Month: May 2020

COVID-19 Exposes Once-Great Superpower As Epic Failure

“And all the King’s horses and all the King’s men couldn’t put Humpty Dumpty back together again.”

I am following worldwide commentary about my country’s disastrous handling of the coronavirus pandemic with equal measures of frustration, fury, and embarrassment. Writers from Europe, the Arab World, Israel, and those here at home have remarked on our dysfunctional politics, the inept and chaotic response of our leadership, and our failures both to care for our own people and to provide leadership in the world. Here are a few examples of recent comments from writers who have historically been friends of America:

An excerpt from an Israeli commentator –

“The country seems like a train wreck: Its systems are failing, hospitals collapsing, patients crying for help and corpses piling up in makeshift morgues. New York, the jewel in the crown, has turned into a ghost town and valley of death: the undeclared capital of the free world cannot hide its shame… “It could have been America’s finest hour… Rather than serving as a role model for all, Trump’s United States has turned into a bad joke.”

This from the Arab Gulf –

“During the last few months, I spent many hours…watching on television the deterioration of the situation in the United States, puzzled by the figures that reveal the crumbling economy of the richest country in the world, and the rising numbers of corona victims. This pushes one to wonder: Why is the richest, most advanced and most civilized state, which is benefiting the most from global wealth, the same one in which the number of deaths by coronavirus exceeded one-third of the deaths worldwide…?”

And critics from Europe were no less harsh: questioning President Trump’s grasp on reality; expressing consternation at his confusing and often contradictory statements; stating that the U.S. was “no longer fit to lead;” and lamenting what had become of the once “shining city on the hill.”

How did we come to this point?

In the first place, it isn’t Donald Trump or the coronavirus pandemic that fractured the American polity. Nor are they responsible for the demise of U.S. leadership in the world. We were already fractured and our leadership has long been in decline. If anything, Trump and the coronavirus have served to highlight (as well as exacerbate) both the fault lines in our dysfunctional politics and our loss of standing in the world.

It was just three decades ago that the Soviet Union collapsed leaving the U.S. as the sole superpower. Heady over this victory, some commentators prematurely envisioned the emergence of a “New World Order” and arrogantly began to plan for an “American Century.” Their gloating lasted only a decade before U.S. leadership began to unravel, largely due to the Bush Administration’s disastrous response to the terror attacks of 9/11. While most nations around the world were ready to work with the U.S. to punish the perpetrators of that horrible slaughter of innocents, the Bush Administration, guided by hubris and blind ideology, led the country into two wars that instead of projecting and insuring U.S. leadership, resulted in an America that was weaker, less respected, and more isolated than at any other time in our modern history. The wars’ costs in lives, treasure, trust, and prestige created opportunities for other nations, like China and Russia, to assert themselves both regionally and globally, opening the door to the current multi-polar world.

While President Barack Obama realized the magnitude of the problems created by his predecessor, his efforts to extricate the U.S. from Iraq and Afghanistan and to restore America’s image were hampered both by his failure to grasp the complexity of the challenges resulting from the war and the dysfunctional hyper-partisanship of our politics. I remember debating a number of leading Bush administration figures and Republican elected officials right after Obama’s “A New Beginning” Cairo speech. They were all using the same talking points, saying that Obama had betrayed America by condemning torture, demonstrated weakness by speaking against the war, and sold out Israel by opposing their settlement policy. When I was asked by the host of one of these shows whether I believed that Obama could succeed in bridging the deep divide, I responded that he stood a better chance of doing so with the Arab and Muslim Worlds than with the Republicans here at home.

Obama’s efforts to change direction in the Middle East were stymied, but he did succeed in reconstructing at least some of the architecture of global diplomacy that the Bush Administration had left in tatters. He negotiated agreements to deal with climate change, to rein in China’s growing influence in Asia, and to limit Iran’s nuclear program.

Because Republicans opposed all three, Obama left office with the edifices he had constructed on shaky ground. In the end, Obama will be remembered for having created high expectations that failed to materialize, leading to even greater concern about America’s ability to lead in the world.

The election of Donald Trump was the byproduct of our partisan dysfunction. His “populism” was fueled by xenophobia, racism, and the anger of the middle class that the Republican party had been cultivating for decades. Once in office, Trump walked away from all of the international agreements negotiated by his predecessor, turned his back on many of the U.S.’s European allies, courted a number of newly emergent right-wing leaders, and sent contradictory messages regarding America’s commitments in the world.

