Mandatory face masks are back in England. The fear factor has returned. After months of assuming the Covid-19 pandemic was all but over, the UK government has imposed new restrictions in an attempt to curb the spread of the new Omicron variant of the coronavirus.
Financial markets didn’t wait for the announcement from Downing Street. It is far too early to know how big a threat the new strain poses but investors assumed the worst as soon as the reports arrived from southern Africa. Share prices fell heavily, with airline stocks the hardest hit as travel bans were re-introduced.
Toughening up restrictions in the west in response to Omicron is a classic case of shutting the stable door after the horse has bolted, because for months the International Monetary Fund and the World Bank have been warning rich developed countries that an end to the pandemic requires poor people as well as rich to be vaccinated.
Gordon Brown has been demanding action from the G7 and the G20 since the start of the year, pointing out that the west has been stockpiling vaccines it will never use while people in Africa go unjabbed. The former prime minister’s warnings have gone unheeded.
At the World Trade Organization (WTO), attempts to secure a waiver on intellectual property rights so that countries such as South Africa can produce their own jabs are backed by the US but opposed by the EU, the UK and Switzerland.
Some rich countries argue that without patent protection pharmaceutical companies would have no incentive to produce new vaccines and that, in any case, poor countries lack the technical manufacturing expertise to turn the formulas into finished products. Neither the IMF nor the US is convinced by this argument and developing countries will voice their anger at “vaccine apartheid” at this week’s WTO ministerial meeting in Geneva.
Whatever the outcome of the intellectual property row, it is already clear multilateralism has failed the test. If ever there was a time for some international solidarity this was it, but the est has over-promised and under-delivered.
Sure, rich countries in Europe and North America have run up big bills fighting Covid-19 and are keen to reduce budget deficits, but penny-pinching on vaccines for developing countries was always going to be a false economy.
Either rich nations make it possible for poor countries to increase jab rates or they have to seal themselves off from the unvaccinated parts of the world. The fact that the first cases of Omicron have already been reported in the UK shows how difficult it is to do the latter.
While the first duty of any government is to ensure the safety of its own people, there are times when this can only be done by acting collectively and this is one of them. Some problems are global in nature.
Last month, the World Health Organization said less than 10% of the 54 countries in Africa were on course to hit the target of vaccinating 40% of their population by the end of 2021. Other variants are likely to follow.
The argument in favour of donating more vaccines or waiving intellectual property rights remains the same as it has been since the start of the pandemic: the right thing to do is also the self-interested thing to do.
That’s true even in the best-case scenario where vaccines provide protection against Omicron and the new strain proves to be less transmissible than currently feared. Why? Because while some countries – such as the UK – will try to adopt a wait-and-see approach others may be more risk-averse. Austria imposed tough new lockdown restrictions last week because its relatively low (by European standards) vaccine rate had led to a surge in the number of infections.
China, far more important to the global economy than Austria, tends to have a zero-tolerance approach to Covid and could decide to close factories and ports, thereby adding to already acute supply-chain bottlenecks.
The dilemma facing central banks will intensify. On the one hand, additional inflationary pressure will make the case for higher interest rates stronger. On the other, the possibility that demand will weaken as consumers and businesses grow more cautious would justify doing nothing. The Bank of England’s monetary policy committee receives briefings from Chris Whitty, the government’s chief medical officer, and in the short term what he says about the health implications of Omicron could be as important as any piece of economic data in determining what happens to borrowing costs.
And this is just the best case scenario. In the worst case, the new variant spreads quickly and vaccines offer only limited protection. Infection rates rise and governments feel obliged to once again impose restrictions on economic activity. Whitty thinks the public will be less willing to accept curbs on their personal freedoms than they were in the spring of 2020 and he is almost certainly right.
Those who have been vaccinated think they can live their lives normally. Many of the unvaccinated – the young, in particular – feel the risk of them getting seriously ill or dying from Covid is slim (which it is). Another lockdown would not just be economically damaging; it would be ignored by many and a hard political sell.
If the worst does happen, developed countries will have only themselves to blame because they had it within their gift to prevent new variants from emerging. There is still time to do the right thing. Rich nations need to ensure vaccine targets in poor countries are hit. They need to meet their financial pledges. They need to stop stockpiling vaccines they will never use. They need to reverse aid cuts. They need to waive patent protection. They need to stop being so short-sighted.