By Observer Research Foundation– Eurasiareview
By Manoj Joshi
As of 10th March 2020, the Covid-19 virus has spread to some 114 countries and the total number of cases around the world are 118,622 with 4,284 deaths. It had also spread to nearly 40 states in the US where there are more than 1,000 cases with 30 deaths. On Sunday, in NBC’s Meet the Press programme, Anthony Fauci, the director of the National Institute of Allergy and Infectious Diseases said that the news from the US front was not good. “We are seeing community spread” he said referring to a situation where the virus has begun to circulate in uninfected communities, outside of areas of quarantine or where there had been known contact with other infected persons.
A good way of looking at the evolving scenario is to extrapolate from the experience of China. According to a WHO analysis based on a ground study of the 16-24 February 2020 period.
“China’s bold approach to contain the rapid spread of this new respiratory pathogen has changed the course of a rapidly escalating and deadly epidemic. In the face of a previously unknown virus, China has rolled out perhaps the most ambitious, agile and aggressive disease containment effort in history.” The WHO report went on to add that “Much of the global community is not yet ready, in mindset and materially, to implement the measures that have been employed to contain COVID-19 in China. These are the only measures that are currently proven to interrupt or minimize transmission chains in humans.”
The Trump Administration was not inclined to treat the Covid 19 infection seriously to begin with. Two weeks into the announced outbreak, Trump said that he expected the crisis to go away in April, claiming that “The heat, generally speaking, kills this kind of crisis.” Trump accused those who were raising the alarm of trying to undermine his Presidency. In turn the Democrats accused the President of failing to respond adequately to the threat and politicising it. As a result of the updates provided by the Centres for Disease Control (CDC), and the crash of the stock market, President Trump made Vice President Pence the point man for all information flow from the government. The CDC thereafter had to seek the approval of the Vice President before releasing any news. By the end of February it was already clear, with the discovery in the US of a patient who had no contact with the existing outbreak, that the disease had reached the status of what is known as “community spread.”
On March 6, the President signed a $ 8.3 billion emergency funding bill to combat the Covid 19 outbreak. Of this $ 3 billion was for developing treatments, including $ 300 million for the purchase of medicines. $ 2.2 billion was for public health measures to help prevent its spread and $ 1 billion for assisting the control of the virus overseas. Originally, when Senate minority leader Chuck Schumer wanted $ 8.5 billion, the Administration had wanted just $ 2.5 billion.
Though the US is the highest ranked country in the latest Global Health Security Index, and so should have been well prepared for the virus, missteps by the Administration, as well as malfunctioning Covid 19 tests led to delayed responses. Perhaps the biggest failure of the US was in testing. By the end of the first week of March it became clear that the US has simply not been able to expand its testing, it is more than likely that the virus has now spread far and wide through community spread. Since most cases of the disease are mild, it is more than likely to have spread undetected since there had been a major gap in testing.
From the WHO advisory it was clear that the first option to tackle Covid 19 was to stamp out the infection immediately. Trace the contacts of the infected people, isolate them and halt transmission. Since that stage had passed by the end of February, the US needed to take step two which is the draconian restrictions imposed by China which have proved to be successful. Singapore which was one of the first to report a Covid 19 case on January 23 and began a regime of aggressive testing from early February onward and found some cases who had no contact with other cases. And as a result Singapore’s total on Sunday was only 150 cases. South Korea now has the largest number of cases outside China, but this is a consequence of the high level of tests, as many as 1,64,740 by March 6.
But by this date according to The Atlantic magazine, the US had tested just about 1,895 people, of which 10 per cent were positive. This was despite promises by the Trump Administration that they would carry out more than a million tests in the week of March 2. “The figures we gathered suggest that the American response to the coronavirus and the disease it causes, Covid-19, has been shockingly sluggish.” The magazine also found that the capacity to deal with the virus varied from state to state. The initial fumbles on testing, the lack of political will, and the fragmented health system can lead to a very fast spread of the virus across the US. Medical and emergency resources of the US are concentrated in urban areas, leaving the poorer rural areas and communities more vulnerable. There are also other systemic problems. 28 million people lack health insurance in the US and would have to pay for their own treatment. People with milder symptoms will be unwilling to isolate themselves because 25 per cent of American workers do not have paid sick leave. But the bigger worry and source of danger could be the fact that the US has a number of undocumented immigrants who fear deportation and will be inclined to stay away from hospitals even after they were infected.
Though the US has excellent healthcare, it is not available for everyone. Another problem is according to the WHO survey cited above, that 5% of people diagnosed with Covid 19 require artificial respiration. Another 15% need to breathe in highly concentrated oxygen and not just for a few days. The duration from the beginning of the disease until recovery is 3 to 6 weeks on average for these severe and critical patients (compared to only 2 weeks for the mildly ill). The US has around 1 million hospital beds of which most are utilised in normal times. But, an intensified spread of Covid-19 could put up a demand for millions of more beds.
On Monday, US stock markets plunged and halted the trading for a while. We all know that the spread of Covid 19 in China has created a huge economic hole within the country where economic activity came to a standstill for more than a month and has yet to recover. And this had a wider impact as oil prices crashed, supply chains were disrupted, air travel and tourism were severely affected in East Asia. Indeed, energy companies are at serious risk for mass bond defaults.
But the effect of an uncontrolled spread of the virus in the US will have even more drastic consequences for the world. US imports are important enough for India, but they are crucial for China, Japan or the EU and its neighbours Canada and Mexico. We have already seen the stock market plunge in the US since the last week of February, this has affected financial markets across the world.
Where the outbreak in China affected the global supply chains, the impact of the collapse of US demand could be even more severe. As the New York Times pointed out, the average American takes three flights a year as against half-a-flight for an average Chinese. US has 11.5 per cent passengers doing cruises a year, as compared to 2.3 in China. 60 million Americans spend $ 19 billion a year on gyms, much more than the $ 6 billion spent by 6.6 million in China. Sporting events like baseball, basketball and football are huge businesses in the US. Americans staying home and “social distancing” themselves from each other could have major economic consequences.
Companies like Google, IM Deloitte and even the Securities and Exchanges Commission have asked their employees to work remotely. The music festival Coachella has been postponed and many international and domestic conferences are being postponed or cancelled. Universities like Harvard, MIT, Stanford, Columbia have cancelled in-person classes. Perhaps the biggest hits have been faced by the tourism and travel operators who have seen major declines in hotels and airline bookings.
On March 4 the OECD had warned that Covid19 presented the biggest danger to the global economy since the 2008 financial crisis. The worst case scenario had been that, growth could be as low as 1.5 per cent as against 2.9 per cent in 2019. At the time, the economists believed that the measures to shore up demand and provide financial aid to affected households and businesses would do the trick. But an uncontrolled spread across the US could call off all the bets and the world could actually go into negative growth. All this happening in the coming months could have a dramatic impact in an election year. This, is of course, where our story started, with President Trump worried about the consequences of Covid 19 for his re-election.
Observer Research Foundation
ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.