Britains Virus Deadlock Is Indicative of a Bigger Challenge

Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include “The Only Game in Town” and “When Markets Collide.”

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Individuals and governments must live up to historical responsibilities.

Photographer: Tolga Akmen/AFP/Getty

Photographer: Tolga Akmen/AFP/Getty

Engaged in protracted negotiations with Greater Manchester, the British government finds itself stuck between a rock and a hard place. The main trade-off in play – between imposing tighter Covid-19 restrictions and risking defiant non-compliance, or stepping back and seeing a further escalation of infections – illustrates a bigger issue that several countries will face. Shifting from a generalized national approach to a more differentiated regional one is no panacea for controlling yet another wave of this terrible virus.

A week ago, Prime Minister Boris Johnsons government adopted a three-tier system due to wide regional differences in infection rates and projected hospital capacity. It makes analytical sense — why impose socio-economically damaging restrictions on areas with low cases？ Also, the approach worked well in some other countries, such as Australia, and, until very recently, Germany.

Yet what seemed desirable on paper is proving harder to implement.

The government‘s own scientific advisory group, or SAGE, questioned the plan’s operational efficacy. Many regions complained that it did not sufficiently take into account their individual conditions. Those subject to tighter restrictions lobbied hard for financial assistance to offset the damage to jobs and businesses. Unavoidably, the government has been dragged into time-consuming bilateral discussions with regions. In each subsequent negotiation, they look to do better than in previous rounds. The other regions then ask for more generous uniformity of treatment, as illustrated by Liverpool receiving an additional 30 million pounds ($38.7 million) in support funds.

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The longer the standoff with Greater Manchester goes on, the greater the risk that the approach will become unstable and an insufficiently effective and expensive muddled middle. It would increasingly risk being too partial and not timely enough to curb pressure on healthcare facilities, and yet also be viewed as unfair and unduly restrictive, fueling discontent and non-adherence. The end result for England could well be the proliferation of travel restrictions within and between regions (some are already in place between England and Wales) that ultimately lead to a tardy national lockdown.

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This isnt the only reason the government finds itself in a complex decision-making situation. The overall context is also a challenge, as it tries to strike an incredibly difficult balance between public health, socio-economic wellbeing and personal freedoms:

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• The very public disagreement with Greater Manchester is likely to embolden other regions to play hardball with London.

• It sends confusing signals, particularly to some segments of a population that already feel held hostage by a series of increasingly “random walk”-like measures for virus control.

• The alternative strong-arm approach, including short-term “circuit breakers,” is resisted by some of the government‘s supporters on the view that it’s overly restrictive, invites mission creep and can easily turn into an open-ended health and economic regime.

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• Meanwhile,economic pressures are building. Many are warning about a likely rise in unemployment and bankruptcies. Last week, credit-rating agency Moodys downgraded the U.K. one notch to Aa3, citing growing debt, eroding growth momentum, and increasing risk of longer-term scarring.

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These myriad difficulties are likely to be repeated in many advanced countries juggling a winter resurgence of the virus, a desire to minimize curbs on personal freedoms, and a delicate balance between lives and livelihoods. The bigger the region-center divides and the greater the mobility of people across regions, the harder it will prove to avoid health and socio-economic damage. More comprehensive lockdowns may result.

All of which speaks to a larger, uncomfortable risk, especially for those living in liberal democracies that rightly put a high value on individual rights.

Pending a vaccine or other forms of herd immunity, many of us will be increasingly vulnerable to confusing stop-go measures that risk falling short both in curbing Covid hospitalizations and deaths, and in limiting damage to jobs, incomes and the social fabric. Yet we can all play a larger role in reducing this risk by better embracing the collective responsibility to protect each others health, as well as our own.

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Every day, there‘s more evidence “living with Covid” means our own actions – adhering to basic health practices such as frequent head-washing, strict social distancing and wearing a mask – must play an important role in designing and implementing policies that are effective in containing disease and limiting socio-economic disruptions. At the end of the day, the choice is as much ours as any government’s. And the solutions will require that both work together, and live up to these historical responsibilities.

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:

Mohamed A. El-Erian at melerian@bloomberg.net

To contact the editor responsible for this story:

Patrick McDowell at pmcdowell10@bloomberg.net