Timeline to the New Normal

By John Mauldin 


Like everyone else, I am weary of this pandemic mess. I want to travel freely, enjoy dinner with friends, hug, and shake hands.

And, of course, I want everyone who lost jobs and businesses to get them back. I wasn’t thrilled with the economy a year ago, but I’d take it again in a heartbeat.

Alas, that’s not going to happen. The recovery in front of us will be slower than we like. History shows improvement over time. Extreme poverty keeps dropping significantly every decade, although this year was a major setback. But that trend will eventually return. We will get through this. Yet the world on the other side will be different In some ways, it will be better, primarily because of technology innovation, but don’t expect the old world of 2019 to return. It’s gone

Having a general idea of where we are going is great, but how we get there is important, too. Today I want to make some informed speculation about how the next year will unfold. We’re going to reach some key decision points in the coming months and you’ll make better decisions if you think about them before we get there.

In a way, this is like getting the full schedule when your child goes to school. When you know when their vacations are, when grades come out, when games are played, it’s easier to do planning. Sometimes those dates are inconvenient, but it’s better to know the schedule.

Landmarks Ahead

I’ll start with some info from an excellent article from STAT, the healthcare news service founded by hedge fund titan John Henry. I find its pandemic coverage far more enlightening than the mainstream media.

On September 22, STAT ran a long article titled “The Road Ahead.” It lists 30 key moments that could either change the pandemic’s direction in the US, or at least give us important information. At this point no one knows what any of them will bring, but they are worth considering. I’ll share just a few.

October 2020: More Treatments Arrive

This month’s big news has been President Trump’s COVID-19 diagnosis and (so far) quick recovery. This is of more than political importance. Simply because of who he is, Trump received quick diagnosis and immediate, aggressive treatment with several different drugs. The apparently quick results may guide treatment decisions for other patients.

Unfortunately, it’s not yet possible for everyone to get tested as routinely as Trump, nor do these drugs exist in sufficient amounts for everyone. They have risks and might not work as well on other people. But, subject to further study, the president’s infection could actually help stimulate a breakthrough.

This applies to more than just COVID-19. Some of these treatments may help other problems or become the basis for even further innovation. We talk about how the whole pandemic has pulled forward many changes, like more people working at home. 

The massive focus on new treatments and vaccines for COVID-19 has opened important new pathways for future treatments of other diseases. Perhaps just as important, we see cooperative research on an international level that really is astounding. I hope this sets a new standard for future medical developments.

As for those tests? We may soon be able to administer our own tests using a piece of paper. It should be quite cheap and relatively quick. If the FDA approves, it will go a long way towards helping us feel comfortable about opening up our economy. If you can be trusted to test for your own pregnancy, surely you can be trusted to take any test for a virus. No doctor should be necessary.

More and quicker testing is a good thing, because the FDA now appears unlikely to approve any vaccine candidates at its next review meeting later this month. Effective treatments and cheaper tests will help buy time.

November 2020: COVID Meets the Flu

This is not particularly comforting, but forewarned is forearmed By this time next month, the regular flu season will be well underway. This is a problem because people with flu symptoms may think they have COVID-19 and panic. Or people with COVID-19 may think it’s just the flu and not seek treatment. Either would be bad. But on the bright side, the masks and social distancing might reduce flu transmission. Regardless, everyone should get a flu vaccine.

Later in November brings Thanksgiving, the beginning of the holiday season and family gatherings. Those will likely be smaller this year, with less long-distance travel. We should hope everyone is careful enough not to spark any large outbreaks. And don’t forget, many retail and service businesses depend on this season to make the year.

December 2020: Vaccine Trial Data

By December, several of the vaccine trials should have gathered enough data to either seek FDA authorization or go back to the drawing board. This could be a real turning point if at least one candidate looks safe and effective.

The companies and government are already working on plans to distribute the vaccine quickly. Experts like to say, “Vaccines don’t stop disease, vaccinations do.” I’m optimistic but this is not guaranteed. And if we don’t have a vaccination campaign on the launchpad in December or early next year, those 2021 economic recovery forecasts may need a review.

February 2021: Super Bowl

Disruption of professional and college sports has been one of the pandemic’s larger economic consequences. These are huge industries, accounting for many jobs. The Super Bowl is the apex of that pyramid. Will it be back?

I don’t know the answer to that, but whatever happens will tell us something. It may be a bit like Groundhog Day and the weather. If the game happens with a (even somewhat decreased) live audience in the stands, it will likely mean we at least think we have the upper hand on the virus. If the game is cancelled or happens with major modifications, it will signal continued “winter.”

March 2021: One Year Since US Outbreak

March will mark a year since the initial European and US outbreaks. This will be a sad milepost, particularly for those who lost loved ones, but also an important data point for the survivors.

First, we will want to see how many of the early patients remain immune. There have been scattered reports of reinfection in those who recovered. Researchers expect they will retain some immunity but it may recede with time. The answer has important implications for vaccine development and herd immunity calculations. 

An interesting side development is that some prior infections with coronaviruses (they typically cause what we think of as the common cold and some flus) seem to infer immunity in some people. 

We are not sure why. Some researchers think that as many as 20 million people in the US have already been infected but with no symptoms. Again, why? There are so many things about this virus we simply do not know.

Second, we know many COVID-19 survivors continue to have ongoing health problems. How long do those last? Are they permanent? This matters a great deal, too, and by mid-2021 we should have a better grasp on it.

April 2021: Vaccines Round 2

Right now, our attention is on the promising vaccines that are being fast-tracked through the clinical trials and approval process. Many others are also in the pipeline, and by next spring we should start seeing results. Many of this “second generation” are truly novel approaches in vaccine science. I know it’s the optimist in me, but I will not be surprised if we find a new vaccine technology that is clearly superior

Some current technologies require the vaccine to be stored at super-cold temperatures below -100 Fahrenheit. Newer candidates can be refrigerated normally or even kept at room temperature. That would vastly reduce the logistical challenges.

Meanwhile, by April, the first-gen vaccines should be widely available. The question will then become whether people will want them. The math is stark here. Success = Effectiveness x Uptake. A 50% effective vaccine given to 50% of the population will mean only 25% of us are protected, and we won’t know exactly which 25%. That’s not enough to change public attitudes and end the recession. Vaccines will be a big economic story next year.

By the way, the fact that a vaccine may only be 50% effective is not a reason to not take it. While it may not keep you from getting COVID-19, it could significantly reduce the symptoms if you are infected. Along with better therapies, your chances of a mild case and a quick recovery should be better.

Bluntly, I intend to get a vaccine. The question will be which one? I am simply going to get my doctor, Dr. Mike Roizen, to tell me what he is taking. I will let you know his take on why he chose one particular vaccine and what he thinks about the others.

