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We forget that flu once plagued the economy as coronavirus does today | Business


It is a sobering thought that, according to the many well-researched accounts to have appeared in recent weeks, this Johnson/Cummings government seems to have been prepared to risk 250,000 deaths from the policy of “herd immunity”. This approach was, mercifully, laid to rest after the intervention of Professor Neil Ferguson, of Imperial College London, on 16 March. There followed the introduction of lockdown and what some of us prefer to call “physical distancing.”

Commentators have been putting the 27,000 or more deaths in this country attributed to the virus so far in the context of the 60,000 civilian deaths recorded during the second world war. This is bad enough. But I wonder how many people are aware that during the “Spanish” flu epidemic of 1918-21, which followed the first world war, the estimated loss of life in this country was, well, 250,000?

In passing, I think it is worth mentioning that, until the onset of the coronavirus plague, the impact of Spanish flu in this country had hardly seemed to dawn on the consciousness of subsequent generations. The first world war itself? Yes. The Great Depression? Of course. Spanish flu? Wasn’t that something that occurred in Latin America – Love in the Time of Cholera?

In drawing attention to the parallels between the economic consequences of Spanish flu and coronavirus, the National Institute of Economic and Social Research has performed a great service. In its May Economic Review, it calculates that output (gross domestic product) will fall by anything between 15% and 25% in this April-June quarter, as a result of the painfully obvious impact of the lockdown on economic activity we see all around us. This compares with a 12-15% fall in the second quarter of 1921.

But in 1921, output recovered by a similar magnitude – 12-15% – in the third quarter, and the NIESR is assuming that, as things ease up, a recovery in the second half of this year might mean that the actual reduction of GDP this year could be some 8% – still unnerving. However, the drop could have been 10% without the alleviation afforded by the furlough and other measures wisely unveiled by the chancellor, Rishi Sunak, and the Bank of England. Even so, unemployment is expected to soar to 10% by the end of this year, and there is already much hardship being suffered by innocent victims of the lockdown, or clampdown, on the economy.

Whichever way you look at it, this is a calamity. Which makes it all the more reprehensible that one of the first announcements the prime minister made after his return was that there was no way he would extend the timetable for our complete withdrawal from the EU, come what may.

Well, a lot of it has come already. The International Monetary Fund calculates a no-deal Brexit – which is what Johnson and Cummings are heading for – would add a further, permanent loss of 5% to the UK’s GDP, on top of the permanent damage from the virus, which the NIESR puts at £800bn, or some 10% of GDP. Citizens and businesses all over Europe are riven with uncertainty about the impact of Brexit.

I am well aware that these macroeconomic references to GDP mean little to average members of the public. But they should. One of the reasons why the NHS was so ill-prepared for the catastrophe – which is not to underestimate the heroic efforts doctors and nurses have been making since it struck – is that the NHS required a 4% increase in spending per annum after 2010 merely to cope with the cost of new technology and the ageing population; but it was granted a miserable 1% a year by Austerity Osborne.

People now hope that Johnson, having recovered from his near-death experience, means what he says about the value of the NHS. My good friend the historian Lord Hennessy, ever generous of spirit, spoke on the BBC of a “new Boris”.

I wonder. His former boss at the Telegraph, Sir Max Hastings, says: “He is a far more ruthless, and frankly nastier, figure than the public appreciates. I would not take Boris’s word about whether it is Monday or Tuesday.” He has sacked decent people in his cabinet and packed it with rightwing Brexiters.

In which context, I shall watch the progress of the relatively new chancellor with interest. He is doing his best to do the right, Keynesian thing with the economy, and has realised the importance of the state, having clearly listened to his Treasury advisers. The latter are not natural spenders, but know a calamity when they see one. They also know, or ought to, that concerns about heavy borrowing are overdone when there is a counterpart of increased savings from a public whose spending opportunities are limited by the clampdown.

Sunak should now also ask his Treasury officials whether he should reconsider his support for Johnson and Cummings over Brexit.

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