Tuesday 17 March, 2020

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Quote of the Day

“Hope is itself a species of happiness, and, perhaps, the chief happiness which this world affords”.

  • Dr. Johnson

The Luck of the Irish

Since this is St Patrick’s Day and my fellow countrymen and women are in semi-lockdown because of the virus, I thought it’d be nice to cheer them up with a reading of one one of the funniest essays I’ve ever encountered. It was written by the late Bernard Levin, who was a theatre critic, a newspaper columnist, an author and a broadcaster and, when he was on song, one of the funniest writers alive. He was a Wagner fanatic and an opera-goer extraordinaire. One of his favourite festivals was the one held every year in the small Irish town of Wexford; Levin was a devoted attendee every year — and much loved by the town’s residents on that account. This is his account of the memorable closing night of Spontini’s opera, La Vestale.

I hope you enjoy it. When reading it I had great difficulty keeping a straight face.

The virus doesn’t care whether you’re rich or poor, but epidemics have always revealed the fissures in the societies they’ve infected

As the Chinese are already finding out (and we will soon).

Boris Johnson’s Dunkirk moment

Boris Johnson has always suffered from a Churchillian complex (even writing a ludicrous biography of the great man). Well, now he holds the same office and he’s just had his Dunkirk moment, as the epidemic modelling team at Imperial College showed that the ‘herd immunity’ strategy that lay at the heart of the government’s approach to COVID-19 was a one-way ticket to disaster. The good news is that unlike some politicians one could mention, he was able to change course.

One puzzling thing, though. When the herd-immunity policy was being advocated, it struck me as a strange way of combatting a pandemic for which there is no vaccine because it relied on at least 60% of a population of 68m getting the disease and acquiring immunity as a result. It’s only when you started looking at the numbers that the scale of this gamble became clear. It’s based on about 40.8 million people getting infected, 99% of whom would hopefully recover and become immune. But assuming a mortality rate of 1%, that would still mean over 400,000 deaths, which is not far from the 451,000 UK deaths in WW2. So when people describe the struggle against COVID-19 as the moral equivalent of war, they may be closer to the truth than they realise.

Then comes the Imperial College bombshell which suggests that the herd-immunity strategy could cause 250,000 deaths and would overwhelm the NHS. And a shocked government turns on a sixpence and changes tack.

So here’s my question: did it not occur to anyone that the 400,000 deaths that would be the likely consequence of acquiring herd immunity would have even more comprehensively overwhelmed the NHS?

Also: isn’t herd immunity about vaccination, not infection?

Which companies should not be bailed out in this crisis?

Tim Wu proposes a useful rule: any company that has been highly profitable before the COVID crisis but has used its profits to engage in share buybacks rather than building up cash reserves or doing R&D should be left go to the wall. The case study he uses is American Airlines:

In 2015, it posted a $7.6 billion profit — compared, for example, to profits of about $500 million in 2007 and less than $250 million in 2006. It would continue to earn billions in profit annually for the rest of the decade. “I don’t think we’re ever going to lose money again,” the company’s chief executive, Doug Parker, said in 2017.

There are plenty of things American could have done with all that money. It could have stored up its cash reserves for a future crisis, knowing that airlines regularly cycle through booms and busts. It might have tried to decisively settle its continuing contract disputes with pilots, flight attendants and mechanics. It might have invested heavily in better service quality to try to repair its longstanding reputation as the worst of the major carriers.

Instead, American blew most of its cash on a stock buyback spree. From 2014 to 2020, in an attempt to increase its earnings per share, American spent more than $15 billion buying back its own stock. It managed, despite the risk of the proverbial rainy day, to shrink its cash reserves. At the same time it was blowing cash on buybacks, American also began to borrow heavily to finance the purchase of new planes and the retrofitting of old planes to pack in more seats. As early as 2017 analysts warned of a risk of default should the economy deteriorate, but American kept borrowing. It has now accumulated a debt of nearly $30 billion, nearly five times the company’s current market value.

And now, suddenly, the company is in crisis because of the virus. It hasn’t yet asked for a bailout but after a recent meeting with airline leaders the director of the National Economic Council said that “certain sectors of the economy, airlines coming to mind” might require assistance. US Treasury Secretary Steven Mnuchin said on Wednesday last that the airlines, including American, would be “on the top of the list” for federal loan relief.

Isn’t it funny how corporations are firmly capitalist while things are good, but firm believers in socialism when disaster looms? Profits are always privatised but losses are socialised.

The consolations of ‘self-isolation’

It’s interesting that a few friends have mentioned the publication of The Mirror and the Light, the third and final volume of Hilary Mantel’s Wolf Hall trilogy, as a good excuse for self-isolation. These are mostly pretty busy academics who would really like a fortnight’s break that’s been ‘legitimised’ by public safety measures — time that they could enjoyably spend in Mantel’s virtual world of Tudor England.

