This week’s Economist (16-22 May) points out that even before the pandemic globalisation was in trouble, weakened by the financial crisis in 2008/9 and the Sino-American trade war, now it is “reeling from its third body blow in a dozen years.” The lockdown has resulted in sealed borders, even within the Schengen area, xenophobia and populism are on the rise and Britain looks set to crash out of the EU and become reliant on WTO rules. The Economist reckons that 90% of people live in countries with largely closed borders and that many countries will open up only to countries with similar health protocols. As the Economist says: “The underlying anarchy of global governance is being exposed.”
My friends in Africa are asking how is it that it is in Europe, the US, Russia and parts of Asia that the strongmen are coming to the fore – it used to be Africa. There is a crisis of governance in Europe revealed by the pandemic. Many countries in the Caribbean have had almost no cases. In South Africa there are to date 14,355 confirmed cases and 261 deaths. That is 261 deaths to date, we lost 170 just today, and 181 deaths in hospitals yesterday in England. Do the maths. As the Economist has pointed out the government has stopped showing the slide tracking UK deaths against other European countries at the daily press conferences. It was last shown on May 9th when Britain was the highest in Europe.
Many are now using the language of war to describe our response to Covid-19. It is therefore appropriate to look back to WWII, these are dark days for the UK. The Economist reports a poll published on April 25th, voters judging Britain’s government to have performed worse than those of China, Germany, France, South Korea, Japan and Australia. By May 5th, Italy and Spain had joined the list. In Europe, Britain’s early dismissal of lockdown was seen as reminiscent of the government’s disregard for the risks of leaving the EU – if the Economist is to be believed our reputation abroad is at a low ebb. It has been hard for several years to explain why we are leaving the EU, I am now asked why we have dealt the Covid-19 so badly.
The Daily Mail reports that “Some 39 per cent of the nation are supportive of the Government's handling of the crisis, down nine points on the 48 per cent recorded last week, while disapproval rose from 36 per cent to 42 per cent.”
The post-WWII settlement, Keynesianism, the NHS and the Welfare State lasted until the mid-seventies, Thatcherism and neo-liberalism followed. While the Labour Government is credited with the implementation, the consensus which made it possible was generated by the traumatic experiences of the inter-war depression which resulted in fascism and World War II. Most analyses of the Weimar Republic and the rise of fascism in Germany point to the weakness of effective democratic opposition.
Thankfully we are not yet in a comparable situation, but we do have a weak opposition, the four nations of the UK are beginning to tackle Covid-19 differently, there is a significant risk of a major depression, and in parts of Europe the radical right is gaining popularity and taking power. It was not all bad in the inter-war period. In the 1930s, when money was cheap to borrow as it is today, there was a national housing effort. Between 1920 and 1930 about 1.5m houses and flats were built in Britain, by the outbreak of war one-third of all houses in England & Wales had been constructed after WW1.
The post-war consensus endured for 30 years, followed by a return to neoliberal policies which culminated in the 2008-9 economic crash. The banks were bailed out, and austerity followed. That is again a risk. The Conservatives won the last election gaining northern seats, where electors were frustrated by the failure of successive governments to address the decline in transport infrastructure and employment in the North. The current government has begun to focus on regional development, reversing the ending of regional policy under Thatcher.
If Britain is to change as a result of Covid-19 we shall need beyond to unite beyond individual campaigns for change, a broad movement for reorientation and reconstruction will need to emerge. Short-termism bedevils UK politics. Time was when policy changes occurred when there was a change of government, in recent years policy changes happen with monotonous and damaging regularity, whenever the minister changes.
How as the post-WWII consensus formed? This is from Peter Sioman’s The Liberal Party and the Economy. 1929-1964 p.114
The opposition parties are weak. NGOs, unions, think tanks and lobby group are about their business and all power to their elbow. But we need to find a way to unite and engage with the law makers and those who determine budgets.
Can we use the Select Committees to create a consensus for change?
What are the three core elements of a new post-covid-war settlement?
The Covid-19 epidemic is an urgent crisis, spread between countries rapidly by people flying around the world. The British Foreign & Commonwealth Office has advised against all but essential travel "indefinitely". The UN World Tourism Organisation reported that 100% of tourism destinations now have travel restrictions in place. 45% have totally or partially closed their borders for tourists, 30% of destinations have suspended international flights either totally or partially. The EU closed all Schengen Borders for 30 days from 17 March. Aljazeera has a useful country by county list of border closures.
Covid-19 is not the only crisis confronting us. The UN Secretary General, Antonio Guterres, pointed out on Earth Day, that the toll taken by the virus is both "immediate and dreadful". But the crisis is also a wake-up call, "to do things right for the future." He argues that "Public funds should be used to invest in the future not the past." The subsidies to businesses which damage our environment must cease and polluters must pay for their pollution. Climate risks must be at the heart of all public policy.
Aviation has been hit very hard by the pandemic. It will be some time before significant numbers of people will be travelling again. Airlines are grounded. Airbus has suspended its dividend, cut production by a third and furloughed thousands of staff , Boeing is planning to cut 15,000 jobs, and Rolls Royce is to cut 8,000 jobs.
Is the crisis an opportunity?
The average age of a commercial aircraft is about 25 years for a short-haul aircraft and 35 years for a long-haul aircraft. Aircraft entering service now will still be flying post-2050, or at least that is the plan.. As other industries decarbonise, aviation will be responsible for an increasing proportion of global greenhouse emissions and guilty of worsening climate change.
