We’re on the road to economic depression

The pandemic is threatening hardship unheard of since WWII. Everything hinges on getting things under control quickly

AFRIEND told me of a business meeting he was at recently where people sensibly followed the HSE guidelines on social distancing. It was a bit weird at first but they all managed to stay two metres apart and nobody shook hands at the end. However, as the meeting ended, they literally blew it. Someone produced a birthday cake for one of the attendees. Delighted, she blew out the candles, showering the cake with whatever viruses she may have had, before cheerfully distributing the slices.

Irish people just don’t get the concept of social distancing. You see it everywhere. We make a token effort, then cluster together when we meet up in the parks and promenades, now crowded with all the people off work to save them from contact with other potentially infected people!

Hopefully we are all a little less blasé after Covid-19 cases spiked this week and we heard some numbers in the news that still managed to shock despite all that has happened already.

A predicted 10,000 Covid-19 cases by the end of the month would grow to an utterly catastrophic 600,000 cases within four weeks if cases continue to go up by 30% a day.

If we can just limit that increase to 20% per day we would have 60,000 cases. That’s a hell of a lot better, but still way beyond the capacity of our health service to deal with.

Nobody should be blamed for infecting anyone else if they get the virus. But those infected at this stage could lead to thousands of infections further along the exponential line and several dozen deaths.

That’s how numbers work in pandemics.

If all that doesn’t make you keep your distance, then you’re not going to do it for the sake of the economy.

But here goes my tuppence worth on that score anyway.

In three decades as a financial journalist, I have never seen such shocking economic stats. Normally, economies expand in low single digits – or contract by less then 1% during bad times over the course of a year. In the first three months of this year, the EU economy is set to shrink by 15% – and then plunge another 22% by June. China’s output is set to fall 31% in three months. The declines would ‘substantially exceed anything previously recorded going back at least to World War II,’ said Deutsche Bank’s economists, while admitting that they were hugely uncertain.

Note that they said ‘at least’ as far back as WWII. So they are not quite sure that we’re not heading into worse economic territory than the war that devastated this continent.

‘These are truly unprecedented events with no adequate historical example with which to precisely anchor our forecast,’ they note. That’s the first time I have seen economists, let alone German ones, use hyperbole or admit any form of uncertainty.

The situation justifies it. In Ireland,

we are on the brink of going from the lowest unemployment rate in 13 years to the highest, maybe ever. And all in the space of weeks.

At the end of 2019, we had just 116,900 people signing on, or 4.7% of the labour force. We created hundreds of thousands of hard-won extra jobs in the years of austerity since the financial crisis.

All that has been unravelled in weeks – and worse is to come.

The Irish Congress of Trade

Unions estimates that 140,000 people were laid off recently and another 200,000 job losses will follow soon.

On that basis, unemployment would jump above 450,000.

In 1992, when unemployment was over 300,000, the Bishop of Cork was moved to speak out about his ‘anger’ on national television.

Based on ICTU’s figures, the jobless rate could reach 18%, an alltime high. And the 17km tailbacks at EU borders are bound to impact our supplies.

And while the Government might be able to borrow the €10bn needed to cover the costs of this crisis over a few months, it is uncertain what will happen if it extends into next year and beyond?

Everything hinges on getting this virus under control within a short few months.

China managed to do it. There were no cases of domestic transmission there on Wednesday for the first time since the crisis began.

They are already going back to work. Its economy is set to rebound by 34% in the second quarter, more than recovering all its losses.

But people in Wuhan didn’t blow out birthday candles at business meetings or cluster close together for group chats in the park during a pandemic

that is killing around 500 people a day in Italy alone.

China built a hospital in a week and welded infected people into their homes.

They literally dragged people off to quarantine and had squads on the streets to forcibly make people keep their distance.

That’s what was needed to beat a virus that remains infectious for hours in the air we breathe, for a day on cardboard surfaces and for several days on steel and plastic, The New England Journal of Medicine has just revealed.

Also this week, the Dáil approved the 2020 version of the Health Act, one like no other since tuberculosis ravaged our people in the 1940s.

Health Minister Simon Harris can now ban events, detain people and enforce regional or national ‘lockdowns’, as we saw in Italy, making everyone in infected areas remain indoors for weeks.

Initially, we all thought these powers would never actually be used. They were far too draconian and were there ‘just in case’.

Now, it seems increasingly inevitable that they will have to be used.

The alternative doesn’t even bear thinking about.