Disagreement and Dithering

The Failure of Germany's Coronavirus Strategy

Chancellor Angela Merkel is pushing for legal changes that would give the federal government more powers to stop the spread of the coronavirus. But the states are pushing pack.

By Matthias Bartsch, Rafaela von Bredow, Jan Friedmann, Florian Gathmann, Veronika Hackenbroch, Martin Knobbe, Timo Lehmann, Jonas Schaible, Christoph Schult, Christian Teevs, Nicolas Wildschutz und Steffen Winter

In normal times, this empty street in Hamburg's St. Pauli district would be filled with revelers. Foto: Hanno Bode / imago images

Sascha Raabe, a Social Democratic (SPD) member of German parliament from the state of Hesse, knows what it’s like to have COVID-19. 

He caught the disease last fall and says it "really knocked him out” for six days. 

After three months, he still can’t taste properly and his sense of smell isn't back yet either, he says. Raabe is not one to minimize the dangers of the virus.

Nevertheless, the 52-year-old is not planning on supporting changes to Germany’s Infection Protection Act when they come up for a vote next week in the Bundestag, as Germany's parliament is known. 

He’s especially bothered by one of the measure it contains: the nightly curfew. 

He argues that it’s neither sensible nor proportionate to "lock people up in their homes after 9 p.m."

The Social Democrat isn’t alone in his displeasure with the legislation, which was in part pushed forward by Olaf Scholz, also of the SPD. 

Scholz serves as vice chancellor to Angela Merkel and is also his party’s candidate for Germany's highest political office in elections this fall. 

During a meeting on Tuesday of the SPD’s parliamentary group, more than 40 members of parliament discussed the piece of legislation, drafted by Merkel and her cabinet, and many were highly critical. 

In the end, the faction leadership attempted to channel the anger of fellow party members, saying they would seek changes when the legislation is debated in parliament.

Chancellor Merkel is seeking to take greater federal government control over measures to contain the coronavirus in Germany, essentially seeking the legal authority to pull the emergency brake. 

In Germany's federalist system, states are in charge of deciding and implementing most such measures. But in recent months, regular meetings between Merkel and the governors of the country’s 16 states have failed to achieve uniform responses to the coronavirus across the country. 

Under the new rules, if the number of infections for a city or district exceeds a threshold of 100 per 100,000 residents for three days within a seven-day period, uniform federal rules would apply. 

The rules also stipulate that people can only meet with a person from one other household, that all stores would have to close except those offering essential services and that a strict curfew would be imposed from 9 p.m. to 5 a.m. 

According to the draft legislation, if infections grow to 200 per 100,000 residents, schools would be required to close and return to remote, online learning. 

Companies will also be required to offer rapid coronavirus antigen tests to their employees.

"The third wave of the pandemic has our country firmly in its grip," Merkel said Tuesday after the cabinet meeting. "If we wait until all intensive care unit beds are occupied, it will be too late. We can’t allow that to happen.”

That, though, is exactly the scenario Germany is now facing. 

The law was not passed within a week, as some in Merkel’s government had hoped. 

Now, the earliest it is likely to be passed is the end of next week, after a meeting of the Bundesrat, Germany’s second legislative chamber, which also has to approve the measure and will first convene next Friday.

Before passage, the legislation is also likely to be watered down in light of the many concerns and counter-proposals. 

Even within the government, legal assessments are circulating that regard a curfew to be legally untenable.

"But if we weaken the measures in parliament now, they will not be sufficient to break the third wave,” warns SPD health expert Karl Lauterbach – criticism that is also directed at his own party. 

"We’re late on this, anyway.” 

In light of the rising and threatening numbers of infections, just hoping for the law is too risky, says Lauterbach. "The federal states need to act sooner.” 

German Health Minister Jens Spahn expressed similar concern on Thursday. 

"We shouldn’t wait until parliament has passed this law,” he said.

After the Easter holidays seemed to slightly slow the growth in new infections, they have been rising sharply again since the middle of the week, to close to 30,000 new infections on Thursday.

