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Imagining a Post Pandemic World

How might a post-pandemic world look and feel? Let’s imagine a creative team at a New York City advertising agency pitching a campaign in 2050 for a new perfume (more than most products, perfumes are sold by attaching to the dreams and aspirations of their times).  The Big Apple, ...

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BUSINESS DISCOVERS THE COSTS OF EXTREME WEATHER -- THAT'S GOOD NEWS!


Saturday February 15, 2014

        The weather has become the go-to excuse for economists and businessmen who want to explain poor performance. “Unusually, disruptive weather across large stretches of the country kept people indoors,” explained Lawrence Yun, the chief economist of the National Association of Realtors, in accounting for a slowdown in home sales in Dec. Speaking on CNBC, Diane Swonk, the chief economist of Mesirow Financial, used the January chill that gripped much of the nation to explain disappointing numbers on U.S. auto sales. “It literally freezes the economic activity,” she noted. Similar explanations were offered for the very weak ISM manufacturing numbers released in early February. Economists blamed the huge miss on Non-Farm Payroll numbers in Dec.  – 74,000 instead of the consensus expectation of 197,000 – on bad weather. The same excuse was trotted out when the January ADP number came in weak. The Bureau of Labor Statistics did not blame the weak NFP number of 113,000 on the weather, but pundits were quick to point out that the January employment survey was taken during the one mild week during the month. To top it off the weather has been trotted out as an excuse for a possibly weak GDP number for the first quarter of 2014 – which really jumps the gun because the quarter is not yet half over.  As many financial bloggers have noted, the weather excuse has become the economic equivalent of “the dog ate my homework.”
       

          Change the word “weather” to the phrase “climate change,” however, and be prepared for howls of protest. Though this is another dismaying example of the how toxic the phrase has become, the universal acceptance that extreme weather has economic consequences points to a path towards awakening the public to the risks we all face. This is simply because we will experience climate change as weather, and the more businesses and municipalities find themselves suffering economically because of extreme weather events, the more they will realize that even more frequent extreme storms, temperatures, floods, and droughts are a risk factor (to use the language of corporate reports) going forward.

           No one would claim that all extreme weather events are the result of global warming, but one of the most widely agreed-upon consequences of warming is an increase in extreme weather events. Climate is what you expect, and weather is what you get. If the weather we experience ever more frequently diverges from expectations, then it is natural to wonder whether climate is changing.

          One of the biggest impediments to any public awakening is that the phrase “global warming” implies that the extremes will only be in the form of heat and everywhere at once. Hence the blizzard of smugness – “where’s your warming?” – that was an insufferable fellow-traveler with the arrival of the Polar Vortex in January (an easy answer, by the way, is “Alaska” where unseasonable warmth led to a massive avalanche that isolated the town of Valdez for two weeks).  When climate changes, however, the scientific consensus is that the transition is not smooth. The term favored by climate scientists is “flicker” where climate jumps back and forth between hot and cold and wet and dry until it finally settles in a new state.  In this context, rather than putting aside concerns about global warming when the temperature plunges, we might well wonder whether or not the extreme is yet another data point in an accelerating pattern of extreme events.
           

        There have been numerous studies of the potential economic impact of climate change (I helped edit one published by the UNDP and World Bank in 2005), the most recent being “The Weather Business” published by the German financial colossus Allianz. Many of the earlier studies speculated about future events, while now, a businessman, economist, a mayor, governor, or President doesn’t need a study to envision the costs of weather catastrophes. All they have to do is look at their corporate results, or busted budgets. The increasing pace of extreme weather events is telling us that climate is changing and it is costing us money now (the Allianz report estimated the cost of worldwide weather disasters in 2012 to be $170 billion).
           

         Which brings us back to the question of the difference between thinking about the costs of extreme events as “weather” related losses or as costs related to “climate change.” Attributing poor performance to the weather contains an implicit assumption that this was a one-time event, not likely to be repeated as things revert to normal. Recognizing that an event might – might – be related to changing climate means that a CEO or political leader recognizes that he or she should be prepared for things not returning to normal. Which corporate leader or politician would you prefer to have making decisions about budgets and strategy?
          

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Short Take

Relaxing COVID-19 Restrictions will Kill, not Save, the Economy


 

[This is a more developed version of the previous Short Take}

Those who want to relax mandates on self-isolation and social distancing to save the economy have got it exactly backwards. Reopen society too soon, and we risk destroying the economy as well as public order and our shaky democratic institutions. The reason comes down to two words: supply lines.

 Supply lines for necessities such as food are already under stress. Those going to grocery stories encounter random instances of empty shelves and vegetable bins. Smithfield Farms shut down a South Dakota plant that supplies roughly 4% of the pork in the nation after over 500 of its workers tested positive for the coronavirus. Other giant meat processors such as Tyson have also shut down plants for similar reasons. Farmers in the West are having trouble finding workers to harvest the crops now reaching maturity in the fields. And even if they manage to get the crops picked, farmers are out of luck if the truckers fail to show up, or the flow of packaging for their products get interrupted. 

Right now, these disruptions are episodic, but that should be concerning because we haven’t even seen the end of the first wave. What we have seen is that vital front-line workers such as nurses, doctors, EMT’s, and other first responders have had trouble finding protective equipment and maintaining morale. Some have staged walkouts over the dangerous conditions, and these are workers with a sense of mission.

By contrast, for most of the hourly-paid workers who keep supplies made, distributed, and sold, their work is a job that pays the bills. It would be appropriate if society recognized that they played a vital role, but mostly these workers encounter demanding bosses, monotony, and surly customers. If sick, they are not going to work – nor would we want them too. And they are not likely to risk their lives if going to work exposes them to contagion.

Disruption of one link, e.g. the trucker that delivers food the last mile, could halt a supply chain. COVID-19 is a threat to every link. Should a second wave hit before there is a readily available, cheap and effective treatment, it’s a very high probability that many supply lines will be disrupted and filling the gaps could easily overwhelm the nation’s businesses. 

Even today, on the evening news, we see images of vast caravans of cars lined up to get supplies from food banks. Imagine two weeks of empty shelves in the stores that feed our cities. How likely is it that civil order could be maintained in that situation? Will people suffer in silence if they realize that they can’t buy food for their kids because our leaders reopened the economy before a treatment was available because they wanted to prop up the stock market (which is how it will be portrayed)? If we want to look analogues for what life is like once supply chains break down, they’re readily available today in cities like Mogadishu, Kinshasa, and Port au Prince. 

 Thus far, the Trump administration’s response to the pandemic seems to be a mélange of Boss Tweed, Don Corleone and Inspector Clouseau. For the next act, the administration has a choice: Churchill, who bolstered British morale during the London Blitz, or Pol Pot, who sacrificed millions of his countrymen for a bad idea. Let’s hope those around Trump can convince him that the cure for the disease is the cure for the economy.
 



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