: Corona crisis, political divison in the USA, new stock market highs. There has been much commentary how this all fits together. We endeavor to go a different route by attempting to rise above all the recent events.

A so-called “30,000 foot view” has been misused in many consultants’ how-to manuals and a Google search will list it under the 25 most annoying business phrases. In reality, it is a useful exercise to undertake occasionally but difficult to execute successfully. You cannot just leave your day-to-day routine, go to a corporate “offsite” and expect to gain great new insights. The image of a mountaineer is much more accurate: establishing base camp, planning a route, hitting new heights in stages, before finally reaching the summit. This year my journey to the 30,000 foot view has been unique, both from my personal situation (establishing a new form of independence) and from the world in general due to the health crisis. What do I see from the lofty heights?

First, the health crisis: At ground level all you see are alarming Corona infection numbers, full hospitals, and a rising death toll for the covid disease. At 30,000 ft you do see different seasonal and geographical patterns from the past, but there is not much change to humans overall. Mortality statistics give no reason to panic. Weekly EU data (euromomo.eu) show two strong spikes, but excessive mortality is limited to a few countries (Belgium, Italy, Spain, UK) and over 90% coming from the cohort of 65+ years old. German weekly data from our ever reliable Statistisches Bundesamt (destatis.de) show no excess mortality. In addition, the meta study of the WHO on the first Covid wave published an average mortality rate for the Corona virus of 0.23% (range of studies from 0.1% to 0.5%).

If you would be alien landing on planet earth, you may find it warmer than expected, but you would not understand all the commotion around covid. Perhaps revealing are some quotes from our public television ARD: “Patients are being delivered and we don’t know where to put them” “They are lying in the hallways” “Ambulances are being turned away” “It is so bad that all operations had to be cancelled” “Our crematorium can no longer handle all the coffins”. All of these were reported in Feb/Mar 2018 at the height of the then bad flu season. Media panic is nothing new, but nowadays is amplified through the billions contributing to social media networks. What is different this time, is the reaction of policymakers.

Second, the political reaction: Did policymakers react appropriately? It would seem logical to react as soon as possible in a pandemic. The first country to react was not China, but Taiwan. They issued a catalogue of over 100 measures on December 31, 2019. Yes, the date is correct. The real problem is that we do not know for certain whether a virus will turn into a pandemic. We want to avoid “the boy that cried wolf” phenomenon. Therefore, a month later, Europe and the US were largely still in denial. The German health minister spoke of a localized Chinese health crisis on January 30. The US banned flights from China on January 31. Barely four weeks later, a competition for the toughest lockdowns began. Oxford University created an index based on the stringency of government anti-corona measures in the EU and compared it to the number of “corona” deaths. Their latest data show the following relationship:

Our regression based on data from Blavatnik School of Government, Oxford University, UK

The case that more stringent measures led to fewer death (a negatively sloping regression line) cannot be made. Surprisingly, there is a slight positive correlation. We have not yet seen a similar study on a global scale. It would be interesting to see why a number of large Asian countries were more successful and whether New Zealand can be emulated.

Third, the economic crisis: In contrast to diversely dealing with the health issue, governments around the world acted more in concert on economic “rescue” packages. This in itself is strange, shouldn’t it be the other way around? A virus does not stop at borders, but economies differ greatly across borders.

The initial measures of distributing money to laid-off workers and suffering companies seem to have worked if you look at where stock markets stand. While some companies are likely to benefit from public investment into infrastructure, the larger portion of the stimuli packages goes towards state consumption in the form of dole outs. This is not just unsustainable, but most often has negative consequences such as crowding out effects or rewarding poorly managed over well run companies. Whatever happened to the concept of saving for a rainy day? Just like malignant cells in a human body, failed companies need to go bankrupt and then be restructured or closed down. The decade long ZIRP (zero-interst-rate-policy) has already led to a zombification of failed corporations, a very unhealthy development for an economy.

In that regard, the 30k-foot-view reveals that this year is actually not so different from the already established trend towards more interventionism. History has shown that societies prosper when peace endures and a clear legal framework including an independent judiciary is well established. A soild frame should give a piece of art the best setting possible. What we see in modern society today is an increasingly large and convoluted frame which not only distracts from the picture itself, but is becoming the picture.

The core argument for interventionist measures are the failure of markets. Of course, the fear of bankruptcy, job loss and not knowing how to feed your family is rational. However, to say markets don’t work would assume the sum of individual decisions is suboptimal, while some form of smart oligarchy is a better allocator of resources. We already live in a corporatistic world, an unholy alliance of big corporate lobby groups and government. There is nothing wrong with big corporations as many have contributed to globalization and its tremendous wealth creation since the middle of the 20th century. But this sustained period of prosperity has led to an increasing number of organizations (big corporations, governments and supranational bodies) wanting to protect their status quo at all costs. “All costs” can for instance mean the exploding central banks’ balance sheets leading to the devaluation of money and hence negative wealth effects for future generations.

To sum up, we absolutely believe that there is a role for strong government to help a society prosper. Strong does not mean big. Strong means standing on the three independent pillars of democracy with transparency and checks and balances that work. This division of power should also include what is often called the 4th pillar, the media. The traditional media and new media bloggers claiming to accomplish serious journalism should be critical and objective. They may also offer opinions, but these should be clearly marked as editorials. This has a long and successful tradition in prospering democracies. If subjectivity rules, or journalists are cheerleading, it is called propaganda. Any measures to curtail free speech should be met with a very cautious eye, such as the recent initiatives on so called “hate speech”. People tend to forget that we already have laws in place (libel, slander) that work.

Even with this negative view on interventionism and media, I am actually quite optimistic that our society will emerge from this phase stronger, more diverse and more decentralized with more power in the hands of the individual. Our brave new world (but not in an Aldous Huxley way) will be outlined in Part 2 – Vision.

The HanseaticHunter

#interventionism #pandemic #2020 #reflection