Fanning the Flames of Fear

Risk management is a relatively recent field of study. The boards of most major companies now have risk management committees charged with the responsibility of ensuring organisations are not exposed to risks that might be fatal to the company or at the very least seriously impede the company’s operation.

Our propensity to deal with risk varies markedly. It would be fair to say that many companies are risk averse. Now while that shelters them from unpleasant surprises on the downside it generally minimises their opportunities for large returns. Governments also fall into this category of being risk averse. They are loath to do anything that might alienate even their most conservative supporters.

But other people think differently. Venture capitalists make their living by investing in high risk opportunities that also have the prospect of high rewards. Those that I knew in my corporate career were, surprisingly, in many ways conservative also. For example they made only few investments but after long and considered analysis of the venture’s likelihood of success. One whom I dealt with told me that they ended up investing in three or fewer of every one hundred opportunities that were brought to his organisation. When I questioned him about what was the most significant factor that influenced their decision to invest in a new enterprise he had no hesitation in nominating the management capability of the start-up. Maybe it is a reflection of poor management competency that causes governments to be so risk averse as well.

Governments of course are ill-prepared to deal with risk. Australia has experienced many decades of favourable circumstances. Those of previous generations that had to deal with wars and depression were more resolute in the face of adversity and had an expectation they would be exposed to more risk than today’s generation. But the cost of attaining a level of security to satisfy citizens is considerably higher than they might expect and might be beyond what they are prepared to pay if they were aware of the costs.

In this essay I would like to discuss the flaws in government risk management involved in dealing with the COVID -19 epidemic.

When making expenditure decisions economists advocate we should assess the opportunity cost of making that decision. “Opportunity cost” is the forgone benefit that would have been derived by investing in an option not chosen. To optimally evaluate opportunity costs, the costs and benefits of every option available would need to be considered and weighed against the others. This is of course practically impossible. Normally it is deemed sufficient to perform a cost/benefit analysis of a range of alternative projects that might have plausibly been funded as an alternative. In their response to the COVID epidemic little consideration has been given by governments to opportunity cost at all.

As the King James Version of the Bible tells us, “In the beginning there was the Word”. Well in the beginning of the COVID pandemic the word was: Fear!

We were told we would have to prepare ourselves to deal with a virus that was not only very infectious but also lethal. We were warned that our hospitals would be overloaded with victims of this hideous disease. We were also warned that because those so afflicted would have their respiratory function compromised that there would not be enough ventilator units to cope.

Our Federal Government acted swiftly to close our international borders. Because the prime responsibility for health lies with the States the states acted variously to place restrictions on their citizens to minimise the likelihood of spreading this infectious disease.

We were also told that the restrictions were put in place to “flatten the curve” of new infections so that our medical facilities could cope. There was a prognostication that more than a hundred thousand Australians might die of COVID in the first year or two of the infection making its way through our population.

Now faced with all this uncertainty and the likelihood of dire outcomes for the population if decisive action wasn’t taken, it is hard to be too critical of the various governments’ responses. But it only took a couple of months of experience with the virus to appreciate that perhaps the initial precautionary measures were unduly restrictive.

After a month or two it was obvious that our hospitals weren’t overflowing and, except for the extremely vulnerable, there had been relatively few deaths. Our intensive care units were sparsely populated and the thousands of ventilators we had scrambled to acquire were hardly used. Yet in latter months, even though there have been no deaths, the Western Australian and Victorian governments saw fit to shut down their states again on the flimsiest of pretexts.

Somehow or other the goal posts seemed to have changed. Without levelling with the public, it seems we are now focussed not on “flattening the curve”, but with the impossible task of eliminating the virus.

