Commentary on Political Economy

Saturday 29 February 2020


China factory index hits record low on coronavirus
Manufacturing activity plunges while US signals interest rate cut could be on the cards

 Manufacturing activity in China plunged in February as the coronavirus took hold, the latest data revealed, while in the US the Federal Reserve has signalled interest rates could be cut in response to the “evolving risks” to the economy from the outbreak. The manufacturing purchasing managers’ index, one of the first official economic indicators published since the coronavirus outbreak, fell to 35.7 this month, an all-time low and down from 50 in January, China’s National Bureau of Statistics announced on Saturday. A figure below 50 indicates a contraction in activity compared with the previous month, as judged by the managers who fill in the PMI survey.  Separately Fed chair Jay Powell issued a statement during trading in New York on Friday afternoon saying that the central bank would “act as appropriate” to support growth. This helped the S&P 500 pare earlier losses to close down 0.8 per cent after being down as much as 3 per cent. That brought its loss for the week to 11 per cent. The 10-year Treasury note, which touched a low of 1.114 per cent following Mr Powell’s remarks, settled at 1.16 per cent on Friday as investors grew increasingly confident that the central bank would cut rates at least twice this year. Mr Powell has used the phrase “act as appropriate” in the past to signal willingness to use monetary policy to support growth.

 The collapse in China’s manufacturing activity, which exceeded its collapse during the global financial crisis of 2008, shows the severity of the problem faced by President Xi Jinping in restarting the world’s second-largest economy. Last weekend, Mr Xi told local officials that low-risk areas should “resume full production and normal life”.  “Today’s PMI data suggest that things are really bad, and the government is willing to report that,” wrote Larry Hu of Macquarie Capital in an analyst note. Mr Hu warned that gross domestic product growth in the first quarter would be worse than the consensus forecast of about 4 per cent year-on-year. He added the government might even report a contraction for the quarter, which would be the first time since the Cultural Revolution.

 February’s PMI reading was the lowest since January 2005, when the index was first released. The previous lowest was 38.8 in November 2008, during the financial crisis. Local officials face two conflicting objectives. They must control the outbreak, which has killed 2,835 people in China, and also get the country back to work after the extended lunar new year holidays, when most of the migrant workers upon whom China’s factories depend return to their rural homes. While the NBS announced that medium-to-large sized enterprises had a “work resumption rate” of 78.9 per cent, banking group ANZ said they were probably operating well below this in terms of capacity utilisation. Based on migration data, ANZ said the Chinese economy was operating at 20 per cent capacity, with about 50 per cent of workers back at their posts as of this weekend.  The new export orders sub-index dropped to 28.7, down 20 points from the previous month, because of cancelled and delayed orders as a result of the coronavirus, said Zhao Qinghe, NBS senior statistician.  Mr Zhao added that the work resumption rate was rising rapidly, and would lead to an increase in the PMI for March.

 Although some city governments have chartered planes, trains and buses to get their rural migrant workers back to the cities, many are unwilling or unable to return due to quarantines and roadblocks imposed by other local governments afraid of contagion.  Apple has issued a revenue warning because of the outbreak. Its contractor Foxconn assembles iPhones and other Apple products in China. Foxconn’s biggest iPhone plant has struggled to return to full production because of housing problems for workers in need of quarantine. Foxconn and other manufacturers often house workers on-site in large dormitories. Separately, Taiwan on Saturday reported a cluster of infections in a hospital, the most significant instance of local spread of the disease since the epidemic began. The infections brought Taiwan’s count of confirmed cases to 39. The hospital cluster raises concerns that Taiwan could face a mass outbreak such as in South Korea and Italy, which Taipei has so far avoided by taking strict and decisive measures. Iran on Saturday reported nine new deaths, bringing its total to 43. It has recorded 593 individuals testing positive for the disease so far. The outbreak, which began about 10 days ago in Qom, a holy city 140km south of Tehran with a population of 1.2m, has spread almost to all the country. Additional reporting by Jennifer Ablan and Peter Wells in New York and Monavar Khalaj in Tehran