The French government's rescue of Air France is contingent on a reduction in domestic flying and Air France becoming "the most environmentally respectful airline". "When you can travel by train in less than two and a half hours, there is no justification for taking a plane." M. Le Maire, France's Minister of the Economy and Finance, said the coronavirus crisis provided an opportunity to "reinvent our model of economic development to ensure it is more respectful of the environment".
2% of the fuel used by Air France's planes would have to be derived from alternative, sustainable sources by 2025 and by 2030 the airline would have to cut its carbon emissions by half per passenger and per kilometre from 2005 levels. more
The pandemic creates two opportunities for better aviation:
A note on the British Dimension
Back on 24 March the UK government ruled out immediate direct aid to the aviation sector. The Chancellor of the Exchequer Rishi Sunak said that firms must first tap all commercial avenues to raise funds, and that any assistance the state does provide will be structured to protect taxpayer interests.
British Airways* appears to have accepted that there is “no government bailout standing by” and is turning to cost cutting. BA is now owned by the International Airlines Group which is reported to be targeting BA rather than its other airlines because it has the highest costs in the group. BA is reported to be planning 12,000 redundancies; it currently has 42,000 employees. Branson has put Virgin Atlantic up for sale, the loss making airline has failed to meet the criteria for the UK Treasury’s Covid Corporate Financing Facility,
*Although BA still flies the flag it is important to remember that it merged with Iberia in 2011. The International Consolidated Airlines Group, S.A, is an Anglo-Spanish multinational airline holding company with its registered office in Madrid, As British Airways was the larger company, those holding shares in British Airways at the time of the merger were given 55% of the shares in the new, merged company. British Airways and Iberia ceased to be independent companies and instead became 100% owned subsidiaries of IAG.
These are extraordinary times, a return to business as usual looks improbable. The IMF is predicting that the 'Great Lockdown' will result in the worst recession since the Great Depression, and far worse than the Global Financial Crisis. They say that there is considerable uncertainty about what the economic landscape will look like when we emerge from this lockdown. Professor Neil Ferguson, of Imperial College London, has this morning said that social distancing will need to be maintained until a vaccine has been found. "If we relax measures too much we'll see a resurgence of transmission. We will have to maintain some level of social distancing indefinitely until we have a vaccine available." While it is fair to say that there is debate amongst epidemiologists Ferguson has been influential in advising the UK government.
Covid-19 is a global pandemic, but its impacts and the responses to it have varied significantly around the world. Just as countries imposed lockdown at different times, they are reducing restrictions on different timetables and in different ways. Of course, this reflects the diversity of our world, itself a significant driver of demand for tourism.
The diversity of impacts and responses will make a recovery for travel and tourism significantly more difficult for travel and tourism than for many other sectors. In my last blog, I wrote about how national governments and local authorities are acting to discourage and prevent domestic tourism and people visiting second homes. Destinations have closed to visitors and tourists, the lockdowns have significantly reduced even local travel. Google has been producing Community Mobility Reports featuring countries from Afghanistan to Zimbabwe – you might like to look yours up.
For tourism to be possible, the lockdown has to have been lifted at the same time in the source market and the destination. And the traveller needs to be confident that their destination is safe and that there is no risk of being trapped in the destination by a lockdown in the destination or at home. There are likely to be further lockdowns and compulsory quarantine for travellers whenever coronavirus spikes. The travellers will also need to be confident that the risk of catching the virus travelling to the airport, on the plane, coach, train or cruise liner is low. Fear will remain a major deterrent, and travel insurance may continue to be unavailable or expensive for cover for risks associated with the pandemic.
For anyone who knows The Gambia the photographs of the deserted Senegambia strip and the beach are distressing. There, and in so many destinations in the developing world, many families are dependent on employment in tourism or on selling goods or services to tourists from wealthier countries. They live hand to mouth, and the tourists are no longer arriving. For them, there are no government bailouts. On 19th March The Gambia banned flights from thirteen countries after recording its first case of coronavirus it prioritised the health of its people. Gambians and non-Gambians travelling from 47 countries in Asia, Europe and the Americas to The Gambia will undergo mandatory quarantine for 14 days. There are many countries in the developing world where livelihoods will be severely impacted by the loss of incomes from tourism and government revenues will be significantly reduced. The damage will be far greater than in their originating markets.
As China has moved to ease restrictions in Wuhan, a new coronavirus flare-up has arrived along its remote northern border with Russia in Heilongjiang province. The frontier has been sealed, and emergency medical units rushed to the area to prevent travellers from bringing the virus back from overseas. Across Europe, different nation-states are relaxing the lockdown and social distancing rules in a variety of ways.
Aviation has been hit hard. IATA reports that worldwide flights are down almost 80% IATA expects domestic flights to bounce back before international recovery, with revenue per passenger-km down 33% year on year by Q4, implying a 55% fall in passenger revenues. IATA is assuming that restrictions on international passenger arrivals will be reduced cautiously. EasyJet chief executive Johan Lundgren is forecasting that "restrictions on domestic flying would be lifted first, but with social distancing measures in place at airports and on flights for an unspecified time…. We don't know when flying will resume again. Nobody can tell what the level of demand will be when this comes back." It is expected that social distancing will be required onboard aircraft, and this will reduce passenger numbers on fights and necessarily increase ticket prices.
I have no crystal ball, and I have no more ability to forecast the future than anyone else, but the evidence suggests that an early return to business, as usual, is highly unlikely.
The sources used for this piece and much more information about the impact of Covid-19 on travel and tourism can be found here
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