Chancellor Angela Merkel: "We can’t allow that to happen." Foto: Murat Tueremis / laif

"The pressure on intensive care units is really high now – in Cologne and Bonn, for example, they are really full,” says Christian Karagiannidis, a senior physician at the Cologne-Merheim Lung Clinic and president of the German Society of Internal Intensive Care and Emergency Medicine. 

The physician is expecting "a significant increase in intensive care occupancy” within seven to 10 days.

He says that patients ought to be moved from the Cologne/Bonn area to other regions to free up beds. 

"But at some point starting next week, there will finally have to be strict contact restrictions for at least two weeks to bring the caseload down,” Karagiannidis says.

It’s highly questionable whether the German government will be able to comply with that demand. 

Just how great the need for discussion among politicians about the planned "federal emergency brake” was also evident at a meeting of the faction of Merkel’s conservative Christian Democratic Union (CDU) and its Bavarian sister party, the Christian Social Union (CSU). 

Although the deputies had already spent three and a half hours arguing over the parties’ shared chancellor candidate, they added a two-hour debate on the Infection Protection Act. 

Participants described the debate as a "lively” one in which "clear displeasure” with the proposal was expressed – and not just be the usual contrarians.

Even more liberal parliamentary group members have expressed concerns. 

The criticism has centered on two points: the fact that the decision as to when to apply the emergency brake is based purely on the incidence value; and the planned curfew. 

Participants said that even parliamentary group head Ralph Brinkhaus was not entirely convinced of the curfew in his speech.

The opposition has been even clearer on the issue. 

"The FDP parliamentary group has a whole slew of serious concerns,” says Marco Buschmann, a senior member of the business-friendly Free Democratic Party (FDP) in parliament. 

He, too, criticizes the fact that the emergency brake is "linked exclusively to the incidence.” 

In his view, other factors, such as the number of intensive care beds available and the nature of the outbreak, should also be taken into consideration. 

Moreover, he said, curfews are considered to be ineffective in combating the epidemic. 

"If there are no substantial changes to the bill, the FDP parliamentary group will not agree to the amendment to the Infection Protection Act.”

The Greens, who have generally supported the government’s policies in the pandemic, have also stated their opposition. In principle, uniform national rules would make sense, says Katrin Göring-Eckardt, the co-head of the Green Party’s parliamentary group. 

"We will agree to a bill that we believe will tangibly reduce infection rates. But that’s not the case with the current government proposal.”

The Greens argue that the restrictions are disproportionate – too many restrictions are being placed on private life and too few on work. 

"Binding rules for the working world are imperative: An obligation to only offer a test is a sham, it doesn’t go far enough,” argues Göring-Eckardt. 

She says that more needs to happen in schools too, that the government can’t wait until an incidence of 200 to take action. 

"At the latest, half-capacity classrooms, two (COVID) tests a week and masks would have to be mandatory from 100 – and even better from 50. 

Starting at an incidence of 50, the requirement of mandatory in-person school attendance should be dropped.”

Meanwhile, the far-left Left Party also rejects the law because it is too lax for them. 

"The planned federal emergency brake is actually more likely to be like stepping on the gas pedal of this pandemic,” says party head Susanne Hennig-Wellsow. 

"The Robert Koch Institute (Germany’s center for disease control) has proposed a staged approach and recommends strong action starting at an incidence of 50 or more. 

And what is the federal government doing? 

It’s increasing that number to 100, thus increasing scope for mutants to spread.”

Scientists also have grave doubts about whether the measures in the bill will be enough to contain the spread of the viruses. 

"We welcome the introduction of unified rules, but these won’t go far enough,” says Thorsten Lehr, a modeler at Saarland University. 

"They encourage risky moves at an incidence level that is already out of control, and they are much too late.” 

Lehr is particularly critical of the rules for schools. 

"I think opening schools at such a high incidence is irresponsible toward the children and parents who still remain unvaccinated,” the scientist says.

Oliver Keppler, a virologist at Munich’s Ludwig Maximilians University also says that from the perspective of infections, it doesn’t make sense to keep schools open when the incidence rate is higher than 100. 

And that if the decision is made to keep schools open for societal reasons, that there would have to be stricter rules for private contacts to compensate for that. 

