I am an old, evidence-based policy wonk (formerly Commonwealth Treasury) and I’m for evidence-based investing (my current gig).
So let’s lay out the evidence.
They are digging ditches for mass graves in Iran. You may not be able to trust the Iranian numbers, but when you see mass graves you should take the effects of COVID-19 seriously.
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Meanwhile Shanghai, Guangzhou and Chongqing are all functional megacities without any signs of mass death. Cases are managed in Singapore and Korea — both countries where we can trust the numbers.
Cases outside China are growing exponentially. Cases in Australia are growing exponentially.
Exponential growth — especially with a doubling every three days or so — is very hard to get your head around. One day you have 30 cases, a month later you have 30,000 and sometime in the month after that most of your country is infected.
The mortality rate will depend on how fast this happens too. Possibly 5% of cases (including many young people) require supplementary oxygen. When half a million people require supplementary oxygen at once, a large proportion of them will die simply because oxygen is not available.
There is an absurd notion that we have a choice between protecting the economy and managing the virus. Nothing could be further from the truth. Just as exponential growth is a formidable enemy, exponential growth can be your friend. It allows you to get this under control quickly and thus relatively cheaply.
If you can get the halving rate to three days, what are now 50,000 probable infections will dwindle to 50 in just a month. Most of those will have symptoms and be able to self-identify. Then we will have infection loads that track and trace, as we’ve seen in some Asian countries. The outcomes we’ve seen in Asian countries are possible here too.
Of course if you wait for the number to double twice more, you will need to go into hard lockdown for another week to make up for the larger starting case load.
The first trick is to get your doubling time down enough. This requires a hard lockdown. An example: UK citizens have today been ordered to stay at home except for limited trips to the shops, essential work or to attend medical treatment. Police have been ordered to enforce the lockdown.
The harder the lockdown, the better. A harder lockdown means a shorter one that will result in less economic damage. Think, not only closing schools but banning kids going to public parks (because there could be infected surfaces there).
Germany has locked down and banned meetings of more than two people. This is the policy direction countries are forced to go. We will get there too, and the earlier and the harder we go, the faster we get to manageable case loads.
Silly objections abound. People say that healthcare workers have kids that need minding, hence it is a bad idea to close schools. Instead, the government could be looking for ways to support workers by billeting the kids. We are an honourable community-minded society. This should not be hard.
Real objections abound too. I am frightened for people who are going to be locked down with abusive spouses. Policing is going to be hard. But there is no other choice.
Thankfully, China and Singapore show that cities can mostly function.
Now let’s dispel a couple of other myths. In most Asian cities, everyone has a face mask on in public. But there are not enough face masks for hospital workers, let alone everyone.
The argument is simple though. A face mask for a hospital worker has to be 99%-plus effective. They are putting themselves in harm’s way. A face mask for you and me only needs to be 95% effective.
That will take the Ro — the measurement of how many other people an infected person will infect — well below one, and hence be adequate for epidemic control.
Sure, there are asymptomatic spreaders. But the Asian experience suggests that the bulk of spread is done by people who have already shown fevers. Thermometers (and quarantining those with fever) will not remove all infections but will also help get the Ro below one.
This is the biggest economic crisis of my lifetime. But the evidence from large cities to our near north is that this can be controlled.
A 30-day hard shutdown should probably cost less than 10% and probably less than 5% of a year’s GDP.
The alternative is mass graves and a sustained, fear-driven partial shutdown which will last much longer and wind up costing much more.
Now is the time to act.
John Hempton is the chief investment officer and co-founder of Bronte Capital, an investment fund manager, based in Sydney.