Friday 28 February 2020


To Take On the Coronavirus, Go Medieval on It

Quarantines and restrictive measures served a purpose in the old days. They can now, too.
Credit...Giacomo Gambineri
Mr. McNeil is a science reporter for The New York Times and has covered epidemics since 2002.
There are two ways to fight epidemics: the medieval and the modern.
The modern way is to surrender to the power of the pathogens: Acknowledge that they are unstoppable and to try to soften the blow with 20th-century inventions, including new vaccines, antibiotics, hospital ventilators and thermal cameras searching for people with fevers.
The medieval way, inherited from the era of the Black Death, is brutal: Close the borders, quarantine the ships, pen terrified citizens up inside their poisoned cities.
For the first time in more than a century, the world has chosen to confront a new and terrifying virus with the iron fist instead of the latex glove.
At least for a while, it worked, and it might still serve a purpose.
The Chinese leader, Xi Jinping, was able to seal off the city of Wuhan, where the Covid-19 outbreak began, because China is a place where a leader can ask himself, “What would Mao do?” and just do it. The bureaucracy will comply, right down to the neighborhood committees that bar anyone returning from Wuhan from entering their own homes, even if it means sleeping in the streets.
The White House, in defiance of recent American history, also opted to go medieval by aggressive measures like barring entry to non-Americans who were recently in China and advising Americans not to go to China or South Korea.
Over the years, states and cities have imposed local quarantines, but there have been no national restrictions on entry since 1892, according to Dr. Howard Markel, a medical historian and the author of “Quarantine!”
In that year, President Benjamin Harrison ordered that all ships from Hamburg be kept offshore for 20 days because officials in that city, one of the world’s biggest ports, had lied about its cholera epidemic.
It apparently succeeded. The United States had cholera outbreaks in 1832, 1849, 1870 and 1910, but not in 1892.
Many public health figures consider shutting a nation’s doors to be an archaic tactic, and nearly impossible in the jet age.
But for Mr. Trump, such a move is natural. He was elected on a Build-the-Wall platform and in 2014, when a few heroic American medical workers got infected fighting Ebola in West Africa, he advocated leaving them there to die. (They were flown back, and survived.)

The Coronavirus Outbreak

  • Answers to your most common questions:

    Updated Feb. 26, 2020
    • What is a coronavirus?
      It is a novel virus named for the crownlike spikes that protrude from its surface. The coronavirus can infect both animals and people and can cause a range of respiratory illnesses from the common cold to more dangerous conditions like Severe Acute Respiratory Syndrome, or SARS.
    • How do I keep myself and others safe?
      Washing your hands frequently is the most important thing you can do, along with staying at home when you’re sick.
    • What if I’m traveling?
      The C.D.C. has warned older and at-risk travelers to avoid Japan, Italy and Iran. The agency also has advised against all nonessential travel to South Korea and China.
    • Where has the virus spread?
      The virus, which originated in Wuhan, China, has sickened more than 80,000 people in at least 33 countries, including Italy, Iran and South Korea.
    • How contagious is the virus?
      According to preliminary research, it seems moderately infectious, similar to SARS, and is probably transmitted through sneezes, coughs and contaminated surfaces. Scientists have estimated that each infected person could spread it to somewhere between 1.5 and 3.5 people without effective containment measures.
    • Who is working to contain the virus?
      World Health Organization officials have been working with officials in China, where growth has slowed. But this week, as confirmed cases spiked on two continents, experts warned that the world was not ready for a major outbreak.