"Curfews can be effective, as the experiences in other countries show,” Keppler says.

But the ban on people being able to leave their homes in the evening is the most controversial. 

Critics doubt it will do much to change the situation at all. 

They cite an open letter from the Society for Aerosol Research to the federal and state governments. 

"Transmission of SARS-CoV-2 viruses occurs almost invariable indoors,” the researchers write. 

"If we want to get the pandemic under control, then we need to make people aware that the danger lurks INSIDE.”

Proponents of a curfew point out that it is only meant to prevent evening gatherings and parties in homes. 

Meanwhile, health expert Lauterbach also says that people could get infected outside if they stand closely together and talk loudly.

On the other hand, critics express constitutional concerns. 

"I am certain that the amendments to the Infection Control Act will be challenged – and that applies particularly to the curfew,” says Thorsten Kingreen, a legal expert and professor at the University of Regensburg. 

"We don’t know exactly how the Federal Constitutional Court would rule on it. 

There are opposing court decisions. 

But given the depth of the encroachment on basic rights, I have constitutional concerns.”

Legal concerns have also been expressed within Merkel’s Chancellery. 

However, the Federal Interior Ministry, which is responsible for constitutional issues, has reviewed the cabinet’s draft legislation several times. 

"The regulation that has been found is without a doubt constitutional,” Interior Minister Horst Seehofer told DER SPIEGEL. 

He said the verdict reached by his legal experts had been clear. 

Seehofer also points out that the curfew isn’t about hounding people who want to take their dog out in the evening.

But few expect the bill to get passed by parliament without changes. 

The SPD, for example, wants to ensure that outdoor sports and non-contact sports for children are exempt from the emergency brake. 

And inside the government coalition, it is assumed that the start of the curfew could be postponed until around 10 p.m.

In the view of Merkel’s government, the Bundesrat isn’t required to approve the legislation. 

But the second legislative chamber, which represents the federal states, could file an objection.

If there were a vote on the law in the body, several states would like abstain, including North Rhine-Westphalia, Bavaria and Rhineland-Palatinate, where the FDP or Free Voters are part of coalition governments. 

Florian Streibl, the parliamentary group leader of the Free Voters in Munich, called the transfer of authority an "affront to the state parliaments,” and a "step backward in the fight against the pandemic.”

That displeasure reflects the opinion of many in the state ministries and district offices. 

They view the shift of power toward Berlin with suspicion, arguing that local outbreaks can best be contained locally and that orders from the capital city will just make it more difficult to get people to accept the rules. 

Support for strong states’ rights is particularly strong in southern Germany, but not only there.

"Germany has gotten through this time better than any centralized government in Europe,” says Saxony Governor Michael Kretschmer of the CDU. 

"If 16 state governors discuss an issue, there is a higher probability that you are closer to reality and that a balanced result comes out than would be the case in Élysée Palace (the president’s office in Paris) or in the Warsaw government palace.” 

What really needs to be done, Kretschmer argues, "is to strengthen that federalism rather than question it.”

The offices of many state governors point out that the provisions of the planned emergency brake are already in force in many places and have already been decided in the regular meetings between the governors and the chancellor. 

In Bavaria, for example, almost all districts already have a curfew after 10 p.m. Bavarian Governor Markus Söder argues that in addition to the national emergency brake, more needs to be done to "consider” how to get the third wave under control. 

He believes that the main responsibility still lies with the states.

The Rhineland-Palatinate governor’s office in Mainz is even of the opinion that the new rules aren’t needed at all. 

Governor Malu Dreyer of the SPD says that in some cases, the state regulations are stricter than the ideas of the federal government. 

In her state, for example, schools are required to close once and incidence of 100 infections per 100,000 residents is reached.

Dreyer also considers other federal proposals questionable, like closing zoos and animal parks once an incidence of 100 as been reached. 

Government officials in Mainz note that the danger of infection outside is far lower than inside. 

And Hesse Governor Volker Bouffier of the CDU argues that the draft’s limits to visitors in a person’s private apartment is neither constitutional nor policeable.

So, will the federal law become a flop before it even goes into effect?

