Consulting corona time

Are the measures taken to battle COVID-19 leading to a much bigger Crisis?

What if the measures taken to handle the corona virus outbreak result with a much bigger crisis?  One that it’ll take years to recover from and with an insurmountable cost. If leaders will continue with the current measures, and won’t change now, we may find ourselves in the day after fighting for survival. 

What is done now? Why? 

The direction of the solution predominantly is isolation; countries close borders, people are forced to stay at home with all the unavoidable social and economic consequences. There are two key reasons for that: 

  • The belief that the virus is contagious and spreads exponentially, and 
  • The belief that the mortality and gravity of effect on health rates are extreme 

What if one of these assumptions is erroneous? What if the rates are actually significantly lower than believed? 

If we accept that the actual number of infected people is by far greater than the number of infected people that we know about, then it will lead to the unavoidable conclusion that the rates of gravity and mortality are significantly lower than believed. The current estimates are that the actual number of infected people is about 100 times greater than the number known, which means that the actual rates of severity are 100 times smaller than the ones believed. Isn’t that placing a huge question mark above the isolation measures? Is it not indicating that we are hysterically overreacting? 

And if this is not enough to place a huge question mark above the measures taken, and even if some prefer to be “cautious now rather than sorry after” then it is critical to understand that as much as isolation and lock down seem to be the most effective measures to slow down (as obviously it does not prevent) the rate of the virus spread, the social and financial effects are rapidly growing to unprecedented and ground shaking levels that pose dramatic threat on people, countries, and the economies. 

The Vicious Cycles 

There are a few vicious cycles feeding one into the other and continuously increasing the accumulated negatives; 

The individual Vicious Cycle 

On the individual front, people locked at home cannot earn money, they consume their savings and/or use credit and loans. The longer the lock-down continues the less cash reserves, or the more debt people will have. When the day comes to return to “normal” many people will not have jobs, and we will not have the same consumption power we used to have. As consumption is the key engine for economic growth, a meaningful economic slowdown is expected. 

The Business Vicious Cycle 

On the businesses front, the situation is similar. Downsized/ stopped businesses cannot make money. The problem is, that many of the businesses do not have cash reserves and cannot consume too much additional credit. Many businesses will just not exist on the other side of the Corona virus crisis, others will be struggling seriously and of those, there will be a second wave of bankruptcies. Those businesses that will survive, will find themselves without capacity (having fired so many people during the virus crisis) and with meaningful challenge in rebuilding their capacities. The combination of reduced consumption and lower capacities of businesses will further enhance the economic slowdown. 

The Government Vicious Cycle 

As far as governments are concerned, they are already dedicating immense (unplanned) budgets to handle the current lock-down, and when the situation ends, they will need to invest heavily in incentivizing regrowth of their economy. However, where would governments get the money for that?  How will they cover these budget holes? The only government source of income is taxes (and most governments do not have too high cash reserves, and if they do are keen in keeping them in a sufficient level). They will have to increase taxes, which will immediately counter the desired results and add fuel to the slowdown fire as people ability to earn, even after the crisis will be kept low. Refueling the individual vicious cycle, and business vicious cycle, that in turn will further fuel the government vicious cycle. 

The longer these isolation measures are continued the longer will these vicious cycles continue after the end of the COVID-19 crisis. 

Isolation/ Collaboration 

The isolation increases the sense of – “Every man for himself”, so these cycles will hit at varying strengths different countries. However, if there is one thing the Corona Virus is teaching us loud and clear is that the virus does not respect borders, does not care about religion, does not consider wealth, talent, hierarchy etc. It affects all and everywhere. This critical learning, needs to be translated to the realization that the best chance we have to fight back is by enhanced cooperation between countries. Enhance Collaboration, the opposite of the isolation trend. 

The Key Solution Element 

In management the key “secret” to success is focusing – knowing what to do, and no less important what not to do. It is therefore critical to find the focus point and make sure everything else is done in accordance. The key focus now should be to solve the virus situation rapidly – have a cure/immunization; it must be the key focus of everyone. It is commonly accepted by everyone, as can be read and heard in any news bulletin, that no one can foresee when will the current measure allow the return to regular life conditions. Estimates vary from weeks to months, or more. An international collaboration, dedicating budgets, resources and means is required to quickly find an immunization/ cure to the Corona virus. This cooperation, must be kept thereafter as such threats are not unlikely to occur again in the future. 

Immediate Changes Required 

The isolation must be stopped immediately, it is clearly not effective. Focused tests to risk populations is what is required, with measures to avoid massive gatherings. 

Protecting health care staff and means of taking effective care of those infected and again, both of these will be much more effectively realized through global collaboration. 

In addition, governments need to reduce the tax load on individuals and businesses right now, to enable a smoother cross through the virus period and reduce the cash needed during the lock-down/ slow-down period. 

This concept is applicable to businesses as well. Too many businesses are laying off/ sending to indefinite payless vacation employees to cut their cost expenditures. It’ll be wiser to have an overall salary cut. By that people will be able to continue and sustain themselves now (with less government funds). This will also allow business to effectively reduce cost now, and sustain recovery capabilities for the day after the virus. 

It is high time for bold leadership, locally at the countries level and globally. 

 

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