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Kristian Niemietz: What difference does the size of the state make to how is deals with Covid? None.


Kristian Niemietz is Head of Political Economy at the Institute of Economic Affairs

We are not having a very good pandemic so far.

With over 1,500 deaths per million people, Britain has one of the highest Covid death rates in the world. You can quibble a bit with those figures, but only at the margins. The number of excess deaths – that is, the number of deaths over and above what we would expect in a normal year – matches the number of Covid deaths far too closely for this to be a statistical fluke.   

In addition to having a higher Covid death rate, we have also had a worse economic downturn than most comparable countries. The UK economy shrank by about 10 per cent in 2020, compared to a European average of seven per cent, and about five per cent in North America and Japan.

And it is not as if we had lighter or shorter lockdowns than others. Our only redeeming feature so far has been the very fast approval, procurement and rollout of the vaccine. But there can be no denying that at least until the end of 2020, the UK has been coping extremely badly with this pandemic. The question is why.  

Britain’s left-wing commentariat was quick to ascribe all this to “austerity”. For example, Polly Toynbee, the Guardian columnist, talks about “an incapacitated public realm, naked in the blast of this epidemic. It wasn’t just the NHS and social care […] but every service crippled by cuts: public health, police, local government, the army and Whitehall – all denuded.” 

Owen Jones, the arch-Corbynite writer, asserts: “a state hollowed out by austerity and market dogma is, in large part, to blame: it cannot be stressed enough that it is mostly because of these ideologically driven failures that Britain has been – is – one of the worst-hit countries on Earth.”

Michael Marmot, the “inequality czar”, wrote a Guardian article with the self-explanatory title “Why did England have Europe’s worst Covid figures? The answer starts with austerity.” 

I could easily find dozens of similar quotes, but you get the gist. It is a highly fashionable opinion. But as is usually the case with fashionable opinions, it is also completely baseless.

“Small-state Britain” is a myth. Despite all the waffle about “austerity”, in 2019, UK public spending still stood at about 40 per cent of GDP. This is a perfectly normal figure for an OECD economy, neither unusually high, nor unusually low.

But that is beside the point anyway. As I show in my new report Viral Myths: Why we risk learning the wrong lessons from the pandemic (published by the Institute of Economic Affairs), the size of the public sector is completely unrelated to how well, or how badly, different countries have been coping with the pandemic.

If the size of the state were the critical factor, Belgium, where government spending accounts for over half of GDP – one of the highest levels in the world – should have been superbly prepared for the pandemic. Alas, they were not. With a Covid death rate of over 1,800 per million, they did even worse than Britain, and their economy also shrank by over eight per cent.

In Italy, where public spending accounts for almost half of GDP, both the Covid death rate and the economic “growth” rate are about the same as Britain’s. France, which has perhaps the largest state in the world (unless you count North Korea and Cuba) fared somewhat better than Britain, but not by a huge margin.

Australia and New Zealand, on the other hand, fared better than most developed countries, with public spending levels that are (moderately) lower than the UK’s. South Korea, with public spending levels of less than a third of GDP, was one of the star performers, and so were Taiwan, Hong Kong and Singapore, where public spending stands at less than a quarter of GDP.

It was not government largesse that saved the best performers. It was specific policy packages, containing measures such as early travel restrictions, a rapid roll-out of mass testing, effective test-and-trace-and-isolate systems, and a rigorous enforcement of quarantining requirements (combined with financial support to make this economically viable).

This is, of course, Captain Hindsight speaking. Being right with the benefit of hindsight is, admittedly, not very impressive. But it is still better than being wrong despite that benefit.





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