Ever the showman, he never stopped inciting his populist support base, taking partisan dysfunction to new levels. While his chaotic and unorthodox governing style and his contradictory statements have created confusion about his policies, Trump nevertheless has toed the Republican line on taxes, deregulation, and the appointment of conservative judges. He has also dismantled or severely weakened many government institutions and placed unqualified cronies in critical government posts.

Then came the pandemic.

Trump’s initial instinct was to claim it was just a flu and would soon pass. As the impact of the pandemic became clear, he turned to Twitter and daily press conferences to boast, mislead, and strike out at his enemies. As he has so often in his political career, he has relied on xenophobia and anger at Democrats and “elites” to deny he had ever been wrong and trumpet his leadership.

All this may help solidify his base and make them feel that he is winning against the “invisible enemy” he says we are defeating. But the numbers prove otherwise. While his base continues to be mesmerized by the “emperor’s new clothes,” the world stands aghast at the naked truth that America is not only incapable of leading the world, but also failing to protect its own people. In the past, America would lead a worldwide effort in cooperation with other countries to find a cure and to provide assistance. Instead, we have withdrawn our financial assistance to the most vulnerable and are raiding world markets to buy up protective equipment we failed to produce and stockpile. At the same time, our infection and death rates exceed every other country. Our testing rates are significantly lower than most other nations.

The world sees all of this and laments the continuing decline of the once-great superpower that won the Cold War. And they wonder whether, after decades of deepening partisan dysfunction and decline, America will be able to reclaim its leadership role.

Under Trump, American Exceptionalism Means Poverty, Misery And Death

No other nation has endured as much death from Covid-19 nor nearly as high a death rate as has the United States.

With 4.25% of the world population, America has the tragic distinction of accounting for about 30% of pandemic deaths so far.

And it is the only advanced nation where the death rate is still climbing. Three thousand deaths per day are anticipated by 1 June.

No other nation has loosened lockdowns and other social-distancing measures while deaths are increasing, as the US is now doing.

No other advanced nation was as unprepared for the pandemic as was the US.

We now know Donald Trump and his administration were told by public health experts in mid-January that immediate action was required to stop the spread of Covid-19. But according to Dr Anthony Fauci, “there was a lot of pushback”. Trump didn’t act until 16 March.

Around the world, governments are providing generous income support. Not in the US

Epidemiologists estimate 90% of the deaths in the US from the first wave of Covid-19 might have been prevented had social distancing policies been put into effect two weeks earlier, on 2 March.

No nation other than the US has left it to subordinate units of government – states and cities – to buy ventilators and personal protective equipment. In no other nation have such sub-governments been forced to bid against each other.

In no other nation have experts in public health and emergency preparedness been pushed aside and replaced by political cronies like Trump’s son-in-law, Jared Kushner, who in turn has been advised by Trump donors and Fox News celebrities.

In no other advanced nation has Covid-19 forced so many average citizens into poverty so quickly. The Urban Institute reports that more than 30% of American adults have had to reduce their spending on food.

Elsewhere around the world, governments are providing generous income support. Not in the US.

At best, Americans have received one-time checks for $1,200, about a week’s worth of rent, groceries and utilities. Few are collecting unemployment benefits because unemployment offices are overwhelmed with claims.

Congress’s “payroll protection program” has been a mess. Because funds have been distributed through financial institutions, banks have raked off money for themselves and rewarded their favored customers. Of the $350bn originally intended for small businesses, $243.4m has gone to large, publicly held companies.

Meanwhile, the treasury and the Fed are bailing out big corporations from the debts they accumulated in recent years to buy back their shares of stock.

Why is America so different from other advanced nations facing the same coronavirus threat? Why has everything gone so tragically wrong?

Some of it is due to Trump and his hapless and corrupt collection of grifters, buffoons, sycophants, lobbyists and relatives.

But there are also deeper roots.

American workers are far less unionized than workers in other advanced economies

The coronavirus has been especially potent in the US because America is the only industrialized nation lacking universal healthcare. Many families have been reluctant to see doctors or check into emergency rooms for fear of racking up large bills.

America is also the only one of 22 advanced nations failing to give all workers some form of paid sick leave. As a result, many American workers have remained on the job when they should have been home.

Adding to this is the skimpiness of unemployment benefits in America – providing less support in the first year of unemployment than those in any other advanced country.