Also, this virus’s speed and apparent lethality gave the experienced doctors in the White House Coronavirus Task Force reason to be nervous. It is spreading between nations very quickly. And, while data is still sketchy, some measurements indicate that its fatality rate might be close to that of the 1918 Spanish flu.
As a result, they endorsed dropping the portcullis and shutting off air links to China.
They even created quarantine stations on military bases, the equivalent of Venice’s island lazarettos, where, in the time of the doges, the infected awaited their fate outside the city.
This has led to much consternation among other public health experts, who argue that travel restrictions can cause more panic, misery and death than they prevent. Crowds may besiege hospitals, supercharging the infection rate. Closed borders can cut off vital medications like insulin. Factory and shop closings mean lost wages, hardships and possibly recession.
Also, quarantines feed racism and stigma.
Officially, the World Health Organization opposes travel and trade restrictions. It reiterated that even as it declared the epidemic a global emergency on Jan. 30.
But it now admits that they helped. The head of the W.H.O. team that visited China said this week that China “took one of the most ancient strategies and rolled out one of the most ambitious, agile and aggressive disease-containment efforts in history.”
The W.H.O.’s epidemic-modeling teams concluded that travel restrictions had slowed the spread of the virus outside China by two to three weeks.
For the United States, the delay was probably far greater. Air-traffic data shows that flights from China to the United States dropped much more than they did to Europe.
As of this writing, a single case not connected to any known transmission has turned up in California, but there are no indications of large outbreaks like those in Italy and Iran.
Harsh measures horrify civil libertarians, but they often save lives, especially when they are imposed in the early days.
The best-known modern example is Cuba’s AIDS epidemic. In the 1980s, Cuba and the United States were both hit hard by the AIDS epidemic. In Cuba, the virus first infected thousands of soldiers, doctors and nurses who had served in Africa.
The Castro regime’s response — roundly condemned by other countries — was to make H.I.V. tests mandatory, and to force everyone infected into quarantine camps. The camps were not hellholes: they had bungalows, gardens, theater troupes, medical care, more food than people outside often had, and less homophobia than gay men often faced in macho rural Cuba. But no one could leave, except for brief family visits with an escort whose main job was to make sure that no sex took place.
Meanwhile, the United States took a pro-legal-rights approach. Even offering an H.I.V. test was made illegal without a separate counseling session, which scared many away from testing. Although gay bathhouses were epicenters of transmission, there were long divisive fights over closing them.
After triple therapy was developed in the mid-1990s, most Cuban camps closed.
But the difference in lives saved by choosing brutality over freedom was stark: Cuba’s H.I.V. infection rate was for decades about one-sixth that of the American one. New York City and Cuba have roughly the same population. In the epidemic’s first 30 years, fewer than 2,500 Cubans died of AIDS. Over 78,000 New Yorkers — mostly gay men — did.
As the virus creeps closer, stark choices will arise. The United States cannot shut out the whole world. Even if all air travel were stopped, the virus could reach Latin America or Canada and enter over our land borders.
With luck, the extra time that China bought us by falling on its viral grenade will help produce a treatment or a vaccine. The threat will subside and reporters like me will be accused of alarmism.
Top American health officials now say “it is not a matter of if but when” the virus begins to spread here. But the American experience will not echo the Chinese one.
China has had imperial rule since 221 B.C. The United States, born of rebellion, prizes individual rights.
There will be no national lockdown. No threats to have anyone “forever nailed to history’s pillar of shame,” as one of Mr. Xi’s underlings warned those who hid cases of infection.
But local control — and the political factionalism that is endemic to democracy — can carry grave risks in the face of a crisis, Dr. Markel noted.
In 1918 and 1919, as the Spanish influenza swept across the country in waves, various cities reacted in their own ways.
Cities like St. Louis that reacted quickly — canceling parades and ballgames, shutting schools, transit systems and government offices, ordering the sick to stay home — ultimately had fewer deaths.
In cities like Philadelphia and Pittsburgh, which were paralyzed by political feuds or pressure from local businesses to avoid shutdowns, many more ultimately died.
To overcome the divisiveness that would imperil a cohesive national response, Dr. Markel said, “you need leadership from the top — and there has to be trust. In an epidemic, the idea that ‘everyone is entitled to their own facts’ is really dangerous.”


I was in Venice only a few days ago. As friends would know, I have often sought to explain and illustrate on these pages why "tourism is not an industry; tourism is servitude!"
This helpful little piece from the NYT illustrates what I am arguing, but does not explain anything. Let me just very summarily recapitulate the reasons why tourism is a disease from which we must free ourselves - especially we, Italians! - before we are enslaved by it and succumb to it like the Chinese Wuhan virus.