May 2021: Summer Begins

Traditionally, May is a festive month filled with weddings, graduations, Mother’s Day and the Memorial Day holiday, which in the US marks the beginning of summer break. May 2020 wasn’t like that. What about May 2021?

At this point, we just don’t know. For it to be anything like normal, we will have to have spent winter and spring distributing a very effective vaccine to most of the population. That, combined with better treatments, might bring people back into circulation. It would mean everything went perfectly for months on end. Possible? Yes. Likely? Ask me next May But if I were running a business that needs more foot traffic, etc., I would start preparing now for a better summer next year.

July 2021: Olympic Dreams?

The summer Olympics, originally set for July 2020 in Tokyo, have been pushed back a year. Japan has been relatively unscarred by the virus, but bringing so many people from so many places together during a pandemic is risky. And there is also the question of what happens before the games. Will athletes around the world have had safe opportunities to train?

I think the best case is the Olympics will be a skeletal event, with small crowds and all athletes vaccinated and quarantined prior to competing.

By August 2021, we should have some level of clarity. Vaccinations will either be happening, or not. If the former, then we should be returning slowly to normal. Maybe by 2022 we’ll be shaking hands and hugging again. But what will be left, economically?

Disruptive Caution

The sequence outlined above may sound bleak. Obviously, we all wish it could end sooner. Possibly it will. A lucky break here or there could change everything for the better. But realistically, I think we should prepare for the disruption to continue well into 2021. And possibly beyond, if vaccine development takes longer than expected.

But the nature and degree of disruption is a matter of choice. I don’t expect to see more lockdowns like last spring. We’ve learned a lot since then. Masks, distancing, and staying outdoors effectively reduces the spread to manageable levels. But these measures don’t stop the spread, so many will remain cautious.

This caution is what disrupts the economy. It’s perfectly rational, too. If you have the option of working from home, you would probably rather do that than enter a building loaded with possible COVID-19 carriers. But it’s a problem for the restaurants, convenience stores, and other businesses you might have visited near your workplace. Multiply by a few million and here we are.

I can only think of two things that would change these decisions If we have effective COVID-19 treatments, people will raise their risk tolerance. If you get infected, your doc just prescribes some pills and you stay home a couple of weeks. Not great, but most people would take the chance. The other is a widely accepted, effective vaccine. You can act more or less normally if you know most of the people you encounter aren’t a threat to your health.

Nevertheless, the behavioral changes that sparked this recession will last a few more months, at least. Some may become permanent. How many people, prevented from going to their gym, have now adopted home workout regimens that are just as effective? Not to mention more convenient and less expensive? They may never go back to their gyms.

Ditto for personal care. Many people who once visited expensive salons to cover their gray roots have learned how to do it themselves. Ditto for manicures, skin care, etc. Bad news for salons and spas.

And conventions? Conferences? I think they’ll be back. I know our Strategic Investment Conference will be an in-person event as soon as possible. But when we had to pivot online this year, it wasn’t so bad and was actually better in some ways. 

I suspect many large events will never return to their previous size. That will be costly for airlines, hotels, restaurants, taxis, and more. Concerts? Bars? 

Again, they’ll reopen but probably with fewer customers. Which means these segments will shrink. Others will grow to take their place. That’s what entrepreneurs do

I know it sounds cold-blooded, but nearly every airline other than Southwest has been in and out of bankruptcy. I fully expect air travel will be higher by the middle of this decade than in 2019, though the flight path there might be a little bumpy.

But that’s the long run. We have a big problem right now.

1930s Ahead

More than two months after the enhanced unemployment benefits ended, close to 25 million American workers are still on the rolls. This is a little bit off the high, but not much. Their initially generous benefits are much smaller now.

Meanwhile, the small businesses that received forgivable PPP loans in April/May/June have reached, or soon will reach, the end of their 24-week spending period. Whatever isn’t forgiven will convert into regular loans. In trying to help these businesses, the government will have saddled some with even more debt.

Further up the food chain, the airline payroll support program just expired. The large carriers are laying off thousands of workers. Retailers continue to close stores and reduce headcount in locations that lack customers.

Hauntingly, we are starting to see layoffs outside the retail and service sector, at companies like Allstate and Raytheon that weren’t directly affected by the pandemic. 

They are shedding jobs anyway. This suggests the recession is spreading into parts of the economy it hadn’t previously touched.

All this is going to continue as long as COVID-19 remains enough of a threat to create the behavioral changes described above. We are at least another six months, and that’s a best case, from a vaccine being widely distributed enough to help. Thousands of businesses and millions of workers don’t have the means to wait. They just don’t. They spent their cash and are running out of choices.

As you know, I am as worried about the massive government debt as anyone. 

But if we don’t spend what it takes to support the economy until a vaccine is ready, the next few years could rival the 1930s. I don’t say that lightly. I see a wonderful long-term future but a giant canyon is opening between then and now.

I am not privy to whatever negotiations may be happening in Washington. Obviously the two parties see things differently. That’s not new. Until recently, they found ways to compromise. They need to do it again, or we will all pay a heavy price.

And that price will be borne by those least able to afford it. I shared this Washington Post chart last week. Which recession doesn’t look like the others?


Source: Washington Post


While talks have again resumed, there has been no announcement as I write this letter. 

Both sides will have to compromise or we will be looking at a straight up depression and a return to the March/April economic crisis. Here’s hoping they can figure it out. 

My base case is that they will.

I am a believer in human innovation and ingenuity. I think we will figure this out. I think the path of technology and innovation, especially in the biotechnology sector, is such that none of us in 2030 or 2035 will want to go back to the good old days of 2019. 

The medicine and healthcare of 2019 is going to look like the Stone Age in the 2030s. 

So will much of our current technology.

We’re going to have to rationalize the debt sometime before 2030. I believe that life-extending technology and perhaps even the Holy Grail of age reversal technology will be available within the next decade or so.

As I filed this letter, I saw that MIT researchers are working on a “universal” flu vaccine. It targets a protein that rarely mutates, and might lead to a longer-lasting and more effective flu vaccine. Such research is happening everywhere. Some of it will bear fruit and make all our lives better.

But in the meantime, we have to get through 2021. In a few weeks we will go to the polls and decide on which direction we want to take for the next four years. The problems will be the same whoever wins. 

The pace of recovery might be different. But entrepreneurs and businesses will figure it out. Innovation will grow. There will be more opportunities to put money to work in new technologies in this next decade than in the last 50 years combined.

So even as we deal with the problems in front of us, let’s not take our eyes off the prize of innovation in the future. Over the coming months, I will be spending more time talking about the potential of the future (often happening right in front of us) and less about the problems of the present. Join me.

Changes and Corrections

First, a major correction. Totally my fault. In my banana bread recipe for last week I incorrectly said ½ cup of sugar in the bread portion. It should have been 1½ cups. Ironically, a few people wrote me saying they like the recipe. I might even try less sugar. It would make my doctor and my weight scales happy.