American workplaces are also more dangerous. Even before Covid-19 ripped through meatpackers and warehouses, fatality rates were higher among American workers than European.

Even before the pandemic robbed Americans of their jobs and incomes, average wage growth in the US had lagged behind average wage growth in most other advanced countries. Since 1980, American workers’ share of total national income has declined more than in any other rich nation.

In other nations, unions have long pushed for safer working conditions and higher wages. But American workers are far less unionized than workers in other advanced economies. Only 6.4% of private-sector workers in America belong to a union, compared with more than 26% in Canada, 37% in Italy, 67% in Sweden, and 25% in Britain.

So who and what’s to blame for the worst avoidable loss of life in American history?

Partly, Donald Trump’s malfeasance.

But the calamity is also due to America’s longer-term failure to provide its people the basic support they need.

Economists On Coronavirus And Capitalism

Greece’s former finance minister Yanis Varoufakis and Irish economist David McWilliams on the hope for a global new deal.

David McWilliams: I think it is fair to say that capitalism – in the course of this unprecedented crisis – has been suspended. We are not going back to where we were, to business as usual. The state has come back, and this episode will not be forgotten by the electorate. I don’t know where we are going, but one thing seems clear: we are not going back.

Yanis Varoufakis: I like this phrase: capitalism has been suspended. The last time capitalism was suspended in the west was during the second world war, with the advent of the war economy: a command economy that fixed prices. The war economy marked the transcendence of the standard capitalist model.

But what we see now is not so much the suspension of capitalism. The rules of capitalism may have been suspended – all those sacrosanct policies are gone, the neat separation of fiscal and monetary policy is gone, the idea that public debt is a bad thing is gone.

But the institutions that are necessary to build “the war economy without war” so to speak – to suspend and transcend capitalism – those have not been put in place. There is a profound difference between saying: “It’s all going to shit, so we don’t expect you to stick to the rules,” and saying: “The rules themselves have changed, and we must make new ones to prevent an economic collapse.” All this talk of quantitative easing by the European Central Bank suggests that we remain very far from a war economy mindset.

DM: This is a familiar category error in Europe. If you are basing your economic policy on the willingness of people who are too traumatised and sick to borrow – which is the core logic of quantitative easing – then you have a very serious problem. A common image of quantitative easing is the hose: a huge monetary hose, with water gushing out to stop the fire of crisis. But the hose of monetary policy is limited by this little valve called the banks, a little valve called the credit committee, a little valve called the “willingness of business to borrow money”. And ultimately, that hose of money becomes a trickle – and even that trickle stands to benefit the wealthy much more than the poor.

So I take your point that despite the suspension of the rules, the infrastructure remains in place. But people across Europe are now saying: “Hey, there is an alternative.” This second phase will be about how we move ahead in rethinking capitalism, in rethinking finance, rethinking how economies work and for whom – potentially toward a new Bretton Woods-style settlement for the entire global economy.

So that’s where we are: in the first year of the third decade of the 21st century. Looking out at the next decade, armed with history as well as economics, what do you think the global and European economy will look like?

YV: We are sitting on a saddle point, prepared to tip in either direction. It is utterly indeterminate which of the two directions we travel.

Let us start with the positive scenario. It builds from your point about the prospects for a new Bretton Woods – with its particular manifestation in the European Union.

The fact that Germany is now in the same pile of shit as the rest of us offers a glimmer of hope

If we are going to have continental consolidation, what should it look like? It would not be a federation, because – even though that is more necessary than ever – it is less likely than ever, because the centrifugal forces of the coronavirus crisis, the migration crisis, and the euro crisis are pulling us apart. But the alternative is to deploy the existing [EU] institutions in a way that can simulate a federated Europe, and we can do this tomorrow, if we so choose: to provide immediate cash to all those who are struggling in poverty, to invest in the green transition.

There is a glimmer of hope here, because there is a profound difference between 2020 and 2010. Back then, when Ireland and Greece went belly up, there were remarkable dissimilarities between what our countries were experiencing and what Germany was experiencing, what Holland was experiencing. Today, Germany’s industrial machine is broken – and was broken long before the coronavirus hit. Two main industries – automobiles and machine tooling – were already in serious trouble. So the fact that Germany is now in the same pile of shit as the rest of us offers a glimmer of hope that they might say: what should we do? It’s no longer: “Your problem: here’s the Troika.”

DM: And we will send you the bill as well! So that’s the positive scenario. The interruption of “business as usual” gives way to new policies and new possibilities for Europe and beyond. What’s the other option?