Bodo Ramelow of the Left Party is one of the few state governors who supports the law. 

"A uniform set of rules is important,” says Thuringia’s head of government. 

He says it would mean that state leaders would no longer have to consult with and possibly bend to all interest groups. 

He names Bavaria’s Markus Söder as an example: "He was the first to open the home improvement stores.”

Sophie Schönberger, a constitutional law expert at the University of Düsseldorf says that the transparent procedure in parliament would be "preferable” to the more opaque meeting between state governors and Merkel. 

"It is to be hoped that the federal government will take up this responsibility and that this isn’t just some one-off action. 

Otherwise, the relationship of competences will become even more opaque."

Meanwhile, the Chancellery is sticking to the plan despite the massive criticism – and officials there also point out that some state heads or municipalities have not adhered to the rules agreed upon with the chancellor. 

In view of the sharply rising numbers of new infections, action needs to be taken now, they argue. 

An effect can only be achieved with "drastic measures.”

For that to happen, though, those measures would have to take effect very quickly. 

And not first when the apocalyptic warning of the intensive care physicians have come true.  

Ensuring a Stronger and Fairer Global Recovery

Although tough trade-offs are sometimes unavoidable, there is a way for policymakers to maintain a robust global economic recovery in 2021 and beyond while simultaneously pulling up disadvantaged countries, groups, and regions. But it will require both national and international policy adaptations.

Mohamed A. El-Erian

CAMBRIDGE – An old joke about tricky trade-offs asks you to imagine your worst enemy driving over a cliff in your brand-new car. 

Would you be happy about the demise of your enemy or sad about the destruction of your car?

For many, the shape of this year’s hoped-for and much-needed global economic recovery poses a similar dilemma. 

Absent a revamp of both national policies and international coordination, the significant pickup in growth expected in 2021 will be very uneven, both across and within countries. 

With that comes a host of risks that could make growth in subsequent years less robust than it can and should be.

Based on current information, I expect rapid growth in China and the United States to drive a global expansion of 6% or more this year, compared to a 3.5% contraction in 2020. 

But while Europe should exit its double-dip recession, the recovery there will likely be more subdued. 

Parts of the emerging world are in an even tougher position.

Much of this divergence, both actual and anticipated, stems from variations in one or more of five factors. 

Controlling COVID-19 infections, including the spread of new coronavirus variants, is clearly crucial. 

So is distributing and administering vaccines (which includes securing supplies, overcoming institutional obstacles, and ensuring public uptake). 

A third factor is financial resilience, which in some developing countries involves preemptively managing difficulties from the recent debt surge. 

Then come the quality and flexibility of policymaking, and finally whatever is left in the reservoirs of social capital and human resilience.

The bigger the differences between and within countries, the greater the challenges to the sustainability of this year’s recovery. 

This reflects a broad range of health, economic, financial, and socio-political factors.

In a recent commentary, I explained why more uniform global progress on COVID-19 vaccination is important even for countries whose national immunization programs are far ahead of the pack. 

Without universal progress, leading vaccinators face a difficult choice between risking the importation of new variants from abroad and running a fortress economy with governments, households, and firms adopting a bunker-like mindset.

Uneven economic recoveries deprive individual countries of the tailwind of synchronized expansion, in which simultaneous output and income growth fuels a virtuous cycle of generalized economic well-being. 

They also increase the risks of trade and investment protectionism, as well as disruptions to supply chains.

Then there is the financial angle. 

Buoyant US growth, together with higher inflation expectations, has pushed market interest rates higher, with spillovers for the rest of the world. And there is more to come.

European Central Bank officials have already complained about “undue tightening” of financial conditions in the eurozone. 

Rising interest rates could also undermine the dominant paradigm in financial markets – namely, investors’ high confidence in ample, predictable, and effective liquidity injections by systemically important central banks, which has encouraged many to venture well beyond their natural habitat, taking considerable if not excessive and irresponsible risks. 

In the short term, high liquidity has pushed cheap funding to many countries and companies. 

But sudden reversals in fund flows, as well as the growing risk of cumulative market accidents and policy mistakes, could cause severe disruptions.