I mentioned that I miss traveling and meeting with people. I seem to be trying to make up for it by spending more time on the phone than ever. And Zoom or Skype or Teams. That is a change for sure. And I’m in the midst of one of my largest business changes ever, which I hope is going to be a big benefit for you. It is frustrating and taking longer than I would like, partly because everyone is more or less confined to their own ZIP Code. Things just don’t happen as quickly. But we are making progress on what I think will be a much better way for us to work with each other in the future.

In the meantime, it is time to hit the send button. Have a great week and call an old friend or two.

Your seeing opportunities everywhere analyst,



John Mauldin
Co-Founder, Mauldin Economics

Latin America’s new poor

The pandemic is reversing years of progress on poverty and inequality



When the pandemic struck Piura, a city in northern Peru, Daniel Zapata had a part-time job with a market-research firm. The 250 soles ($70) he earned each month paid his fees for a three-year course in business administration. 

The covid-19 recession put paid to all that. The firm closed, and Mr Zapata, who is 20 and lives with his parents and a sister, has dropped out of his course. The family received 760 soles in emergency aid from Peru’s government. 

With the lockdown over, they must now rely on his sister’s income as a teacher and his father’s pension from his years working in a textile factory. Having lived in the lower tier of the middle class, Mr Zapata is staring into the abyss of poverty. 

He expects little from a general election next April. The politicians “just squabble instead of working”, he says.

The covid-19 recession is wiping out years of progress in Latin America in reducing poverty and inequality. Economists are starting to map just how big the social impact of the pandemic is. Many governments imposed long lockdowns. 

These hit the half of Latin Americans who work in the informal economy especially hard. 

Many countries, like Peru, offset part of the lost income by expanding aid programmes for the poor. That has helped, but not enough, and the effort may not be sustainable.

The region’s economy is set to contract by 9.1% this year, according to the un Economic Commission for Latin America and the Caribbean. It says this means that 45m people will fall back into poverty (taking the total to 37% of the population). 

The unemployment rate has risen by 2.2 percentage points to 11% in nine countries for which data are available, reports the International Labour Organisation. Income from wages in Latin America has fallen by 19.3%, compared with a global average of 10.7%.

These estimates assume that everyone loses a similar percentage of their income. Nora Lustig, an Argentine economist, and her team at Tulane University in New Orleans have used household surveys to figure out which groups lost most income and received most from the government in Brazil, Mexico, Colombia and urban areas of Argentina, which together account for two-thirds of Latin America’s total population. 

They think that the biggest losers will be among the region’s lower-middle classes, because social-assistance programmes provide an income floor for many of the poor. 

Although women, people of African descent and indigenous people are more likely to lose income, they get more help from the government.

Ms Lustig thinks the year may end with up to 21m new poor in those four countries. 

The impact is much bigger in Mexico than in Brazil, because of contrasting government policies. Mexico’s president, Andrés Manuel López Obrador, claims to be of the left and his campaign slogan was “First, the poor”. Yet he has done little to help the poorest. 

Brazil’s president, Jair Bolsonaro, is of the hard right. But his government has made an emergency payment of $107 per month for five months, from which 53m people have benefited. The payment has been extended, though at a lower amount. Poverty could even decline slightly in Brazil, while in Mexico there will be at least 10m new poor.

The damage will last. 

Even though the pandemic is at last starting to wane in the region, at least for now, and many economies have opened up again, demand will remain depressed because firms and workers are poorer. 

Researchers at the Inter-American Development Bank have found that in past recessions when gdp contracted by 5% or more unemployment took an average of nine years to return to its previous level.

If the pandemic-induced recession is like previous ones it will reverse much of Latin America’s recent progress in reducing inequality. The causes of that progress included the spread of education and more demand for unskilled workers in service businesses. 

The hard-up are much less likely to be able to work remotely. The many low-skilled workers whose jobs require personal contact—waiters, hairdressers, etc—may see their wages fall.

Even before the pandemic Latin America was highly unequal. Frustration at slow economic growth, lack of opportunity and a discredited political class showed in the election of populist presidents and in street protests in several countries. 

The tens of millions of new poor have reasons for resentment. They may not accept their fate quietly. 

That is likely to shape the region’s politics for years to come. 

One million and counting

The covid-19 pandemic is worse than official figures show

But some things are improving, and it will not go on for ever

As the autumnal equinox passed, Europe was battening down the hatches for a gruelling winter. Intensive-care wards and hospital beds were filling up in Madrid and Marseille—a city which, a few months ago, thought it had more or less eliminated covid-19. 

Governments were implementing new restrictions, sometimes, as in England, going back on changes made just a few months ago. The al-fresco life of summer was returning indoors. Talk of a second wave was everywhere.

Across the Atlantic the United States saw its official covid-19 death toll—higher than that of all western Europe put together—break the 200,000 barrier. India, which has seen more than half a million new cases a week for four weeks running, will soon take America’s unenviable laurels as the country with the largest official case count.

The world looks set to see its millionth officially recorded death from covid-19 before the beginning of October. That is more than the World Health Organisation (who) recorded as having died from malaria (620,000), suicide (794,000) or hiv/aids (954,000) over the whole of 2017, the most recent year for which figures are available.


Those deaths represent just over 3% of the recorded covid-19 cases, which now number over 32m. That tally is itself an underestimate of the number who have actually been infected by sars-cov-2, the virus which causes covid 19. Many of the infected do not get sick. Many who do are never seen by any health system.

A better, if still imperfect, sense of how many infections have taken place since the outbreak began at the end of last year can be gleaned from “serosurveys” which scientists and public-health officials have undertaken around the world. These look for antibodies against sars-cov-2 in blood samples which may have been taken for other purposes. Their presence reveals past exposure to the virus.

Various things make these surveys inaccurate. They can pick up antibodies against other viruses, inflating their totals—an effect which can differ from place to place, as there are more similar-looking viruses circulating in some regions than in others. They can mislead in the other direction, too. Some tests miss low levels of antibody. Some people (often young ones) fight off the virus without ever producing antibodies and will thus not be recorded as having been infected. As a result, estimates based on serosurveys have to be taken with more than a grain of salt.

But in many countries it would take a small sea’s worth of the stuff to bring the serosurvey figures into line with the official number of cases. The fact that serosurvey data are spotty—there is very little, for example, openly available from China—means it is not possible to calculate the global infection rate directly from the data at hand. But by constructing an empirical relationship between death rates, case rates, average income—a reasonable proxy for intensity of testing—and seropositivity it is possible to impute rates for countries where data are not available and thus estimate a global total.

The graphic on this page shows such an estimate based on 279 serosurveys in 19 countries. It suggests that infections were already running at over 1m a day by the end of January—when the world at large was only just beginning to hear of the virus’s existence. In May the worldwide rate appears to have been more than 5m a day. The uncertainties in the estimate are large, and become greater as you draw close to the present, but all told it finds that somewhere between 500m and 730m people worldwide have been infected—from 6.4% to 9.3% of the world’s population. The who has not yet released serosurvey-based estimates of its own, though such work is under way; but it has set an upper bound at 10% of the global population.