YV: Well, we humans – and we Europeans, in particular – love to miss fantastic opportunities and end up with dystopian outcomes instead. It’s very likely that we will encounter the same recalcitrance by the same set of European ordoliberals, who will keep putting roadblocks in the way of moves toward a genuine, democratic federalism.

DM: Obviously, such a roadblock will have a disproportionate impact on the southern member states of the European Union. What do you think the impact of this particular trauma will have on, say, Italy – a founding member of the European Union, and a crucial part of Europe’s emotional hinterland?

YV: Every time there is a crisis in Europe, Italian growth rates fall. Every time there is a problem, Italy sinks deeper into stagnation – with Salvini waiting in the wings. If Frankfurt, Berlin, and Brussels fail again to move toward the positive scenario, Italy – not just Italy, but all of Europe’s most devastated regions – will move again toward the neo-fascist right. In that case, all bets are off.

This is the endpoint of the negative scenario: a giant domino effect, leading to the disintegration of the European Union. Not that the EU will cease to exist. Only that it will become irrelevant, like the Commonwealth of Independent States.

DM: Oh, I remember the Commonwealth of Independent States very well …

YV: It still exists! It still has an office in Moscow. So the negative scenario is that the European Union will become like the CIS. And that will be music to the ears of the Trumps, Bolsonaros, and Modis of this world. We would move into a transactional, Hobbesian global economy: nasty, brutish, and poor for the majority of people.

My sense is that the period when you could travel, engage, move, we might have reached the end of that open period.

DM: When I was born in Ireland, the country was very poor. And then it became quite wealthy, on the back of the European project, on the back of Europe’s position in the global supply chain, and with a tax policy that attracted lots and lots of capital. My sense is this model might be gone, and this style of globalisation along with it. I fear that the period when you could travel, engage, move – we might have reached the end of that open period. People will say: “This virus came from the cosmopolitan world, from the world of international movement.” Whether it’s right or not, we might begin to blame people. We know that the Black Death resulted in ferocious antisemitism in Europe. People asked: “Who can we blame for this?” And so they blamed the one community that was already in isolation in the ghetto.

This is what terrifies me most, sitting here in the first year of the third decade of the 21st century. What we saw before may come again, and we turn back to Yeats: “Turning and turning in the widening gyre / The falcon cannot hear the falconer; / Things fall apart; the centre cannot hold; / Mere anarchy is loosed upon the world.” I fear now, unless we move quickly and in a new direction, the world that my kids will inherit is going to turn very nasty, indeed. So it’s a clarion call.

YV: The loudest call in a generation. I share all of your concern for the future, although I must challenge the analysis on which it is based. The openness that you describe has always gone hand in hand with severe restrictions: Nafta and the US-Mexico border; freedom of movement in Europe and Frontex along the Mediterranean. This is not a contradiction; it is the logic of a system that prizes the movement of capital over the freedom of human beings.

If we fail now to stand together – to rally around a new Bretton Woods, to deliver the investments that humanity and the planet so desperately need – my fear is that this system will only deepen its cruel logic. Surfing on the hose of liquidity unleashed by the policies like quantitative easing, the financial sector will increase its grip on the global economy; bankers are very good at getting rich from such volatility. So now is the time for us, here in Europe as around the world, to mobilise behind this shared vision of a global new deal. Because without it, the walls between us will only get taller and thicker: porous only to the money that flows through them.

Trump’s Anti-China Theory Implodes

The big lie of the Trump administration is that China is the cause of America’s problems. The meme has worked for a while, since it plays into American smugness that if China is succeeding, they must be cheating.

Trump and his right-wing allies upped this game recently by claiming the Covid-19 pandemic was the result of an accidental release from a Chinese laboratory and that China’s “cover up” blocked an effective global response.

According to CNN, the still-secret findings of the Five Eyes intelligence agencies (the US, UK, Australia, New Zealand, and Canada) pour cold water on this claim. So too does Trump’s top infectious disease expert, Dr. Anthony Fauci.

Yet just this past Sunday, Secretary of State Mike Pompeo asserted, “There is a significant amount of evidence that this came from that laboratory in Wuhan.”

Such charges by the Trump administration and by Sen. Tom Cotton of Arkansas are reckless and dangerous. They could push the world to conflict just as the Bush Administration’s lies about weapons of mass destruction in Iraq pushed the US into war in 2003.

