Beyond blah blah blah
Figure 1 Guilty as charged
A month ago I wrote a piece entitled ‘more questions and fewer answers’ . Since then a few more clues had emerged, if not yet answers, but in the last two weeks the Omicron variant has raised new doubts. It may seem that many conventions and norms in politics, economics and financial markets are either suspended or no longer applicable but even the most bullish investors cannot afford to ignore them completely. Not all developments are for the worst, especially looking at the long-term, but it is increasingly difficult to be sure what could happen as soon as next week. Then again, to cite Yogi Berra: ‘It’s tough to make predictions, especially about the future’. Having said that, as this edition’s title suggests, at leastCOP26 feels like a tipping point even after ‘the tumult and the shouting dies, the Captains and the Kings depart’. ‘Lest we forget’, indeed, not least thanks to the eloquence of David Attenborough on behalf of the scientific community and the stridency of Greta Thunberg and her supporters around the globe in exposing humankind’s culpability (Figure 1).
Figure 2 Glasgow s’miles better!
Source: Bloomberg
Climate change will become the lens to view everything else
Readers may well be feeling COP26ed-out and so, here I shall just gratefully settle for Bloomberg’s scorecard (Figure 2) and then look beyond the blah blah blah in Glasgow. It does seem that Climate Change deniers have been vanquished at last. That the science is no longer in doubt was stated explicitly by India’s Environment Minister Bhupender Yadav as his country went from bad guy to hero and back again. Progress going forward will be variable and almost certainly too slow for those most exposed to rising sea levels, drought, and air pollution but, essentially, governments around the world are now committed to knuckling down to practicalities. In many countries younger people, both as consumers and voters, can be expected to hold political leaders to account. Many businesses (from the First Movers Coalition of global companies to local family firms) are already running ahead. Institutional fund managers are putting increasing emphasis on scientific analysis (as well as on the more subjective field of Social Responsibility) in anticipation of greater environmental regulation and corporate compliance as well as changing investor preferences and requirements (Figure 3).
Accordingly, the ‘entente’ between the US and China has significance far beyond the blah blah blah! Increasingly, Climate Change is going to determine not just how we vote but how we work, shop, travel and invest. For now, the big remaining arguments may seem to be over who should pay for the necessary measures but these are ultimately financeable. The crucial challenge will surely be for all of us to accept the need for changes in where and how we live, whether as indigenes or migrants. COP26 may well be a tipping point but the scale of the challenge before us is being demonstrated daily as the world struggles to contain COVID-19.
Figure 3 Investors are getting ahead of blah blah blah
COVID-19: testing humanity
If there are grounds to be optimistic on international cooperation on Climate Change over the long-term, it is hard right now to raise much cheer over how the pandemic is being handled by governments around the world. Official policiesrange from China’s zero tolerance to Norway’s high vaccination take-up and ‘normal daily life with increased preparedness’ while in most advanced and richer developing economies they are somewhere in between. Mandatory vaccination is looming to combat rampant infections in Germany, lockdowns are in force in Austria, Greece is proposing to fine those who refuse to be vaccinated while Italy, Spain and Portugal claim to have benefitted from solidarity both nationally and within local communities.
Figure 4 suggests that climate is currently a crucial factor once again as the Delta variant spreads in Central and Eastern Europe just as colder weather increases the level of indoor social mixing. This appears to match the experience in Western Europe and the US with other variants in the previous two winters. Adding to the challenge are the sharp differences, despite government efforts notably within the US and the EU, in people’s willingness to be vaccinated and comply with mask-wearing and other restrictions. The Omicron variant is providing new ammunition for all the groups of protagonists: scientists, doctors, health officials, drug companies, governments, opposition politicians, antivaxxers, anti-maskers and, inevitably, promoters of conspiracy theories. Even within these groups, opinions are far from homogeneous with just about everything being disputed by somebody: including COVID-19’s origins, the scientific research, the conduct of the vaccine trials and the approval processes, the efficacy of the various restrictions and their legitimacy and, inevitably, the accuracy of official data on COVID-19 related infections, hospitalisations and deaths.
Figure 4 Death in a cold climate
As the pandemic enters its third year and sixth global wave humanity is being tested on many fronts: medical, political and moral . Meanwhile, on the economic front there are two major trade-offs that have to be confronted as soon as possible, both of which also have huge moral dimensions:
Public health vs. the economy. As the immediate costs of the vaccines and hospital treatments continue to mount, less easy to quantify and more open-ended are the costs of Long COVID (physical and mental) and of delayed treatment of other health conditions.There appears to be an inverse relationship between vaccinations and hospitalisations and deaths while the sheer number of vaccinations over a lengthening period is providing evidence on efficacy. Mask-wearing appears to help too with COVID and has a long track record against other infections (and pollution) in Asian countries. Lockdowns are at best a very short-term solution and not only damage economic growth but also, it now appears, have sparked inflation through disrupted supply chains and surges in consumer demand. Lockdowns can also strain public finances and divert funding from better targets. As governments grapple with these public health vs. the economy trade-offs, a major complication is that a significant number of people do not want to be vaccinated or wear masks or be subjected to social restrictions. Not all of them are willing or able, for manifold reasons, to avoid contact with those who are vaccinated and complying with official restrictions. China’s zero tolerance favours public health while the US seems willing to accept many more casualties in the causes of economic growth and personal liberty. Most other major economies are likely to continue to seek a balance based on higher (mandatory in some cases) vaccination rates but compliance with other restrictions will vary with high levels in Nordic, Southern European and Asian countries and lower levels (and more casualties like the US but without the economic growth) in countries with populist leaders, including the UK.
National vs. global. Many developing countries are simply not in a position to choose between public health and economic growth. An urgent economic as well as moral issue is that the advanced economies have been keeping most of their vaccines to themselves and are continuing to give priority to booster jabs for their own population (Figure 5). The UK has this week secured a future supply sufficient to vaccinate the population six times over. In contrast, only 7% of Africans are thought to have been vaccinated and some countries lack the resources to roll out vaccines even if they could get hold of them. There are similar situations in remote parts of South America and Asia. High infection rates anywhere in the world increase the chances of new mutations spreading from unvaccinated populations to both the vaccinated and unvaccinated elsewhere. Omicron may or may not have originated in South Africa but it is only the latest in the succession of variants. Richer countries are putting their own population and economy at risk by failing to share more vaccines on a global basis. Alas, in dealing with the trade-off between national and global vaccine roll-outs, we are still at the blah blah blah stage. We really ought to be able to do better!
Since the Omicron story broke, there have been new jitters over the solidity of the economic recovery outside the US and, more recently, India, over inflation and over the Fed’s apparent new hawkishness. This, in turn, has been unnerving global financial markets that were already suffering from vertigo. There is a great deal of blah blah blah on these developments too but it will have to wait until my next edition.
Figure 5 Not all in it together
Disclaimer: This report is compiled from sources the author believes to have been reliable but it may not be complete or accurate on any particular subject. All opinions, estimates, and analyses are or were those of the author at the date of issue and are subject to change without notice. Accordingly, the author makes no representation or warranty on any subject discussed in the report; nor does he accept responsibility or liability for any claim, loss, damage, expense or cost arising from reliance upon its contents.