The lock downs have caused vast economic damage resulting in high unemployment, the collapse of small businesses, children deprived of their schooling and the removal of many freedoms we would normally take for granted. We have witnessed the personal tragedies of people separated from their loved ones, denied access to proper medical attention and forced to suffer other indignities that would not normally be tolerated. We have seen over-zealous policing where citizens have been subjected to harassment and disproportionate fines for minor infringements of the restrictions imposed by governments. On top of this we have the psychological suffering that people have had to endure as a result of all these privations which might in the end ne more significant than we expect.

As well, at least in some states, policing has been politicised. We have seen preferential treatment given to those demonstrating for such “politically correct” causes as Black Lives Matter and those rallying against traditional Australia Day celebrations whilst other protests have been quickly shut down.

We have also seen preferential treatment given to the movement and quarantining of sports stars and celebrities whilst Australians caught overseas have faced significant barriers to their returning and citizens in various states seeking to travel between states for humanitarian reasons have had their travel plans thwarted.

But let us return now to my original point about opportunity costs.

It would appear from the growing evidence around the world that the simple acts of social distancing and good hygiene provide the best bang for our buck in taming the COVID pandemic. And now we have vaccines that should be effective in halting the persistent march of the virus.

Wearing of face masks when appropriate seems also to give some protection. But the ridiculous response of some governments who mandated wearing face masks when you are alone outdoors or when driving your car when you are the only occupant, defy reason.

Nevertheless, these are not high cost options. Social distancing is costly for the travel and hospitality industries but not unduly so for industry at large.

But after these simple responses the cost of the next step, lockdowns, is truly horrendous.

Evidence from the United States and Europe is starting to suggest that lockdowns have little long term benefits.

But more than this, lockdowns place citizens in virtual house arrest. Their freedoms are curtailed by the state in a rather arbitrary way without the informed consent of the populace. Rod Dreher in his book Live Not By Lies warns us of “soft totalitarianism” where our freedoms are gradually eroded by the state without the consent of the citizenry. Lockdowns in my mind are great exemplars of soft totalitarianism.

And lockdowns are very costly. Economists have suggested that, for example, every time Melbourne locks down it costs the Victorian economy at least a million dollars a day. Do we think that was worth it?

If the lockdown goes, say, for five days, that’s a cost of five million dollars. Is that the smartest way that Victorians could spend five million dollars? Might not there have been a better return if the money was spent on aged care services, child care, road upgrades, support for the homeless, cancer research or whatever?

We will never know because the government, in its rush to address the Coronavirus, never weighed up the other options. And why was this? Because the government is obsessed with convincing all its citizens that COVID is such an existential threat there really is no alternative but to commit to this expenditure.

And how did governments distract us from asking such questions (say about the impact on our freedom and the cost-effectiveness of the expenditure)? They distracted us with fear.

Let me give you an example.

When the UK variant of COVID appeared in Australia, Victorian Premier Daniel Andrews told us this strain was so infectious that it spread at “the speed of light”. He justified some of his more draconian restrictions on that basis. But subsequent data show us that this variant is only marginally more infectious than the original strain. Since it was detected in a quarantining traveller at Melbourne Airport’s Holiday Inn and acquired by a worker at the hotel who spent considerable time in the community while infected, it has in fact only been acquired by those in close contact with those so infected.

A number of premiers seem intent on instilling undue fear in the hearts of their communities to attain their unquestioning compliance. They trot out their medical experts to bolster community fears. The unconscious proposition they are putting to voters is that the pandemic is a lethal threat to everyone, and only the government has the expertise to understand its impact, and consequently only the government can save you.

This infantilising of the populace appears to be hugely successful. In an increasingly secular society, surprisingly, more saviours have arisen! Chief among them are premiers Andrews, Palaszczuk and McGowan. Premier Palaszczuk has already been re-elected by campaigning on her government’s handling of the COVID crisis. McGowan seems likely to be re-elected in WA with an overwhelming majority underpinned by his very conservative handling of the pandemic. And surprisingly, in Victoria, where the vast majority of deaths have occurred because of the government’s mismanagement, Daniel Andrews remains far ahead in the polls.