If the Trump administration’s claims are shot down by the intelligence agencies and independent scientific analysis, as now seems likely, they recall the end of McCarthy era. Trump is our present-day Senator Joseph McCarthy, who uses lies and innuendos to scare Americans into submission. McCarthy’s notorious lawyer, Roy Cohn, who himself was a pathological liar, was Trump’s lawyer and mentor.

McCarthy knew no bounds to his lying, and eventually claimed that the US Army was soft on communists. The Army exposed McCarthy’s lies, and in immortal words, the Army’s lawyer Joseph Welch ended McCarthy’s career. “Until this moment, Senator, I think I never really gauged your cruelty or your recklessness … You have done enough. Have you no sense of decency?”

The right-wing charges against China made no sense. First, some on the US right charged that the coronavirus might have been a Chinese bio-weapon, a claim that was quickly shot down by scientists by analyzing the virus. Then they charged that the virus was accidentally released from the Wuhan Institute of Virology, with a subsequent cover-up. That too was illogical.

The virus was in circulation in Wuhan for weeks, and eventually killed thousands of Chinese people. In the confusion of the time, Wuhan authorities organized a major New Year’s event on January 18 that spread the virus. Why would the Chinese authorities have done that if they knew, and were covering up, a laboratory release from several weeks earlier? The actual answer is almost surely that they were still in the fog of war against the new virus.

In fact, neither the biology nor chronology support the laboratory-release story. Biologists note that the Wuhan lab did not even have the Covid-19 virus under study. The virus is of a kind that originates in bats, but Covid-19 may have had an intermediate mammal host, perhaps one that was traded in the Wuhan live animal market implicated in a majority of the cases with onset before January 1, 2020. The Wuhan market was shut down on January 1 after the initial outbreak. Perhaps we will learn that the earliest human cases were not even in Wuhan at all and were brought to the Wuhan market by an infected individual traveling from Western China.

Aside from the claim of a laboratory release, the administration and the right-wing media also charge that China covered up the outbreak more generally for weeks. Yet consider the record. The doctors in Wuhan first noted unusual cases of viral pneumonia in mid-December. Wuhan health officials notified the World Health Organization office in China on December 31. The China health agency called the US CDC on January 3. The genome was fully sequenced and published online on January 11, and Wuhan was locked down on January 23.

Given the inevitable early confusion about a new disease that had never before been seen, that is a rapid timeline. Were there mistakes? On December 30, Dr. Li Wenliang sent fellow doctors a warning of a new an outbreak that resembled SARS. His brave warning was correct in essence even as the disease turned out to be a new one. Yet the Wuhan Public Security Bureau forced Dr. Li to sign a statement admitting to disturbing the public order.

Tragically, Dr. Li succumbed to the disease in February. In March he was exonerated by a national investigation. Also, the Chinese authorities waited until January 20 to declare definitively that the virus transmitted human to human. This too was a mistake, a tragic delay of several days that may have resulted from an incorrect and unrealistic hope that closing the Wuhan live animal markets would stop the disease, or from more general uncertainties, or a desire not to disrupt the start of the Chinese New Year.

But rather than acknowledging the general rapid timeline culminating in the shutdown on January 23, Trump has played fast and loose with the facts, hitting at China at every turn. But that has been par for the course in Trump’s China bashing. For example, the administration has claimed repeatedly that Huawei and other high-tech Chinese companies are direct threats to US security, without providing any direct evidence. That’s why America’s closest allies such as the United Kingdom and Germany have gone in a different direction, continuing to do business with Huawei and to cooperate more generally with China.

The bottom line on the epidemic and Trump’s dismal failure is this. On December 31, 2019, China notified WHO. On January 23, China locked down Wuhan. On January 30, WHO declared a global public health emergency.

As of January 30, there was not yet one single Covid-19 death in the United States. The first is now thought to have occurred on February 6.

Now there are more than 71,000 US deaths.

There was plenty of warning, Messrs. Trump and Pompeo. To this moment, Americans have not fully gauged your recklessness. You have done enough. Have you no shame?

How To Avoid An Economic Depression

Whether or not we can avoid an economic depression will be determined by what we do now. Amid the pessimism it is crucial to appreciate that it is possible to avoid this outcome if we deploy all the right levers of economic policy. The European Central Bank (ECB) has underwritten the economy at borrowing rates below zero. As a result there should be no hesitation in borrowing more to tide us over.