As the upper part of the following data panel shows, serosurvey results which can be directly compared with the diagnosed totals are often a great deal bigger. In Germany, where cases have been low and testing thorough, the seropositivity rate was 4.5 times the diagnosed rate in August. In Minnesota a survey carried out in July found a multiplier of seven. 

A survey completed on August 23rd found a 6.02% seropositivity rate in England, implying a multiplier of 12. A national serosurvey of India conducted from the middle of May to early June found that 0.73% were infected, suggesting a national total of 10m. The number of registered cases at that time was 226,713, giving a multiplier of 44. Such results suggest that a global multiplier of 20 or so is quite possible.

If the disease is far more widespread than it appears, is it proportionately less deadly than official statistics, mainly gathered in rich countries, have made it look? Almost certainly. On the basis of British figures David Spiegelhalter, who studies the public understanding of risk at Cambridge University, has calculated that the risk of death from covid increases by about 13% for every year of age, which means a 65-year-old is 100 times more likely to die than a 25-year-old. And 65-year-olds are not evenly distributed around the world. Last year 20.5% of the eu’s population was over 65, as opposed to just 3% of sub-Saharan Africa’s.

But it is also likely that the number of deaths, like the number of cases, is being seriously undercounted, because many people will have died of the disease without having had a positive test for the virus. One way to get around this is by comparing the number of deaths this year with that which would be predicted on the basis of years past. This “excess mortality” method relies on the idea that, though official statistics may often be silent or misleading as to the cause of death, they are rarely wrong about a death actually having taken place.

The excessive force of destiny

The Economist has gathered all-cause mortality data from countries which report them weekly or monthly, a group which includes most of western Europe, some of Latin America, and a few other large countries, including the United States, Russia and South Africa (see lower part of data panel). Between March and August these countries recorded 580,000 covid-19 deaths but 900,000 excess deaths; the true toll of their share of the pandemic appears to have been 55% greater than the official one. 

This analysis suggests that America’s official figures underestimate the death toll by 30% or more (America’s Centres for Disease Control and Prevention have provided a similar estimate). This means that the real number of deaths to date is probably a lot closer to 300,000 than 200,000. 

That is about 10% of the 2.8m Americans who die each year—or, put another way, half the number who succumb to cancer. And there is plenty of 2020 still to go.


Add to all this excess mortality unreported deaths from countries where record keeping is not good enough to allow such assessments and the true death toll for the pandemic may be as high as 2m.

What can be done to slow its further rise? The response to the virus’s original vertiginous ascent was an avalanche of lockdowns; at its greatest extent, around April 10th, at least 3.5bn people were being ordered to stay at home either by national governments or regional ones. 

The idea was to stop the spread of the disease before health-care systems collapsed beneath its weight, and in this the lockdowns were largely successful. But in themselves they were never a solution. They severely slowed the spread of the disease while they were in place, but they could not stay in place for ever.

Stopping people interacting with each other at all, as lockdowns and limits on the size of gatherings do, is the first of three ways to lower a disease’s reproduction number, R—the number of new cases caused by each existing case. 

The second is reducing the likelihood that interactions lead to infection; it requires mandated levels of social distancing, hygiene measures and barriers to transmission such as face masks and visors. 

The third is reducing the time during which an infectious person can interact with people under any conditions. This is achieved by finding people who may recently have been infected and getting them to isolate themselves.

Ensuring that infectious people do not have time to do much infecting requires a fast and thorough test-and-trace system. Some countries, including Canada, China, Germany, Italy, Japan, Singapore and Taiwan, have successfully combined big testing programmes which provide rapid results with a well developed capacity for contact tracing and effective subsequent action. Others have foundered.

Networks and herds

Israel provides a ready example. An early and well-enforced lockdown had the expected effect of reducing new infections. But the time thus bought for developing a test-and-trace system was not well used, and the country’s emergence from lockdown was ill-thought-through. 

This was in part because the small circle around prime minister Binyamin Netanyahu into which power has been concentrated includes no one with relevant expertise; the health ministry is weak and politicised.

Things have been made worse by the fact that social distancing and barrier methods are being resisted by some parts of society. Synagogues and Torah seminaries in the ultra-Orthodox community and large tribal weddings in the Arab-Israeli community have been major centres of infection. While unhappy countries, like Tolstoy’s unhappy families, all differ, the elements of Israel’s dysfunction have clear parallels elsewhere.

Getting to grips with “superspreader” events is crucial to keeping R low. Close gatherings in confined spaces allow people to be infected dozens at a time. In March almost 100 were infected at a biotech conference in Boston. Many of them spread the virus on: genetic analysis subsequently concluded that 20,000 cases could be traced to that conference.

Nipping such blooms in the bud requires lots of contact tracing. Taiwan’s system logs 15-20 contacts for each person with a positive test. Contact tracers in England register four to five close contacts per positive test; those in France and Spain get just three. 

It also requires that people be willing to get tested in the first place. In England only 10-30% of people with covid-like symptoms ask for a test through the National Health Service. 

One of the reasons is that a positive test means self-isolation. Few want to undergo such restrictions, and few are good at abiding by them. In early May a survey in England found that only a fifth of those with covid symptoms had self-isolated as fully as required. The government is now seeking to penalise such breaches with fines of up to £10,000 ($12,800). That will reduce the incentive to get tested in the first place yet further.

As much of Europe comes to terms with the fact that its initial lockdowns have not put an end to its problems, there is increased interest in the Swedish experience. Unlike most of Europe, Sweden never instigated a lockdown, preferring to rely on social distancing. 

This resulted in a very high death rate compared with that seen in its Nordic neighbours; 58.1 per 100,000, where the rate in Denmark is 11.1, in Finland 6.19 and in Norway 4.93. It is not clear that this high death rate bought Sweden any immediate economic advantage. Its gdp dropped in the second quarter in much the same way as GDPS did elsewhere.

It is possible that by accepting so many deaths upfront Sweden may see fewer of them in the future, for two reasons. One is the phenomenon known, in a rather macabre piece of jargon, as “harvesting”. Those most likely to succumb do so early on, reducing the number of deaths seen later. 

The other possibility is that Sweden will benefit from a level of herd immunity: once the number of presumably immune survivors in the population grows high enough, the spread of the disease slows down because encounters between the infected and the susceptible become rare. Avoiding lockdown may conceivably have helped with this.

On the other hand, one of the advantages of lockdowns was that they provided time not just for the development of test-and-trace systems but also for doctors to get better at curing the sick. In places with good health systems, getting covid-19 is less risky today than it was six months ago. 

