COVID-19 and political risk
COVID-19 and political risk
New daily links to some of the best articles on the pandemic and its consequences
I don’t often recommend Tom Friedman’s work, but these are crazy times.
The title sums up the point of his latest column: “Our New Historical Divide: B.C. and A.C. — the World Before Corona and the World After.”
Before the coronavirus crisis hit, I was toying with writing a book about 21st-century political parties, but in light of this global epidemic it’s obvious that whatever nonfiction book you’re working on now, put it down. There is the world B.C. — Before Corona — and the world A.C. — After Corona. We have not even begun to fully grasp what the A.C. world will look like, but here are some trends I’m watching.
In typical Friedman fashion, there are overdrawn metaphors and too many quotes from CEOs, but his basic point is clear and well-founded. COVID-19 is going to have an enormous impact on the world in ways that we don’t yet know.
An infected bat was sold in a market in December and by March the volatility index almost doubled what its highs from the financial crisis.
I started this newsletter as a way of exploring different aspects of political risk that often go missed as the industry focuses on the big news story of the day. I wanted to focus on depth in a field often focused on breadth.
Now, that calculation has flipped. There is, at least for now, one gigantic news story but its implications go far and wide.
Things are moving faster with deeper consequences that we may be imagining. To grapple with this, I’ve been consuming a news from different areas every day. This newsletter will carry some of the best of what I read on a near daily basis.
I will still write longer pieces from time to time and will be producing podcasts on different aspects of political risk as well. But most of this newsletter’s issues will be focused on a curated look at the changing world.
I will try to focus on the non-health aspects of COVID-19: the political, economic, and business fallout of social distancing and closed borders. There are better places to get public health information and I’m not an epidemiologist - so I’ll wash my hands of that part of the crisis.
With that, here’s the first day’s set of stories.
Politics
Intelligence Chairman Raised Virus Alarms Weeks Ago, Secret Recording Shows - NPR
The chairman of the Senate Intelligence Committee warned a small group of well-connected constituents three weeks ago to prepare for dire economic and societal effects of the coronavirus, according to a secret recording obtained by NPR.
This is the sort of story that could have huge political ramifications - perhaps more than the Mueller Report.
On Feb 27, President Trump was publicly dismissing the impact of COVID-19. At a lunch with business leaders from his home state (who paid to be part of the group hosting the lunch), North Carolina Sen. Richard Burr was saying that the illness was more like the 1918 pandemic.
This matters not just for the content but because of the fears it confirms about how the government has handled the crisis:
Trump was going against what the rest of the government knew.
Burr, the chair of the Senate Intelligence Committee, knew what was happening. He predicted travel restrictions to Europe, school closures, and the military being called to help.
Burr spoke to well-connected and wealthy donors but wasn’t willing to raise the alarm publicly.
This will be a key question for every candidate before November. To borrow from Howard Baker, what did everyone know and when did they know it?
The fact that Burr may have illegally profited by selling stocks before the market crashed will also keep this story alive.
Economy
So Far, Stimulus Is Leaving Mass Transit Behind - Bloomberg
Mass-transit systems across the country are taking a violent financial hit from Covid-19. That’s because these systems are largely dependent on fees from riders which are, of course, way down.
This is not the biggest near-term economic story. But it could be that in a decade or two that we look to this moment as the time when a huge opportunity was missed.
Because of the particular regulations and governance structures of mass transit systems, they are dependent on ridership and local taxes - unlike highways. If this crisis turns into a deep recession, that revenue will dry up.
The federal government could make this the moment to invest in transit - or states and transit authorities could take advantage of ultra-low interest rates to issue bonds.
If they do, it could lay the groundwork for modern mass transit. If they don’t, our infrastructure will continue to decline.
Business
Responding to coronavirus: The minimum viable nerve center - McKinsey
The integrated nerve center is not a formulaic panacea. It is, rather, an efficient means of coordinating an organization’s active response to a major crisis. It is endowed with enterprise-wide authority and enables leaders and experts to test approaches quickly, preserve and deepen the most effective solutions, and move on ahead of the changing environment.
As with any management consultant writing, the above would make Hemingway jump blindfolded into a bullring.
But it describes a good practice. A business is a process for taking people’s time and material resources and turning it into profits. In a time of uncertainty, that process is disrupted.
As strange as it sounds to think of a business needing a “nerve center,” a group that is tasked with finding out what new problems are arising, what needs to be done to fix them, and doing them is of critical importance.
Every business should be willing to rethink the systems they have in place and looking for where a new turn would take them into trouble. It’s good practice in normal times, and necessary practice now.
Sports
CWI offer to host England Test series in Caribbean - ESPNCricInfo
One of the first signals to the public that this was serious was when the NBA suspended its league.
This story shows what might be happening after COVID.
The West Indies cricket board has offered to host the England’s home matches this summer. This could be both the England-West Indies series, as well as the England-Pakistan series.
While there are COVID-19 cases in the Caribbean, the virus would appear, at this stage, to have taken hold far more in the UK. There have, for example, been only two reported cases in each of Barbados and St Lucia and one in Antigua.
Since sports now get most of their revenue from TV rights, rather than in-person ticket sales, the finances wouldn’t take much of a hit. In fact, it could even be beneficial to those with money on the line: the time difference means that each match would go into UK primetime.
This doesn’t mean that this plan will happen. But it’s a sign that sports leagues are willing to be flexible to ensure that their core product - professional athletes competing in front of cameras with satellite feeds - can happen.
I mean, if the NBA came back with just a live stream from a practice facility, wouldn’t ESPN broadcast it?
About Two Lanterns
Two Lanterns Advisory is a political risk consultancy based in Boston, Massachusetts. For information on training courses in political risk, hiring a consultant, or commissioning reports, check us out at http://www.twolanterns.co.