Which made me think of the only time when I have been really ill — way back in the mid-1990s when I had a bad case of influenza. It was the first time in my life when I felt unable to get out of bed and so I decided that it was legitimate to stay home and do nothing. Except, of course, that I didn’t ‘do nothing’. I started to read about the history of computing and came up with the idea of writing an account of the origins of the Internet. Thus began the process that eventually led to A Brief History of the Future. So that particular period of self-isolation turned out to be amazingly productive.

What would you do if you were quarantined?

As Ian Bogost points out, many us would just do what we mostly due anyway — work away at home, watch Netflix or TV or cook or do some gardening in downtimes from when we’re actually working. I had an email today from a busy guy who said that, in a way, he’d rather enjoy being told that he had to ‘self-isolate’ because it would give him time to think, to catch up on all those books on his bedside table, and maybe even to write some stuff for himself rather that for a publisher. “You already live in quarantine”, says Bogost. “Being holed up at home has never been more pleasant.” He might be right.

What’s missing from this picture?

Answer: Chinese tourists. Normally King’s Parade is over-run by them. But the coaches have stopped coming, and the streets are quieter and less congested. All as a result of Covid-19.

Taken this morning at 10:25.

Who said irony was dead?

Michael Gove has apparently confirmed that up to 50,000 people may be needed to manage the paperwork for the borders of the newly-‘liberated’ UK. This prompted George Packer and Daniel Thomas to observe (in today’s FT) that “By the time Britain exits the transition period, the private sector may have hired four times more people to fill in customs forms than the 12,000 people working as fishermen in the U.K. — the industry that is supposedly one of the big beneficiaries of Brexit.”

Nobody knows anything

That, at least, is the conclusion the NYT‘s Farhad Manjoo has reached:

I’ll lay my cards on the table: To me, Sanders is looking increasingly electable, the virus looks like it could reshape much of daily life at least in the short term, and the Trump administration’s response to it is bound to be bumbling and perhaps extremely scary.

Of course, I could be wrong. We all could be.

It’s largely because the world is a complex system, and one of the implications of complexity is unpredictability.

Self-isolation and employee rights

A lawyer (who shall remain anonymous) from a reputable firm writes:

Q: As an employer, can I refuse to pay the salary of an employee who is ‘self-isolating’?

A:If an employee has contracted the virus, the normal rules around sick pay will apply and they will either receive Statutory Sick Pay (SSP) or contractual sick pay. If you have specifically told the employee not to come into the workplace as they have been to an affected area, they would ordinarily get their normal pay.

What is unclear is if the employee remains off as they have been quarantined or recommended to isolate themselves. In those circumstances, it would not strictly be considered as sick as the reason for the absence isn’t down to the employee being unwell, therefore no entitlement to sick pay.

There may be a contractual clause relating to such circumstances and how this time off should be paid. In the absence of any contractual clause, the position will be that the leave will be unpaid (or the employee can request to use their annual leave entitlement to cover the absence).

Q: For an employer, what are the implications of the coronavirus?

A:Whilst the above applies, if an employee is quarantined and their time off would be considered as unpaid, it may be worthwhile for you to consider the absence as sick leave and comply with any sick pay requirements. If this is not done and the employee attempts to come to work, this imposes the risk of spreading the virus. As an employer, you have a duty of care towards all staff to provide a safe premise of work. If an employee is adamant they wish to return to work, you may decide to suspend the employee on health and safety grounds, in this instance, they would have to be paid as normal.

You should ensure that employees are updated with potential symptoms of the virus and affected areas so they can be vigilant. You should seek guidance on what can be done to minimise the risk of spreading the virus and provide guidance to staff on what they can also do e.g. provide tissues and hand sanitisers and encourage staff to use them. In certain circumstances, you should consider whether staff can work from home if they have the resources and capabilities available to do so. You must need to ensure that you are taking a consistent approach with all your staff and ensure no one is being singled out because of their race or ethnicity.

For the avoidance of doubt: this does not constitute legal advice, just a lawyer’s perspective. I just thought it might be useful because it highlights the realities of that glib phrase ‘self-isolation’. There are, of course, other interesting questions that arise. For example, how would a family living in a rural location get supplies of food and other necessities? Tesco Direct?

The fragility of global supply chains

Tyler Cowen has an interesting Bloomberg column about this. In part, he observes,

Supply chains are not indestructible. If the new costs or risks are high enough, the entire structure will be dismantled. By their nature, supply chains do not fall apart slowly, because each part of the chain relies upon other parts to add its value. It does not help much to have the circuit components of the iPhone lined up, for instance, if you cannot also produce the glass screens. In this way, these supply chains are less robust under extreme conditions.

Global supply chains have yet to come apart mostly because trade and prosperity generally have been rising. But now, for the first time since World War II, the global economy faces the possibility of a true decoupling of many trade connections.

I think he’s right. Complex supply chains will not degrade gracefully. One link will fail and then the whole chain will rapidly disintegrate.

Funny how we’ve built an entire civilisation on just-in-time delivery. (The famous Toyota ‘lean machine’.)