We can also reprice existing debt to dramatically reduce the cost of outstanding debt, and we can boost demand to cushion the slump by putting money directly into people’s and businesses’ accounts.

Dropping money into accounts is the same as giving a tax cut, which is something we are accustomed to. We don’t seem to twig that money in our back pocket is the same whether it’s gifted to you in a direct payment or a tax cut. Much of our resistance to new ideas is conceptual as much as logical. This is not limited to economics.

The battleground for the economy is the small business sector, where not only the future of the economy lies, but also the fortunes of the new government. The small firms sector – companies with 50 staff or fewer – employs half of all Irish people. Such companies depend on cash flow, having neither deep reserves of cash nor access to investors’ funds.

Where assets are owned they are typically not liquid, perhaps consisting of a premises or specialist machinery, and are not easy to sell when cash is short. Small businesses tend to operate in highly competitive markets, such as hospitality and tourism, with slender margins.

Slender margins come back to modest capital, the perennial curse of the small business.

Where a company can charge a lot, generating margin, it normally has a unique product or some permanent comparative advantage. Such a company is tending towards monopoly, which is what all companies want, but usually they are reined in by their competitors.

In this way small companies are kept small by other small companies. Although there are examples of companies that break out, typically small companies swim in the same crowded stream.

Balance sheet

Access to capital is usually the crucial determinant of whether a company breaks away from the crowd. If you see a company growing much faster than its competitors in a highly competitive market, quite apart from the ambitions of the owner, you can bet that its balance sheet is more leveraged than the others.

A fast-growing company in good times is normally a fast-contracting company in bad times. In general, though, small businesses don’t break away from the pack as they are hemmed in by the forces of competition. However, they can be profitable, and they employ lots of people because they tend to be labour-intensive.

Small business owners are regularly vilified by low-grade ideologues and even lower-grade members of the intelligentsia, heroic. Though not big enough to join Ibec, and not represented by Ictu, they are the people who take the risks, and who turn off the lights when everyone else has gone home.

In James Joyce’s time they used to be called the civic bourgeoisie. Joyce, the arch modernist, championed this tribe by making his everyman hero, the ever-anxious, Leopold Bloom, a self-employed advertising copywriter.

Without them there is no economy. You can’t run an economy with multinationals and civil servants alone. You need the domestic private business sector in the middle.

In terms of the nitty-gritty, small businesses have fixed and variable costs. The variable costs are largely wages, and the fixed costs are loans, premises, rents and taxation. The ratio is usually about 60 per cent wages, and 40 per cent fixed costs. There are variations, but that’s a fair rule of thumb. Maybe in hospitality it’s higher in the wage side.

Up to now the Government has looked after the variable costs bit with its wage subsidy. But there’s no help on the fixed cost side to prevent small businesses going bust.

Today small businesses are drowning because they have no income. They have been shut down by the virus. No income with fixed costs to pay means bankruptcy and a run on cash. Creditors don’t get paid; they in turn can’t pay their creditors; and a debt spiral becomes inevitable.

Recognising this, the UK government last week announced that it would underwrite small business loans up to £50,000 at the same historically low interest rates afforded to the government. This is a big move that will be financed by the central bank.

The UK government will bear the short-term risk that some companies will go bust; the majority will not, precisely because they now have access to credit. It is a short-term loan, not a grant. It is administered by the UK banks in the normal way, except the banks will not be making their usual interest rate cut. In effect the banks have been subordinated to the UK government’s will for the duration of the crisis.

We should do exactly the same. The ECB has already made the cash available to the State and the banks at -0.75 per cent. It has also instructed all banks to stop giving out dividends to shareholders, signalling that capitalism has been suspended. It is urging us, via our Central Bank, to act.

The Irish Central Bank could immediately facilitate the repricing of all loans to zero. Technically the ECB has made this possible by a monetary instrument called a targeted longer-term refinancing operation (TLTRO), which gives credit at 0 per cent to banks.

The Irish State owns 70 per cent of AIB. It could instruct AIB to reprice all SME loans and mortgages to 0 per cent.

If the banks are worried about depositors not getting paid interest, the Irish Central Bank could make available one rate for depositors and one for debtors. The rate could be 1 per cent for depositors and 0 per cent for borrowers – a concept called dual interest rates.

Carry the cost

Then, you may ask, won’t the Central Bank have to carry the cost? Well, yes it would, but central banks can’t go bust. Have you ever seen a central bank go bust?

