Finance: Research, Policy and Anecdotes

COVID0-19 response - failing governments

In a survey, published  in October 2019, the US and the UK were rated as the two countries best prepared for a global pandemic; as it is well known now, these two countries now head a different ranking – that of total excess deaths during the pandemic so far. Why is this?  Is it populism?  Structural reasons? And how can a recent survey go so wrong?

 

Let’s first take the US – yes, it is certain that political leadership plays a role and that Hillary Clinton, Bernie Sanders, Marco Rubio, Jeff Bush, Mitt Romney or actually any functioning adult would have been better than the current president, but beyond the political leadership (well, the lack thereof), this pandemic has shown the failure of the federal government in the US. Starved of funding over the past 20 years, ridiculed and insulted by one of the two parties over the past 40 years and lacking a consensus that public health should be a common good, not a club good, the federal government is not up to the job. There is a lot more to be said about the current situation in the US (which has been hit by a combination of 1918, 1929 and 1968 shocks), but I will leave it for another day.

 

Let’s now take the UK (which is personal for me as I am currently living here). Being an island, the country had the advantage of being exposed several weeks later to the virus than other countries. The reaction: “well, we are so much better than everyone else, especially than Italians, so let’s go and watch horse races in Cheltenham.” One might forgive the government for changing their advice and policies as more evidence became available, but: too late in securing PPE, too late in quarantining travellers from abroad (they might implement it next week, when it is all but useless), too late in starting to test, too late in securing enough ventilators, with the consequence of sending older people from hospitals back to care home, where they were left to transmit the virus to others and die – how much more disgraceful can a democratically elected government become – well, too late in everything! But as the Prime Minister declared yesterday: he is proud of his record! And when the data contradict the government’s assertion, they are being either not published (such as testing data over the past days) or they are being manipulated (such as counting mailed test kits as undertaken tests). I am sure there is still a receptive audience for Johnson’s nationalist idiotic bluster, but in the not too far future, there will be a reckoning for this failure.  And I am not even mentioning the threat of yet another Brexit no-deal cliff edge.

 

There is one more thing I have noticed in the UK over the past years: politicians love slogans. From “take back control” over “Brexit means Brexit” and “get Brexit done” to “following scientific advice”, British politicians love hiding behind slogans. It shows how empty of quality the political class in this country has become. Having a government minister on the radio or TV often turns into PR disasters as their lack of competence shows when they are forced to go beyond their carefully prepared notes and when interviewers question their silly slogans. Changing ministerial briefs every few months does not help either. But it is clear that something is deeply broken in the governmental system of the UK. Brexit is damaging but not necessarily deadly; bungling the COVID-19 response kills people!  And their families will note!

 

This brings me to a broader point. The legal origin theory is often interpreted as implying that everything is better in Common Law (such as US and UK) than in Civil Law countries (and yes, I have several papers showing that legal origin can explain some variation between countries in financial development). The effectiveness of government might certainly be an important exception to that! Having spent my adult life in two Common Law (US and UK) and two Civil Law countries (Germany and the Netherlands), my own personal and professional (as economist and academic) experience with government services has been much better in Continental Europe than in the Anglo-American world, but then again, the plural of anecdotes (of which I have plenty) is not data. I think this crisis has shown more than any other evidence that (controlling for the level of GDP per capita), government quality is certainly not higher in the UK or US than most (Civil Law) countries in Continental Europe. However, this also means that we have to become much more cautious with institutional indicators based on expert surveys, such as the one I quote at the beginning.