ISARIC, which researches infectious diseases, has analysed the outcomes for 68,000 patients hospitalised with covid-19; their survival rate increased from 66% in March to 84% in August. The greatest relative gains have been made among the most elderly patients. Survival rates among British people 60 and over who needed intensive care have risen from 39% to 58%.

This is largely a matter of improved case management. Putting patients on oxygen earlier helps. So does reticence about using mechanical ventilators and a greater awareness of the disease’s effects beyond the lungs, such as its tendency to provoke clotting disorders.

Nouvelle vague

As for treatments, two already widely available steroids, dexamethasone and hydrocortisone, increase survival by reducing inflammation. Avigan, a Japanese flu drug, has been found to hasten recovery. 

Remdesivir, a drug designed to fight other viruses, and convalescent plasma, which provides patients with antibodies from people who have already recovered from the disease, seem to offer marginal benefits.

Many consider antibodies tailor-made for the job by biotech companies a better bet; over the past few years they have provided a breakthrough in the treatment of Ebola. The American government has paid $450m for supplies of a promising two-antibody treatment being developed by Regeneron. 

That will be enough for between 70,000 and 300,000 doses, depending on what stage of the disease the patients who receive it have reached. Regeneron is now working with Roche, another drug company, to crank up production worldwide. But antibodies will remain expensive, and the need to administer them intravenously limits their utility.

It is tempting to look to better treatment for the reason why, although diagnosed cases in Europe have been climbing steeply into what is being seen as a second wave, the number of deaths has not followed: indeed it has, as yet, barely moved. The main reason, though, is simpler. 

During the first wave little testing was being done, and so many infections were being missed. Now lots of testing is being done, and vastly more infections are being picked up. Correct for this distortion and you see that the first wave was far larger than what is being seen today, which makes today’s lower death rate much less surprising (see data panel).


The coming winter is nevertheless worrying. Exponential growth can bring change quickly when R gets significantly above one. There is abundant evidence of what Katrine Bach Habersaat of the who calls “pandemic fatigue” eating away at earlier behavioural change, as well as increasing resentment of other public-health measures. 

YouGov, a pollster, has been tracking opinion on such matters in countries around the world. It has seen support for quarantining people who have had contact with someone infected fall a bit in Asia and rather more in the West, where it is down from 78% to 63%. In America it has fallen to 55%.

It is true that infection rates are currently climbing mostly among the young. But the young do not live in bubbles. Recent figures from Bouches-du-Rhône, the French department which includes Marseille, show clearly how a spike of cases in the young becomes, in a few weeks, an increase in cases at all ages.

As the fear of such spikes increases, though, so does the hope that they will not be recurring all that much longer. Pfizer, which has promising vaccine candidate in efficacy trials, has previously said that it will seek regulatory review of preliminary results in October, though new standards at the Food and Drug Administration may not allow it to do so in America quite that soon. 

Three other candidates, from AstraZeneca, Moderna and j&j, are nipping at Pfizer’s heels. The j&j vaccine is a newcomer; it entered efficacy trials only on September 23rd. But whereas the other vaccines need a booster a month after the first jab, the j&j vaccine is administered just once, which will make the trial quicker; it could have preliminary results in November.

None of the companies will have all the trial data they are planning for until the first quarter of next year. But in emergencies regulators can authorise a vaccine’s use based on interim analysis if it meets a minimum standard (in this case, protection of half those who are vaccinated). 

Authorisation for use under such conditions would still make such a vaccine more credible than those already in use in China and Russia, neither of which was tested for efficacy at all. But there have been fears that American regulators may, in the run up to the presidential election, set the bar too low. 

Making an only-just-good-enough vaccine available might see social-distancing collapse and infections increase; alternatively, a perfectly decent vaccine approved in a politically toxic way might not be taken up as widely as it should be.

In either case, though, the practical availability of a vaccine will lag behind any sort of approval. In the long run, billions of doses could be needed. A global coalition of countries known as Covax wants to distribute 2bn by the end of 2021—which will only be enough for 1bn people if the vaccine in question, like Pfizer’s or AstraZeneca’s, needs to be administered twice. The world’s largest manufacturer of vaccines, the Serum Institute in India, recently warned that there will not be enough supplies for universal inoculation until 2024 at the earliest.

Even if everything goes swimmingly, it is hard to see distribution extending beyond a small number of front-line health and care workers this year. But the earlier vaccines are pushed out, the better. The data panel on this page looks at the results of vaccinating earlier versus later in a hypothetical population not that unlike Britain’s. Vaccination at a slower rate which starts earlier sees fewer eventual infections than a much more ambitious campaign started later. At the same time increases in R—which might come about if social distancing and similar measures fall away as vaccination becomes real—make all scenarios worse.

By next winter the covid situation in developed countries should be improved. What level of immunity the vaccines will provide, and for how long, remains to be seen. But few expect none of them to work at all.

Access to the safety thus promised will be unequal, both within countries and between them. Some will see loved ones who might have been vaccinated die because they were not. Minimising such losses will require getting more people vaccinated more quickly than has ever been attempted before. 

It is a prodigious organisational challenge—and one which, judging by this year’s experience, some governments will handle considerably better than others.  

America’s history war looms over the presidential election

Trump’s call for ‘patriotic education’ creates a dilemma for the Democrats

Gideon Rachman 

© James Ferguson


Was the American nation founded in 1776 or 1619? It sounds like a question for an exam paper. But it has become an issue in the 2020 presidential election.

In a speech at the National Archives, earlier this month, Donald Trump, promised to create a “1776 commission” to “restore patriotic education to our schools” and to counteract any effort to brand America as a “wicked and racist nation”. 

The US president explicitly took aim at the 1619 project — a much-discussed series of articles published by the New York Times and named after the year that the first enslaved Africans arrived in the colony of Virginia.

That project was a reframing of US history that placed slavery and racial oppression at the heart of the American story. By contrast, Mr Trump argues that liberty should be seen as the central theme of American history. So his commission would reassert 1776 — the year of the Declaration of Independence — as America’s foundational moment.

A reasonable person might conclude that US history is complex and that stories about freedom and oppression are not mutually exclusive. 

But this is raw politics. By highlighting the 1619 project — at a time of heightened racial and social tension — Mr Trump aims to put Joe Biden, the Democratic party’s presidential candidate, in a tricky situation. 

The question for the Democrats is how simultaneously to acknowledge the centrality of racial injustice in the American story while promoting the positive vision of the country that is expected of would-be presidents.

The publication of the 1619 project, which began last year during the 400th anniversary of the beginning of American slavery, sparked enormous interest and controversy. 

Many schools and universities embraced it and moved to incorporate it into their curricula. It provided some of the intellectual background for the explosion of emotion and activism associated with the Black Lives Matter movement. But it also attracted criticism — some of it from unexpected quarters. 