Finally, uneven economic recovery risks aggravating the income, wealth, and opportunity gaps that the COVID-19 crisis has already widened enormously. 

The greater the inequality, particularly with respect to opportunity, the sharper the sense of alienation and marginalization, and the more likely political polarization will impede good and timely policymaking.

But, whereas the old joke hinges on the unavoidability of tough trade-offs, there is a middle way for the global economy in 2021 and beyond – one that maintains a robust recovery and simultaneously lifts disadvantaged countries, groups, and regions. 

This requires both national and international policy adaptations.

National policies need to accelerate reforms that combine economic relief with measures to foster much more inclusive growth. 

This is not just about improving human productivity (through labor reskilling, education reforms, and better childcare) and the productivity of capital and technology (through major upgrades to infrastructure and coverage). 

To build back better and fairer, policymakers must now also consider climate resilience as a critical input for more comprehensive decision-making.

Global policy alignment also is vital. The world is fortunate to have benefited initially from correlated (as opposed to coordinated) national policies in response to the COVID-19 crisis, with the vast majority of countries opting upfront for an all-in, whatever-it-takes, whole-of-government approach. 

But without coordination, policy stances will increasingly diverge, as less robust economies confront additional external headwinds at a time of declining aid flows, incomplete debt relief, and hesitant foreign direct investment.

With the US and China leading a significant pickup in growth, the global economy has an opportunity to spring out of a pandemic shock that has harmed many people and, in some cases, erased a decade of progress on poverty reduction and other important socioeconomic objectives. 

But without policy adaptations at home and internationally, this rebound could be so uneven that it prematurely exhausts the prolonged period of faster and much more inclusive and sustainable growth that the global economy so desperately needs.

Mohamed A. El-Erian, President of Queens’ College, University of Cambridge, is a former chairman of US President Barack Obama’s Global Development Council. He was named one of Foreign Policy’s Top 100 Global Thinkers four years running. He is the author of two New York Times bestsellers, including most recently The Only Game in Town: Central Banks, Instability, and Avoiding the Next Collapse.

Amazon’s Labor Unrest May Show at the Margins

Unionization would be a challenge given Amazon’s distribution scale, but impact could be felt on margin expansion

By Dan Gallagher

Workers at an Amazon fulfillment center in Alabama will be given a chance to vote on unionization. / PHOTO: DUSTIN CHAMBERS/REUTERS

Would unionization hamstring Amazon.com’s AMZN 2.16% business? 

The answer isn’t clear-cut.

About 6,000 workers at one of the company’s fulfillment centers in Alabama have been given a chance to vote on whether to join the Retail, Wholesale and Department Store Union. 

That vote is being tallied by the National Labor Relations Board, with results expected sometime this week.

The group represents less than 1% of Amazon’s base of about 950,000 U.S. workers. 

If successful, though, it would also be the first union to penetrate the 26-year-old e-commerce pioneer that is now the world’s second-largest public company by annual revenue, according to S&P Global Market Intelligence.

Amazon opposes the idea, frequently pointing to its $15-an-hour starting wage and disputing reports of harsh working conditions. 

The company has allowed its main Twitter account to pick public fights with lawmakers, including former presidential candidates Sen. Elizabeth Warren and Sen. Bernie Sanders. 

President Biden also has voiced support of Amazon workers unionizing—again putting the company directly at odds with the occupant of the Oval Office.

Amazon’s opposition would suggest unionization poses a major threat to its business. 

But the company has never spelled that out as a major risk to shareholders. 

Its most recent 10-K filing from February mentions “labor or trade disputes” at the bottom of a list of 18 bullet-point items that could impact its operating results. 

Wall Street analysts—generally eager to duck hot-button political issues—also have avoided the topic so far.

Amazon has long worked hard to avoid the trappings of a big company. 

Exiting Chief Executive Jeff Bezos still proclaims to shareholders in his annual letter every year that “it’s still Day 1.” 

But unionization may be an unavoidable fact of life for a company that now operates 820 distribution facilities encompassing more than 274 million square feet in the U.S. alone, according to logistics consulting firm MWPVL International Inc. 

The Bureau of Labor Statistics lists transportation and warehousing as having the second-highest union representation among private-sector industries.