But surely now it is time to stand back and take stock. COVID-19 is not the bubonic plague or the Spanish Flu. In Australia it has hardly proved to be hugely lethal. (It is worth reminding ourselves that currently on average three Australians die every day from motor vehicle accidents, i.e. over a thousand per year whilst we have had only a little over 900 fatalities in total from COVID-19.) And indeed as our medical experience has grown and our treatment processes evolved, even fewer are dying from COVID-19 in Australia. Globally to date something like 2.5 million people have died from COVID-19 yet every year other communicable diseases kill more.

And of course now that the vaccination process has begun we can expect even fewer infections and as a consequence even fewer deaths. But we would be foolish to believe that the disease can ever be totally eliminated. This ambition is made even more difficult because of a reticence of some segments of the population to be inoculated.

Our ambition needs to be to totally open up our economy again but to have in place reasonable measures to deal with the inevitable occasional outbreak. It is surely not sustainable to shut down a whole state every time a new case is detected. As a result of this policy being applied in Victoria and Western Australia we have had regional communities severely compromised even though they have had no coronavirus infections at all and are often hundreds of kilometres away from where infections appear.

Emeritus Professor Steven Schwartz who is a Senior Fellow at the Centre for Independent Studies recently wrote:

Unfortunately this virus will be with us for years. Let us hope our leaders begin to consider trade-offs. If they stick to their current course, quarantines, lockdowns and border closures may go on forever.

And this would not be good enough. By and large our leaders have continued with the methodology they devised to protect us when we knew little about COVID-19 and quite rightly took strong measures to protect the population against what was purported to be a huge threat to our well-being. But we know a lot more now.

In Australia, Gladys Berejeklian has shown the way. After navigating the disaster of the Ruby Princess, she quickly built her government’s capacity to test and trace victims of the virus. She tried to ensure that she didn’t shut down her state’s economy. When infections arose she sought to isolate just the infected area and not broad geographical areas where many had little likelihood of being exposed to the virus.

But now we have vaccines and more successful treatments for the virus. Surely, using Scott Morrison’s analogy it is time to stick our heads out from under the doona and re-engage with the world. And surely we can be a little less risk averse while doing so. It is time to be less fearful and more rational with respect to our response to COVID-19.

12 Replies to “Fanning the Flames of Fear”

  1. As always a sound article but I am surprised at these two comments:

    1. And now we have vaccines that should be effective in halting the persistent march of the virus.

    2. Wearing of face masks when appropriate seems also to give some protection.

    Since the vaccine and genetic treatments, called vaccines, manufacturers, said from the beginning that they would not prevent infection, how on earth can they play a part in the march of the virus?

    And mask-wearing still has absolutely no scientific evidence to support it so it can give no protection, indeed, the masks are unhealthy, predisposing people as more than one medical expert has said, to bacterial respiratory infection.

    It important to be informed and honest on all counts, not just some.

    1. Whislt I must confess I am somewhat dubious about face masks Ros, at least the wearing of face masks is just an inconvenience whereas moving to the next step – lock downs – is a huge infringement of our personal freedoms.

  2. So pleased to live in NSW – and glad to have Gladys as our Premier!! As a consequence of the over-reactionary tendencies of those 3 premiers mentioned in your piece above, we are at risk now of being a country split into tribes. Once were a federation.

  3. I look regularly at website. When I see the mess that many countries are in, I am very pleased that our politicians and scientific staff are managing it here in the current manner.

    1. But Ken you live in Biloela and I live in Rockhampton. We have been little touched by Coronavirus and if you don’t have a burning desire to travel outside our state we would hardly know there is a pandemic. My daughter lives just outside Melbourne. Her life and that of her family has been severely impacted by the state’s disproportionate response. As I wrote in my blog I am not unhappy with the initial responses of government but now we know a bit more about the virus and its impact I think our governments shoud start treating us more like adults.