The scholarship behind the project was questioned in a series of interviews with prominent historians run by the World Socialist Web Site — whose class-based view of American history was at odds with the race-based view promoted by the 1619 project.

Several of these historians went on to write a critical letter to the New York Times — taking issue with the project and demanding corrections. One key dispute was about the claim — made in a passionate and closely-argued introductory essay by Nikole Hannah-Jones — that a primary motivation for the American Revolution was the desire to preserve slavery in the US, at a time when it was coming under pressure in Britain.

The critical historians, who included some of the best-known scholars of the American Revolution, branded this claim as simply untrue. But some younger academics have supported the 1619 project’s argument. 

They point, in particular, to Dunmore’s Proclamation, issued by the British governor of Virginia in 1775, promising freedom to slaves willing to flee their owners and join the British in fighting the American rebels. 

This academic debate rumbled on and the New York Times has since amended some of the project’s original language to soften its claims, without pulling back from its central argument.

This debate is of much more than academic significance. It goes to the heart of the claim made by the Black Lives Matter movement that slavery and racism have been integral to the American project from the beginning — and underpinned even some of its most celebrated moments, such as the Declaration of Independence and the writing of the constitution. 

American conservatives understand that if a new generation embraces that view it will be easier for the BLM movement to win support for deep social and structural change.

But, as well as seeing danger in the 1619 project, the Trump camp sniff political opportunity. It provides a perfect chance to brand the Democrats as “anti-American”. 

The Republicans know that Americans tend to be pretty patriotic and would like to embrace the pilgrims’ view of their nation as a “shining city on a hill”.

Mr Biden has yet to show how he will handle Mr Trump’s call for patriotic education and the president’s attack on the 1619 project. If the Democratic nominee is put on the spot, he could borrow the framing used by former president Barack Obama at this year’s Democratic convention. Without referring to the 1619 controversy directly, Mr Obama acknowledged that the US constitution “wasn’t a perfect document. It allowed for the inhumanity of slavery”. But, he continued, “embedded in this document was a north star that would guide future generations . . . a democracy, through which we could better realise our high ideals”.

Mr Obama’s approach was a humane and nuanced way to reconcile the tensions between the dark 1619 view of American history and the soaring 1776 version. 

Unfortunately, humane and nuanced are not words commonly associated with the Trump era.

Do not be surprised if the politics of history resurface during this presidential election. This is not just a skirmish in the “culture war”. It is also an argument about the nature of the US and about political power. 

As George Orwell noted in his dystopian novel 1984: “Who controls the past, controls the future. Who controls the present, controls the past.”

Can China Still Export Its People’s War?

Dusting off Mao’s Cold War playbook won’t help Beijing.

By: Phillip Orchard


Earlier this summer, as the Indian government scrambled to curry support both at home and abroad for its bare-knuckle standoff against China in the Himalayas, it began reviving another unrelated longstanding grievance with Beijing: China’s alleged covert support for Maoist rebels in restive parts of northeastern India. 

Among other recent incidents, according to New Delhi, China deserved blame for a deadly attack on security forces in June by far-left separatist groups in Manipur state, which borders Myanmar. 

In July, ahead of the Myanmar government’s latest long-odds attempt to broker peace with the alphabet soup of ethnic separatist groups ringing the country, the powerful chief of the Myanmar military called out China for arming some of the most powerful rebel groups. 

Two weeks ago, Indian media, citing sources in both the Indian and Myanmar governments, reported that China has been smuggling arms to various insurgent groups in the region through a network of militants along the Myanmar-Bangladesh border. Among other goals, according to the sources, Beijing was seeking to derail Indian-backed infrastructure projects in Myanmar that ostensibly would compete with China’s Belt and Road Initiative.

These sorts of developments – combined with warnings from the U.S. and some of its friends (including India) that Beijing is using Chinese apps like TikTok and college student groups to spread communist ideology in the West – certainly make it sound like the Cold War is rising from the grave. 

And China may indeed have increasing cause to dust off its Mao-era playbooks for waging proxy wars and stoking ideological struggle abroad. 

The country, after all, is in quite a strategic fix as outside powers grow ever-warier of its rise and ambitions. It’ll need every tool available to keep its adversaries divided, preoccupied and leery of confrontation. 

The fractured geography of South and Southeast Asia gives it numerous internal cleavages in strategically important states on its periphery to try to exploit.

In truth, though, outside of a couple of areas in its periphery where its covert influence operations have never stopped, Beijing is neither capable of nor particularly interested in playing a global, U.S.-Soviet-style covert destabilization game. 

Nor would it realistically have any hope that the modern Communist Party’s ideology could cultivate a substantial base of supporters, much less inspire other countries’ masses to remake their governments in Beijing’s image. 

But its new weapons of influence are arguably far more potent and better-suited for the hostile environment it’s facing today than Maoism ever was.

Little Red Books for Everyone

Under Mao, exporting revolution was a core part of Chinese strategy. With the country war-torn, preoccupied with reclaiming its buffer states and perpetually dealing with internal crises of its own making, it couldn’t afford to do much in the way of providing substantial material support to like-minded groups in distant proxy conflicts on the scale of the Soviets and the Americans. 

To the extent it did get its hands dirty, it was typically in places where it feared either spillover across its border or occupation by a foreign military power – e.g., Indochina and Korea. It also occasionally provided limited amounts of arms, financial assistance and training to sympathetic militant movements farther abroad, but never on a scale needed to truly tip the balance of power.

Mostly, though, China leaned on Maoist ideology as a way to cultivate foreign support. And it was a powerful tool indeed. The beauty of Maoism is its ability to mean whatever any particular class struggle-based political movement needs it to mean. It is not a particularly rigid or coherent doctrine or blueprint for seizing and wielding power so much as a loose, sometimes self-contradictory collection of sayings, ideas and diagnoses of social ills. 

But what this sacrifices in intellectual rigor it more than makes up for in mutability. It provides a neat framework for understanding power structures and social discontent, plus organizing principles that can be incorporated easily into other ideologies. 

Elements of Maoism, for example, can be seen in an unlikely range of social movements, including nominally religious ones like the Taliban, the Islamic State and Iran’s Revolutionary Guards.

Still, Mao’s ideological reach rarely had much effect on China’s strategic position. It did not, for example, prove capable of eradicating deeper geostrategic tensions with Moscow, Hanoi or even Pyongyang. 

Beijing was never able to wrest control of the global communist movement from Moscow amid the Sino-Soviet split in the 1950s and 1960s, and most communist countries fell firmly in the Soviet sphere as a result – including those in China’s backyard. 

Maoist successes in places like Cambodia under the Khmer Rouge and to a much lesser extent Indonesia were relatively short-lived, ultimately ushering in hostile governments and a long-standing wariness of Chinese interference.

Thus, almost as soon as Mao was gone, Deng Xiaoping set about implementing a dramatic reorientation of China around principles that would resonate in just about any capital: getting rich and keeping enemies at bay through traditional realist strategic maneuvering. 