But scale also works in Amazon’s favor, as unionization would need to spread well beyond a single facility in Alabama to have a noticeable impact. 

And even then, the effect is unclear. Consider the example of Amazon’s two largest peers in logistics: More than three-quarters of United Parcel Service’s domestic workforce are represented by unions, according to the company’s most recent 10-K filing. 

FedEx is the opposite; the company said in its own annual filing that only the pilots of its FedEx Express division are unionized, representing a small number of its total employees. 

And yet, both companies averaged an annual margin of just under 13% before interest, taxes, depreciation and amortization for the years 2010 to 2019, according to data from S&P Global Market Intelligence.

Amazon also has survived challenges to its cost structure before. 

The company once largely avoided collecting sales tax on most of the goods it sold over its site, which competitors argued gave it an unfair advantage. 

That has largely disappeared over the past few years because of new state laws. 

It hasn’t kept the company from growing its share of retail sales.

Still, it may not take much to hurt Amazon in a way investors care about. 

A key component of Amazon’s surging market value has been its ability to deliver strong revenue growth along with an expanding bottom line. 

Amazon averaged 30% annual sales growth between 2017 and 2020 while also more than doubling its annual operating margin from 2.3% to 5.9% in the same period, thanks mostly to its rapidly growing cloud-computing business. 

Wall Street expects Amazon’s operating margins to hit nearly 9% by 2023.

But those are still thin margins by tech standards. 

And Amazon’s labor-intensive retail business also gives the company a very different profile relative to its peers. 

Amazon generated a little under $30,000 in revenue per employee in 2020—nearly one-fifth the average of Apple, Microsoft, Facebook and Google parent Alphabet, according to S&P data. 

Amazon needs a large army to do business. It is little wonder the company worries at any sign of revolt.

The Problem With Face Masks and Vaccinations

Thoughts in and around geopolitics.

By: George Friedman

On Thursday, my wife and I got our second COVID-19 vaccination. 

I would like to go to a bar, strike up a conversation with a stranger, and share some lies with him. 

I assume this isn’t going to happen. 

The vaccine is incredibly successful, we’re told, which I would expect given the amount of money spent by my government in developing it. 

But my government is telling me that in spite of the vaccine nothing will change. 

I must maintain social distance, wear a face mask and so on. 

The vaccine’s creators say it’s unclear if the virus can still infect someone. 

That would seem pretty easy to find out: I could breathe on a healthy young doctor and see if he gets sick. 

I’m obviously missing something. 

It’s got to be possible to figure out if I’m still infectious I would have thought they would have checked this out on a gerbil or a lab rat. 

More seriously, though, the continuous usage of masks can have unintended consequences.

As I’ve noted before, face masks and social distancing were the only solutions the medical community could devise when COVID-19 first struck with all its fury. 

It continues to be a favored adjunct to vaccination. 

It is often said that wearing a mask and maintaining distance is a trivial burden to pay for safety. 

But I take issue with that argument. 

When human beings meet for the first time, they tend to face each other when they speak. 

Hell, so do people who have known each other for a while. 

Talking is far more complex than merely hearing words. 

Humans communicate much with facial expressions. 

Take the statement: “George, you wrote a great book” (This is something I can’t hear often enough.) 

That statement can mean many things. It might be meant sarcastically, with a curl of the lip. 

It might be genuine praise, with the mouth framed in a respectful fashion. 

Or it might be a comment by someone who never read the book who wants something from me, with the smile framed in an obsequious manner.

Humans use the face to identify threats; criminals wear masks as much to hide their intentions as they do to conceal their identities. 

Someone enraged at you or planning to harm you looks a certain way, someone delighted to see you another. 

It is not only the mouth that speaks to you. 

The muscles in the face can reveal tension or pleasure. 

The nose moves. 

The eyes reveal much. Facial expressions are much harder to interpret behind a mask. 

If you are very bored, ask your spouse to put on a mask and interpret their true feelings by the eyes alone. 

It can be done, but without context the probability of being wrong soars. 

The mouth, nose and lower half of the face are the checksums on what is said, and the mask impedes that greatly.