  4. I with you on every point Ted. There is also the fear of calling out the ridiculous. And some responses are plainly ridiculous, but furthermore, actually harmful to people. Sure I accept to some degree a blunt instrument had to be used, but when the plain ridiculous is played out before you (and imposed upon you, with penalties otherwise), I think, more people should have been courageous enough to call it out. In cycling racing for example (which I participate in), you are literally inhaling the sweat and exhalation aerosols of the rider in front. But after the race, the podiums are placed 1.5m apart and off course no handshaking is allowed. I also think leaders reactions, and the too quick to judge populous, compounded by social media, created a mob consensus of fear, and fear to be critical. The NZ prime minister is way overrated (but hey, that’s not a popular view, and risky to say). How many people have really died FROM the virus. How many people WITH the virus. I don’t trust the numbers we are presented. Particularly in this age of fake news.

    1. Great to hear from you again Matt. I am pleased you are still reading my blog essays.

      Your description of the irrational processes involved in your sport of cycling highlights the absurdity of some government responses.

      You also make another great point. Many of the deaths, particularly of older people, attributed to COVID-19 are because people died with the virus rather than from the virus. In the UK many people have sought to have death certificates of their loved ones changed for this very reason. Similarly there is some doubt about the reduced number of deaths caused by influenza this year. Certainly the precautions taken to reduce COVID infection also work to reduce infections by flu viruses. But many suspect that flu has killed more than recorded and COVID less than recorded in the race to exaggerate the statistics about COVID mortality.

      Thanks again for your comments.

  5. I studied risk in my masters-level program and acknowledge personal-attitude-to-risk is as individual as a fingerprint. That said, I agree with Ted that bureaucracies are predominately designed to be risk adverse and ill-prepared to deal with escalating risk issues.
    The fact the goal shifted from flattening the curve to eliminating without parliamentary oversight and debate is personally concerning. Remember the government declares or extends the Health Emergency and then the Chief Medical Officer legally is responsible for making the decisions. The democratic process seems to have been abandoned.
    I have always been concerned about what we are measuring. As Ted says, 900 deaths each year on the road yet no one blinks. Sam Waterson in the Australian (27-28 Feb 2021 p17) points out that the long term average of deaths in Australia due to respiratory disease is well withing the long term average. He questions if people who died from COVID may well had died anyway from existing respiratory disease.
    If these decisions were based on evidence, how do we account for the fact that in 2020 Queenslanders voted twice with tens of thousands voting early. Not one COVID case was recorded during those events.
    Have governments over-reached? In my opinion yes. Things need to change.

  6. Ted
    I think the rise of “soft” totalitarianism is a little “harder” than you make out. What a wonderful weapon/tool is fear, to achieve so much blinkered compliance by the majority that would have seemed totally ridiculous not so long ago. Even more remarkable is that governments across Australia have been re-elected after exercising such an over-reach of their powers. McGowan next.
    It is interesting to chart the progress of the massive fear campaign begun just over 12 months ago. Many of us were going to die from the novel virus, so said the models. No? then we must avoid putting our health system at extreme risk. Then when that didn’t happen, those same flawed modellers predicted mass immunity from vaccines which didn’t exist, and this has now become fact for most folks despite lack of any information about long-term side effects. Even worse, I understand those same modellers predicted that the new mutated strains of the virus were far more contagious/infectious, and authorities have reacted as expected with single-case lockdowns of entire populations.
    Should we long for a return to the good old days when we were all free to do almost anything we wanted within the law, hygiene was a social responsibility and not a crime, and there was proportionate (and honest) reporting of illness and deaths not the ghoulish daily spectacles we have witnessed? Or should we embrace the “new abnormal”? Not me.

    1. Thanks Dave for your comments. It seems as though risk averse governments are prone to over-react. But surprisingly the polls suggest that the population at large supports them!

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