First, tourism has very low competitive barriers. 
Second, tourism has no scope for productive growth. 
Third, tourism can expand limited revenue only through a few execrable, contemptible subterfuges: cut costs, debase the offer of services, overcharge and cheat, mislead tourists, attract allied trades like drugs and gambling.
Fourth, tourism is a passive activity that encourages laziness, rent-seeking, mendacity, hyperbole, overconfidence, servile and menial habits, anti-entrepreneurial and anti-intellectual attitudes, criminal activities to supplement income and revenue.
Fifth, laziness and servitude encourage self-defeating and servile attitudes, leading to fatalistic and unpatriotic and criminal behaviour.
Sixth, unlike proper industrial technical activities, tourism is a dead end in terms of the rapid redeployment of industrial activities to other productive uses in case of emergencies like the Han Chinese Rat virus. (Example, if I produce gloves, in an emergency I can quickly re-tool and produce guns to defeat the Han Chinese Rats in a conflict!)
Seventh, whilst it saps the morale of its citizens, tourism bolsters and aggrandizes and exacerbates the morale and contemptuous attitudes of tourists toward the local population! This is evident with exquisite revolting virulence in the attitudes of Han Chinese Rats who visit our cities - subsidised by the Butchers of Beijing who have every interest in encouraging racist attitudes in their CCP henchmen and fellow-travellers and the wider Han Chinese Rat populace!

Enough for the moment. Enjoy the piece and check out the last two paragraphs!

The Ghost Town of Venice
Known for its crushing crowds of tourists, Venice is now all but empty, as travelers cancel over coronavirus fears.

By Anna Momigliano
·        Feb. 27, 2020

First came the flood, then came the disease.
Over the past three months, the tourism industry of Venice, has had its share of plagues.
Flooding in November, prompted by exceptionally high tides, led to mass cancellations. Now as Italy experiences the biggest coronavirus outbreak outside Asia, a similar and unwelcome drop-off is occurring.

According to Associazione Venezia Albergatori, an association of local hotel owners, 50 percent of reservations in Venice have been canceled in the last week. “The situation is dramatic for the industry,” said Vittorio Bonacini, the chairman.
Mr. Bonacini estimates that since November, Venetian tourism, worth 3 billion euro or about $3.3 billion, “has probably lost 800 million euro.” Since the outbreak began on Feb. 21, he said, Venice hotels have lost almost 70 percent of their international visitors.
Once plagued by overtourism, Venice is now ghastly empty.

Many of its world-famous hot spots, including Campo Santa Margherita and the Jewish Ghetto, are deserted. Few tourists can be seen even in the usually packed St. Mark’s Square.
“It feels like one of those zombie movies with one guy walking in an empty New York,” said Matteo Secchi, a hotel receptionist. He said tourists scared off by the virus are canceling their reservation up to April. “One month like this it’s something we can deal with, but if this drags for months, people will get unemployed.”

Venice is hardly the epicenter of the coronavirus outbreak in Northern Italy, and no lockdown has been imposed on the city.
As of Thursday, 650 coronavirus cases have been confirmed in Italy, according to the country’s civil protection agency (the ministry of health’s count, which lags the civil protection numbers, is slightly lower). The vast majority are in Lombardy, where 11 villages and small towns have been fully quarantined and the regional capital Milan has self-imposed a lockdown, with schools, gyms and public offices closed, while pubs and cafes are subject to an on-and-off curfew.

In neighboring Veneto, the confirmed coronavirus cases are 71, said the civil protection agency. Its regional capital, Venice, has closed only its schools and museums.
And, of course, the last two days of the Venice Carnival were called off, making international headlines.

Some Venetians didn’t approve. “I am not sure keeping museums and school closed, while bars and restaurants are open, sends the right message,” said Nicola Ussardi, a local salesman and community activist. “Consumption is taking a precedent over culture.”
When Gov. Luca Zaia canceled the carnival, critics accused him of spreading unnecessary panic. “It was a tough decision,” Mr. Zaia told the local newspaper Corriere Del Veneto, “but we have to put Venetians’ health above everything else.”

As some countries, including Israel and Ireland, are advising their citizens not to travel to Italy because of the outbreak, Venice is not the only city struggling with tourism.

Milan postponed its Design Week, its largest international draw, and Rome has reported thousands of traveler cancellations.
Earlier this week Federalberghi, the country’s association of hotel owners, issued a statement asking the government for tax relief for the duration of the emergency. The association still doesn’t have a solid estimate on the outbreak’s impact on Italian tourism, but its president, Antonio Barreca, said cancellation rates “varied from 30 to 70 percent, depending on the city.”

But what sets Venice apart is that, unlike Rome and Milan, the city has almost no other source of income but tourism, and has already suffered a 35 percent cancellation rate in November, which raises some questions about the resilience and sustainability of its economic model.

“For ages, we staked everything on mass tourism,” said Mr. Ussardi, the community activist. “We really need to rethink that.”