Consider this. 

I spent most of my high school career trying to kiss girls – admittedly with minimal success. 

My failure drove home the importance of kissing as part of the process of coming to terms with the fact that there are boys and girls and that from the first kiss you will be living with that awareness as it teaches you to deal with lust and its relationship to love, one of the most important passages of the human soul. 

How do you do that with a mask on?

Consider social distancing. 

It makes impossible the fights boys must have to learn how to settle matters later without fights. 

I recall girls putting their heads together and giggling. 

I was never sure about what, but the old rule is: If you can’t spot the jerk at the poker table, it’s probably you.

You can text or phone, but the ability to see those you speak to, or stand close to a stranger you just met, is indispensable to being human. 

So by definition, masks and distancing disrupt the process of being human. 

Ironically, if someone is speaking with a well-made mask, they are frequently incomprehensible unless you are a lot closer than six feet apart. 

The mask and social distancing tend to be mutually destructive.

Now, if these measures are the only ways to avoid mass death, then obviously they are necessary. 

But the assertion that these measures protect without cost is untrue. 

On multiple levels they impose costs that we may not yet understand. 

Learning how to play as a child, exploring the limits of tactile interaction, is essential to adulthood. 

My argument is not against these measures, if they are truly vital, but the cost-benefit must be addressed, and if the measures involve real costs, they should be imposed cautiously. 

Finding out if the vaccine makes me not infectious must be figured out quickly, as I fear the costs of a year of massive social and economic disruption are mounting. 

If the mask is essential to prevent another surge, so be it. 

But do not treat social distancing and masking as a trivial matter.

Blood and money

The influence of Central American dynasties is ebbing

Oligarchs are no match for demagogues and drug lords

The castillo family has been on top for 500 years. 

It traces its origins to Bernal Díaz del Castillo, the chronicler of the conquest of Mexico by Hernán Cortés. 

The Spanish empire rewarded him with an encomienda over what is now Guatemala, entitling Castillo to control of all non-Christian labour. 

The family’s wealth exploded after the creation in 1886 of the Central American Brewery, which for decades enjoyed a national monopoly on beer production. 

It has since evolved into two separate conglomerates and branched out into coffee, sugar, finance, amusement parks and bottling Pepsi.

Clans like the Castillos occupy a peculiar place in the minds of the 33m people living in the “Northern Triangle” of Guatemala, El Salvador and Honduras. 

For decades Salvadoreans have spoken of “the 14 families” who supposedly control the country. 

In Guatemala the cliché is to speak of eight families; in Honduras it is five. 

The precise numbers are a myth, but the inequality and social immobility that such tales hint at is real.

A look at the three countries shows why such tales capture imaginations. 

Poverty and violence abound. Flimsy states are ill-equipped to fix problems. 

Waves of northward migration act as an escape-valve from despair. 

Family firms are common in all countries, but in few places are the big ones as dominant as in the Northern Triangle, or as widely distrusted. 

No family holding company in the region is publicly traded. 

Most are reclusive, and no one knows how rich the owners really are.

Such families have long used their political muscle not only to make money but also to preserve flaws in the system that help them to do so. 

On March 26th Juan Gonzalez, an aide to President Joe Biden, said that it was partly thanks to a “predatory elite” that so many Central Americans try to escape to the United States.

Having withstood civil wars, military dictatorships and the arrival of democracy, these networks of families are among the region’s most enduring institutions. 

Though few families have been rich and powerful for as long as the Castillos, many of today’s clans have been around for at least a century. 

And yet there are signs that this dominance may at last be ebbing.

In El Salvador and Guatemala the colonial system doled out the best positions of power to Spanish colonists, who sold the products of indigenous labour—such as indigo and silver—to their homeland. 

But it was not until the arrival of coffee in the 19th century that an agro-export industry took off. 

The wealthiest families persuaded governments to pass laws which handed them land hitherto owned communally. 

Laws against “vagrancy” forced indigenous peasants to work half the year on estates. 

Any resistance was harshly punished.

Honduras was different. 

Its chief crop in the early 20th century was not coffee but bananas. 

Exports were managed by foreigners. 