They don’t have balance sheets like normal banks. They can generate interest income for the banks indefinitely – that’s the magic of central banking. They make free money when they print the stuff. Its called seigniorage in monetary economics. Equally, they can run losses for as long as it takes the economy to recover. In an earlier career when I worked as an economist in the Central Bank we ran all these crisis scenarios.

All these options are still open. The only difference now is that the ECB is the lender of last resort, and it has already indicated that it will pick up the tab at less than zero interest rates.

There is no time to waste. The Central Bank has to act now, and the new government must make saving small businesses its number one priority.

What Asian Nations Know About Squashing COVID-19

The number of Americans who have died from Covid-19 now significantly exceeds the total US troop fatalities during the Vietnam War.

While the coronavirus continues to ravage the country, with confirmed cases exceeding 1 million and deaths rising by the day, some states are lifting stay at home orders in hopes of salvaging the economy. With so many lives at stake, it’s time the United States looked to those countries in the Asia Pacific region that have successfully controlled the pandemic to figure out how to save ourselves and the economy.

Several places in the Asia-Pacific, including Australia, China, New Zealand, South Korea, Taiwan and Vietnam, have reported suppressing the reproduction number — the average number of people who will catch the disease from a single infected person — to below 1, without the need for continued, widespread lockdowns.

They are now rapidly and successfully suppressing outbreaks of the disease by isolating those who are infected and their contacts who are likely to be infected.

It’s as if there are two worlds.

The United States has had more than 66,000 deaths, or about 20 deaths per 100,000 people. The number of deaths per 100,000 people reported in Western European countries is also very high: Belgium, 67; France, 37; Italy, 47; Germany, 8; Spain, 53; and Sweden, 26.

Meanwhile, the reported rates in Asia and Oceania are considerably lower: Australia, 0.4; China, 0.3; New Zealand, 0.4; South Korea, 0.5; Taiwan, 0.03.

Despite the stark disparities, America seems blind to the strategies other countries have used to control the virus. How is it that one part of the world is succeeding, while the other part refuses to learn the lessons of success?

On Tuesday, the The Wall Street Journal extolled the virtues of Germany’s efforts in comparison with the United States, France, Italy, and Spain, without even a mention that Germany’s mortality rate per million is itself more than 100 times higher than Taiwan and Hong Kong, and more than 10 times higher than in Australia, Japan, New Zealand and South Korea.

How have these countries succeeded to date?

Many have adopted nationwide public-health standards, using mobile technologies, professionalism of government, widespread use of face masks and hand sanitizers, and intensive public health services to isolate infected individuals or those likely to be infected.

Testing has played an important role, but has not been the be-all-and-end-all as is sometimes believed in the United States.

Vietnam has succeeded, for example, with contact tracing and an aggressive quarantine regime. When one person is confirmed positive, many of his or her close contacts — even those without symptoms — are isolated. As a result, Vietnam tested only a moderate number of people as a share of the population because it managed to contain outbreaks so effectively. Vietnam, with about 95 million people, has not reported a single Covid-19 death so far.

In New Zealand, the government is starting to ease lockdown restrictions as officials say they are now in a position to test and trace any new clusters of infection.

Here are the careful and precise words of New Zealand Prime Minister Jacinda Ardern. “There is no widespread undetected community transmission in New Zealand. We have won that battle. But we must remain vigilant if we are to keep it that way.”

There are similar success stories across much of the region.

South Korea, which has dramatically broken the epidemic with aggressive testing, contact tracing and basic public health measures such as thermal monitoring, has also employed digital technology in the fight against Covid-19, according to a new report. South Korea uses a text alert system to keep the public informed, while various apps allow people to track new Covid-19 cases, make doctor’s appointments or monitor hotspots to avoid.

The government also uses apps to monitor people in quarantine, through self-reported symptoms and location tracking. Despite the fact that these apps may raise privacy issues in the United States, the upshot is an economy that is open, albeit cautiously so, together with a suppression of new infections.

The US government has been utterly incapable of learning from these cases of success.

President Donald Trump is incompetent and his appointees at Health and Human Services, the US Centers for Disease Control and Prevention, and Transport Security Administration have failed to provide leadership. America First has put us first in deaths in the world, with tens of thousands of lives squandered as a result.

We can save ourselves and our economy, if we look to and learn from the achievements of other nations. And if the federal government continues to fail, as seems likely, our governors and mayors must step forward to do the job.