And this meant facilitating a rapprochement with the West, particularly the U.S., which meant China couldn’t be seen as aiding Soviet aims by exporting revolution. Maoism was still emphasized at home, of course – or at least the principles Deng thought would cement party rule were emphasized. 

But Beijing largely shut down Mao-era efforts to foment class struggle and support like-minded militant groups abroad.

Game’s the Same, Just Got Less Fierce

China has stuck with this approach ever since, albeit with a few notable exceptions – none of which were driven by ideological affinity. It continued to support the Khmer Rouge even after it was driven from the capital, for example, but this was a strategic move in coordination with the U.S. aimed mainly at countering Soviet-backed Vietnam. 

Since China still felt compelled in 1979 to invade Vietnam, where Chinese forces performed poorly, and since it cemented Vietnamese influence in Phnom Penh for a generation, one could argue this backfired. Backing an ousted regime that killed off 20 percent of its population in just four years is not exactly a great way to engender public goodwill or position yourself as a long-term friend to regional governments.

Another exception is in Myanmar, where well-armed rebel groups in the country’s north and northeast have long taken advantage of borders with China (and, to a lesser extent, Thailand) to raise funds, sell contraband, procure weapons, flee attacks and so forth. 

The strongest of these groups, the United Wa State Army, grew out of the armed wing of the Communist Party of Burma, which had received substantial Chinese support in the 1950s as Mao sought to stamp out a fledgling insurgency being organized by U.S.-backed remnants of the Kuomintang in Shan state. Since then, the UWSA has grown into one of the world’s most powerful drug trafficking organizations. 

While it’s believed to have begun sourcing most of its arms from China about two decades ago, Beijing’s relationship with the group is uneasy, at best. 

China isn’t particularly thrilled to have such a group corrupting officials and moving narcotics across its border – particularly one that’s proved strong and independent-minded enough to occasionally frustrate Beijing’s moves to use it to gain leverage over Naypyitaw. And it's an open question just how much of the weapons and financial support that it gets from China is actually sanctioned by Beijing. 

Nonetheless, to keep Myanmar from moving too close to India or the West, Beijing has been keen to position itself as an indispensable power broker in the interminable peace process between Naypyitaw and the rebel groups. 

Since nearly all of the major ethnic armies in Myanmar rely on UWSA support to some extent (the UWSA was named in the aforementioned Indian reports about Chinese-backed arms smuggling networks), China cannot afford to shun the group.

Finally, there’s India, which credibly accuses China of providing safe haven to prominent Naxalite leaders and giving them free rein to raise support and facilitate arms flows into India through largely ungoverned spaces in Myanmar, Bangladesh and northeast India. 

Chinese leaders have tacitly admitted to this by making the case that, since India hosts the Dalai Lama and other Tibetan exiles – even incorporating Tibetans into Indian forces in the Himalayas – fair is fair. Either way, the various separatist groups (some of them Maoist) allegedly receiving Chinese support are at most a perpetual irritant to New Delhi and a modest drain on military resources that could ostensibly be redirected into something more important, like naval development. 

They pose little risk of fundamentally destabilizing the Indian core or undermining Indian control over territory where it actually fears Chinese incursion, such as the Siliguri Corridor. China stands to gain relatively little leverage from supporting them, especially compared to its far more lucrative investment in India’s chief source of concern: Pakistan.

Not Your Father's Cold War

Otherwise, there’s little evidence of much Chinese support for opposition political movements in the region, particularly violent ones. Not that Beijing would be short of opportunities to back such movements if it wanted. The fractured geography of South and Southeast Asia, along with the extreme levels of social disruption and inequality that have come with the globalization boom, makes the region awash with ethnic and demographic fault lines.

Consider the Philippines. The archipelagic country, which functions as something of a gatekeeper to vital sea lanes to the Western Pacific, presents perhaps the foremost strategic problem for China. Naturally, China is desperate to pull the U.S. treaty ally into its camp, or at minimum keep it from allowing the U.S. or another hostile power to set up naval or missile bases there that could be used to impose a blockade on China. 

The Philippines also just happens to be home to a dizzying array of rebel groups, including the New People’s Army, proud facilitators of the world’s longest-running communist insurgency. Yet, such groups do not appear to have played any part in China’s ongoing efforts to put the squeeze on Manila.

Its approach to the Philippines illustrates quite a bit about what China actually needs from such states and what tools it thinks might actually be effective. For one, it tells us that Beijing doesn’t think there would be much return on investment from supporting such groups. This is, in part, because few realistically have the potential to be much more than an irritant to their governments. 

The threat posed to Naypyitaw by the United Wa State Army and the other rebel groups in Myanmar is rare, in other words. The New People’s Army, for example, is considered a spent force, having effectively devolved into a decentralized collection of local criminal syndicates rather than something capable of mobilizing the Philippine masses against Manila. 

Moreover, the strongest militant groups in the Philippines, as in much of South and Southeast Asia, are Islamist. Beijing fears anything that would strengthen such groups to the point where they could funnel support to ethnic Uighur militants in Xinjiang and along China’s western borders.

For another, Beijing’s handling of the Philippines tells us that China realizes its ideology no longer has mass appeal. To be sure, with inequality and social disruption soaring across the globe, the environment is as receptive as ever to an ideology focused on class struggle. 

But the Communist Party of China can no longer take advantage of this, because it can’t really hide the fact that it's turning China into an imperialist, wealth-obsessed autocracy treating its neighbors as little more than commodity depots. 

Even the New People’s Army’s parent political organization, the Movement for National Democracy, has been harshly critical of the Duterte administration’s embrace of Beijing’s neocolonialism. 

To the extent that Chinese messaging and disinformation operations can be at least modestly successful, watch a couple of tactics in particular: One is targeting overseas ethnic Chinese communities with nationalist narratives. 

Another is using its growing control over information technologies to censor unflattering news about China, tout Chinese aims as benevolent and projects like the Belt and Road Initiative as mutually beneficial, and sow discontent with Chinese adversaries. (Consider, for example, the way Beijing flooded social media channels overseas with conspiracy theories about the U.S. and COVID-19.)

Finally, it tells us that China thinks the risks of openly attempting to foment rebellion in its periphery far outweigh the potential rewards. Economically, what China needs is open markets for its manufactured goods and emerging technologies, steady supplies of commodities and receptiveness to Chinese investment. Militarily, China needs allies, which at present are very few. 

But at minimum, it needs to keep regional states on the sidelines of its disputes with major outside powers. Diplomatically, it needs to beat back deep-rooted regional suspicions that China’s rise will be inherently incompatible with peace and stability and persuade its neighbors that the best bet for a prosperous future is a China-centric regional order. 

Attempting to destabilize its neighbors, in most cases, would quite likely only undermine these aims, driving them to seek out outside military support, generating suspicion of Chinese technologies and investment, and raising the political risks for regional leaders of cozying up to Beijing. 

