Our economy is suffering more than most

We have overstated the health risks but not given sufficient attention to the economic effects of the pandemic, writes Dan O’Brien

LITIGATION, and the threat thereof, made news last week. In the middle of a pandemic and economic collapse, news bulletins led with reports of teachers’ fears they would be sued by students who might be unhappy with their grades. In no other country is there a national discussion about school children lawyering up over an emergency response to exam cancellation.

Suing people and organisations which cause you harm is an important right in free society. Being protected from vexatious claims is also important. Balancing the two is not easy.

Ireland balances the two badly. All available evidence shows we are an extremely litigious country. Nothing illustrates the long history in Ireland of excessive litigation and compensation culture like the Army deafness scandal in the 1990s and 2000s. In effect, anyone in the Defence Forces at the time, or who had served in the past, got a payout if they sought it.

No other country has ever had mass compensation for its service personnel for the firing of guns. Even the US, a famously litigious country, has never had such claims — its Feres Doctrine forbids military personnel suing Uncle Sam, regardless of whether negligence is involved. Americans who sign up and are paid to fight and die to protect their fellow citizens also sign away their right to seek compensation from those same citizens if they are harmed in the line of duty. That is how it should be.

In Ireland, there is a prevalent attitude that somebody else should pick up the tab when risks materialise. It underpins our compensation culture. It is increasingly evident in our wider response to the pandemic.

Politicians and assorted populists are saying ever more vocally that ‘ordinary people’ shouldn’t have to pay for the pandemic. Somebody else can pay.

Let’s get real about what has happened as a result of the virus. Ultimately, people generating wealth in the private sector pay for everything. Unsubsidised private sector employment has more than halved over the past two months. This makes the last crash look like a mere blip.

There are now fewer than a million people generating the wealth which allows us all to have the quality of life we are accustomed to. This is utterly, completely and totally unsustainable for more than a few months.

The balance of risks we now face is like nothing society has faced in living memory. There are no easy answers. But it increasingly appears as if the Government response, and society more generally, have not given sufficient attention to the economic effects of the pandemic, while we have overstated the health risks.

Ireland now has the strictest lockdown measures among peer high-income countries anywhere in the world, according to a Covid-19 Government Response Tracker compiled by Oxford University. Apple’s mobile phone data shows Irish people’s mobility has fallen further than almost any other country bar Italy and Spain. According to research by Central Bank economist Reamonn Lydon and others, the decline in postings of new jobs in Ireland since the pandemic has been one of the most extreme among our peers.

This amounts to tentative evidence that, despite its position of strength just two months ago, the Irish economy is faring worse than peers. Given the structure of the Irish economy, with its big pharmaceutical, technology and food sectors, it should be faring better than most.

From a health perspective, there is also no reason to think that Covid-19 has hit us harder than others, and should thus be slowing economic activity by more than others.

By no measure of confirmed Covid deaths or wider excess mortality estimates has Ireland been particularly badly affected. There are no indications that the disease is unusually prevalent here. The country has a low population density, which appears to be a factor in slowing the spread of the virus. We also have the smallest share of people over 65 years of age in Europe.

If measures to slow the rate of infection increasingly look like blunt instruments that are causing massive collateral damage to livelihoods, fears about the virus itself also look exaggerated.

The health risks from the virus for older people and those with underlying illness are grave, as data from across the world shows consistently. That is well known. What is less well known is how low the deaths and serious illness have been for younger people.

As of last Friday, not a single young person under the age of 15 had died in the Republic. Only two children with the disease have ended up in intensive care. Among 15-45-year-olds, 17 deaths have been recorded and 51 people in that age bracket have needed ICU treatment.

Let’s put these numbers into some sort of perspective. If 5pc of the under-45 population has had the virus, it would amount to one person in every 9,000 dying. This is not significantly different from one’s lifetime chance of dying on the roads.

If the numbers infected are smaller, then the deadliness of the virus is greater. If the numbers infected are greater, then the risk is lower.

It is long past time that the Government sought risk estimates from medical experts. Just as these experts can make informed estimates of the R value — the rate at which the virus is spreading — they can do the same for risks to different cohorts of serious illness and death.

Such estimates should be central in informing decisions around the easing of lockdown, which is slower than peer countries for reasons which are unclear. Such estimates are also needed so people and families can make their own informed decisions about the risks they take.

More grown-up risk assessments from political leaders are urgently needed. Plainer talk on the economic pain to come is also needed because if people have generally overstated the risks to their lives from coronavirus, they are underestimating the risks to the livelihoods and incomes.

A recent CSO survey found that 95pc of people who are ‘newly non-employed’ expect to return to their jobs. Unfortunately, it is by now extremely unlikely that only 5pc of jobs will be permanently destroyed as a result of the pandemic.

Even if all restrictions were lifted tomorrow, voluntary behavioural changes mean demand for many employment-intensive services will remain much reduced.

*****

May 2020 has another week to run, but it is already guaranteed to be a milestone month in European affairs.

In a ruling earlier this month, Germany’s constitutional court challenged both the entire EU legal order and the European Central Bank’s use of money printing as a policy tool (the latter is now staving off economic catastrophe in many parts of the continent).

It is no exaggeration to say that the ruling has created a fullblown constitutional crisis for the EU.

Last Monday, the two most powerful countries in the bloc, Germany and France, announced their support for the most radical change in what the EU does in decades.

The proposal would give what is already Europe’s de facto federal government, the European Commission, the right to borrow money as national governments do.

The proposal, if accepted by the other 25 members, and the German court ruling, will have profound and multiple implications for all its members.

‘More grown-up risk assessments from political leaders are urgently needed’