Weighed in the balance

The feckless leadership of this country heading into the deepening coronavirus crisis has been pretty astonishing to behold.  Of course, there is the Governor of the Reserve Bank (and his statutory MPC offsiders), whose complacent utterances and utter inaction have been well-documented here this week.   And there is the Ministry of Health which has been actively discouraging people from stocking their pantries, constantly talking down any areas of concern, refusing to seriously engage with the public on the worsening overseas situation (including Australia, with whom we share a fairly open border) and is still telling us the risks of community outbreak are low.  This was still on their website a short time ago

MOH virus

(And when a reader asked the Ministry of Health for the justification for this stance, the only reply he got was along the lines of “we clear all our statements with clinicians” , as if these anonymous “clinicians” are different from people in any other field of expertise, where there will be a wide range of views, particularly amid extreme uncertainty. )

And then of course, there is the Prime Minister and the Minister of Health. The latter, despite being an elected politician, simply seems to channel his officials –  and perhaps only in the aftermath when all the OIAs are in will we know whether officials are tailoring their stance to suit ministers, ministers are so incurious as not to ask the hard questions, or both.

But in a crisis the focus should naturally fall on the Prime Minister.  It is for rare events of this sort of magnitude that we elect people who purport to be leaders.  But again we’ve just had constant minimisation, “pat on the head –  there, there” idle reassurances,  and a sense of always dithering and being behind the play.  There is no sense that our Prime Minister has any conception as to just how bad the global situation is getting, how serious the Australian situation is becoming, or any willingness or ability to articulate a coherent alternative view (if she has really thought hard enough to come to one).  There is no fronting the public about how no health system can adequately cope with large outbreaks, and only last week in Parliament she was still trying to play down the prospect of even a mild recession in New Zealand.  More recently, nothing serious has been heard confronting the very serious economic dislocation we face, whether or not the happy talk from her and her officials re low risk of community outbreak happens to come to pass.

Who knows why?  People speculate that it is all about the Christchurch commemoration –  whether for cynical reasons or because some short-term empathy with those victims has totally distracted her from a focus on the much larger threat that is now about to overwhelm us, and for which she –  as Prime Minister –  can actually affect outcomes.  But whatever the explanation it is pretty inexcusable to have a “leader” so totally in reactive minimisation, avoiding fronting with the public, mode.

But not to divert too long or too far from the main focus of this blog – economics and economic policy – I thought it might it would be good to give some coverage to some survey results out this morning, asking leading economists in both the US and Europe about the outlook.

The virus situation in Europe is currently worse than that in the US, so lets look at the European results first.

europe igm corona

Weighted by expertise, 82 per cent of respondents expect a “major recession” (none of the silly debate that still seemed to be in focus in New Zealand even last week as to whether we’d have two slightly negative quarters).

And although for most macro policy purposes, it doesn’t much matter whether the disruption is coming from the demand or supply side (contra the Reserve Bank public handwringing), 47 per cent think the main effects will be coming from the demand side.  Only 12 per cent disagreee.

(In New Zealand, so far, there is little doubt that almost all the effects we’ve seen have been demand-side ones –  reduced (mostly foreign) effective demand for our goods and services.)

And here are the US results

US igm panel corona

Not quite as bleak –  yet –  but almost.

The release doesn’t say when exactly the survey was taken, although I’m guessing very recently.

There is not a shred of reason to believe that the New Zealand situation will be any different, and that would be so whether or not we somehow manage to avoid community outbreak (I’m sceptical, but I guess we should always allow for the possibility the Ministry might be right).   Much of the world economy is now shutting down –  perhaps not for long, but no one can be sure of that – in a way for which there is almost certainly no modern (post Industrial Revolution) precedent.

And yet you still hear nothing of this from our Prime Minister, our Minister of Finance (let alone our central bank – and numerous senior central bankers have been choosing to talk in public this week).  It is simply irresponsible, if they realise, not to be fronting the issue and offering honest leadership. If they still don’t realise, it is simply inexcusable, and not one of them would then be fit for the offices they hold.  Crisis reveal whether those holding office are really leaders: at present you could really only say of ours, weighed in the balance and found wanting.

Perhaps they will all yet redeem themselves.  We must hope so, as a matter of urgency.