The few attempts it has made in recent years at putting its thumb on the scale of another country’s political landscape have backfired, underscoring the reality that pinning one’s geopolitical strategy on any particular regime makes for a flimsy strategy.

For Beijing, then, the best course is likely to continue leaning heavily on the more traditional tools of statecraft it has already been wielding with some efficacy. This means cultivating economic dependencies through investment and market access. It means deepening inter-elite financial ties to ensure pro-China sympathies across countries’ political spectra – something bearing abundant fruit in the Philippines and elsewhere. 

It means tilting the military balance of power with regional states ever more in its favor, declaring that might makes right in territorial disputes, and exposing the limits of America’s interest in coming to their defense. 

It means providing authoritarian-minded regimes in the region with the technological tools and financial resources to cement their control and shield themselves from public discontent. 

In truth, it means making itself an indispensable partner in helping governments put down rebellions – as it did in Nepal in the mid-2000s, when it helped arm the government in its fight against Maoist rebels.

Ultimately, these efforts may not be enough to win long-term friends to the extent needed to establish the new regional order it craves. But Beijing has already succeeded in making regional states, even some powerful ones, exceedingly reluctant to bandwagon against China in meaningful ways. 

No one in the region wants a new cold war, but least of all China. 

Because if China finds itself having to fight in the manner the last one was waged, it’ll quite likely already have lost.

The Redistribution Games

Life is not the Olympics, where talent and training determine an athlete’s performance. It’s more like a Roman arena in which well-armed gladiators vanquish unarmed victims who lose not because they did not try hard enough, but because of the asymmetrical initial distribution of armor.

Yanis Varoufakis


ATHENS – The Olympic 100-meter final is about to begin. The crowd roars at the sound of the starting gun. The sprinters are off. 

But, after 30 meters, the frontrunners slow down, as if in solidarity with the laggards. They have not chosen to do so, but new rules set strict limits on the maximum distance separating the winner from the last-place finisher.

Conservative opponents of income and wealth re-distribution have this kind of analogy in mind when they lament the “politics of envy.” They envision the rich as sprinters that do-gooders want to slow down by law and through punitive taxes.

But life is not the Olympics, where talent and training determine an athlete’s performance. It’s more like a Roman arena in which well-armed gladiators vanquish unarmed victims who lose not because they did not try hard enough, but because of the asymmetrical initial distribution of armor.

In the 1950s and 1960s, hard work and an innovative mind could perhaps be relied upon to lift people from poverty and propel them upward. But that was possible only because society imposed constraints on what the ultra-wealthy, bankers especially, were allowed to do with their money. 

Since those constraints were removed, with the collapse of the Bretton Woods system and the ensuing financialization of our economies, working long hours and showing immense flair may get one nowhere.

The problem facing most people, especially the young, is not that superstars like Warren Buffett are leaving them behind. It is that they are being held behind by stagnant investment and wages, owing to the simple fact that the wealthy get wealthier almost in their sleep, for reasons that have nothing to do with effort, entrepreneurship, or parsimony.

Even the great innovators are part of the problem. Jeff Bezos had foresight, revolutionized retail, and made a fortune. But what part of his $200 billion is a reward for his smart thinking and entrepreneurship? And what part of his current wealth is simply a function of his previous wealth?

While it is impossible to answer such a question precisely, the greatest proportion of the world’s wealth does not find its way to society’s innovators or maintainers. As wealth accumulates in few hands, the rest of the economy gradually becomes a desert.

This is not news. We have always known that exorbitant market power underpins exorbitant wealth, which then feeds back into even greater market power. And this is the crux of the matter: Nothing retards productivity and depresses employment as efficiently as exorbitant market power. 

To invoke the conservative analogy, not even the fastest runners can win when the wealth commandeered by the ultra-rich turns the track into sand for everyone else. That’s why the most soul-destroying poverty and the largest number of “deaths of despair” are observed in countries where wealth concentration is soaring.

What should we do about highly concentrated wealth? How do we redistribute it fairly and efficiently?

A wealth tax is much in vogue today. But no legally and politically feasible wealth tax can reduce substantially the current levels of crushing inequality. Moreover, it enables conservatives to cast doubt on wealth redistribution by asking pertinent questions: Should the state evict the poor heir of a good house if she can’t afford to pay the wealth tax? How do we price an asset, such as a stamp collection, without first auctioning it off?

Fortunately, there are proven ways to redistribute wealth without violating anyone’s rights or crossing ethical lines. In 1906, Theodore Roosevelt famously broke up Standard Oil and other cartels despite a chorus of opposition bemoaning his attack on innovation and entrepreneurship. Following the 1929 Wall Street collapse, another Roosevelt, Franklin Delano, faced the same chorus when he put the financial genie in a bottle. With these two moves, the Roosevelts effected a redistribution of wealth and power that nothing short of a revolution could accomplish.

Of course, the powerful find ways to shake off such shackles. After the Bretton Woods system collapsed in 1971, Wall Street and the cartels began to dominate again. Today, three megafirms, BlackRock, Vanguard, and State Street, own at least 40% of all American public companies and nearly 90% of those listed on the New York Stock Exchange.

Tacit collusion is rampant, because every CEO knows that the parent megafirm is likely to be talking to CEOs of rival companies that it also owns. The result is higher prices, less innovation, lower investment, and, naturally, stagnant wages.

Power was further concentrated after Wall Street imploded in 2008 and central banks began to pump rivers of money into the financial system. 

Levering up the central bank money, the gargantuan cartels used this liquidity to invent new forms of complex debt and to buy back their own shares, sending share prices (and, naturally, bonuses) into the stratosphere while starving the world of investment in quality jobs and green infrastructure.

Megafirms also indulged in another favorite pastime: usurping markets, buying politicians, and capturing regulators – in short, poisoning liberal democracy. 

By the time COVID-19 sent the real economy further into depression, the world of finance had decoupled fully from the real economy, turning capitalism into a type of techno-feudalism.

To end this regime, we must update the two Roosevelts’ interventions. Instead of wasting energy on an ineffective wealth tax, progressives should concentrate on a three-pronged strategy.

First, central bank money must be exclusively directed to support public investment in the green transition and other public goods. Second, corporations that monopolize large marketplaces of their own making – as, say, Amazon and Facebook have done – should be broken up. 

Lastly, a proportion of large corporations’ shares (perhaps 10%) should be deposited into a social equity fund to fund a universal basic dividend.

This combination of policies, drawing inspiration from anti-trust and New Deal legislation of yesteryear, could revive the economy, revitalize democracy, and save the planet. If political economy were an Olympic event, the gold-medal favorite would be clear.


Yanis Varoufakis, a former finance minister of Greece, is leader of the MeRA25 party and Professor of Economics at the University of Athens.