Firms like the United Fruit Company would build ports and roads in exchange for land. 

This meant that no domestic agricultural upper class emerged, leading to the popular joke among Hondurans that their country was “so poor it couldn’t even afford an oligarchy”.

Such rotten social contracts were unsustainable. 

By the middle of the 20th century uprisings were common. 

Honduran banana workers went on strike. 

Guatemala toppled its dictator in 1944 and began a decade-long experiment with democracy before this was extinguished by a cia-organised coup and the country descended into a 36-year civil war. In 1979 a group of Salvadorean soldiers launched a “reformist coup”, pre-approved by the United States, in an effort to thwart guerrilla groups swelling in the countryside. 

Once conflict enveloped that country, though, many of the elite fled abroad.

As peace came in the 1990s, Northern Triangle economies became more dynamic. Millions of civil-war emigrants began sending remittances home. 

Commerce and tourism expanded, with family-run shopping complexes and hotels. 

Even in Honduras, elite families, many of them immigrants from Palestine, started to make serious money. 

Elsewhere, landowning families intermarried with other clans and entered businesses other than farming. 

Since commerce and industry flourish best in wealthier, better-educated societies, such diversification aligned the elite families’ interests slightly more closely with those of ordinary Central Americans.

A scholarly debate rages as to whether big family conglomerates, common in poor countries, are “paragons or parasites”. 

Some note that they create a lot of jobs and pay a lot of taxes. 

Many oligarchs wax lyrical about their moral duty to use their power to improve life for everybody; some add that they feel unfairly demonised in a region with no shortage of bad actors.

Other scholars argue that conglomerates are both a symptom and a cause of poor governance. In a well-governed country, the firms that thrive are those that build a better mousetrap, and mousetrap-builders tend to specialise. 

In ill-governed places, what counts is political connections, and firms that have them can sprawl into multiple unrelated industries. 

That shuts out smaller businesses and hinders the emergence of a middle class.

Once entrenched, big families can rig the rules still further. 

El Salvador does not have taxes on property or inheritance, which is nice if you are rich. 

The top rate of income tax in Guatemala is only 7%, despite several attempts to raise it. 

The most recent, in 2010, left the finance minister, Juan Alberto Fuentes Knight, fuming that the “g-8”—a group of eight patriarchs from top families—spent more time in the president’s office than he did.

Oligarchs’ opinions can still decide important questions. 

The military coup in Honduras of 2009 was blessed by most of the top families. 

For years cicig, a un-backed anti-corruption body in Guatemala, probed government sleaze and military aggression. 

However, when it started to look into undeclared campaign donations, big families furiously objected. 

It was ultimately disbanded in 2019.

Big families do not all think alike. 

The newly rich industrial dynasties tend to be more open to change than the old coffee clans. 

Those whose businesses depend more on co-operation with the government, such as airlines and construction, try to jump into bed with every president. 

The oligarchs in one country have a particular reputation for red-meat conservatism. 

“Our businessmen look like San Francisco yoga people compared with those Guatemalans,” says a Salvadorean.

Many family firms grew rich thanks to protectionism: when governments shut out foreign competition, they could charge local consumers more. 

But the arrival of globalisation has not hurt them as much might be expected. 

Foreign firms need local partners, and the oligarchs have the right connections. 

Brands such as Burger King, Hilton and Zara end up letting local families operate franchises. 

Other families have sold banks, supermarkets, breweries and tobacco farms to multinationals, especially in El Salvador. 

The cash has helped families diversify further still.

But succession can be a problem. 

Things can go awry in the third generation. 

Children who were born rich have less incentive to work hard. 

Power struggles grow more tangled as the family tree expands, with in-laws and cousins joining the fray. 

Most families nowadays bring in consultants to manage generational change, explains one businessman from the back porch of his mansion. 

His children signed a family code of conduct on their 16th birthdays, pledging good behaviour and financial independence. 

They will not be hired by the family firm until they have earned two university degrees and worked for five years for another company.

The advent of democracy and the spread of organised crime have also made oligarchs’ lives more complex. 

In Guatemala, the state has been captured by a rival network of generals, criminals and dodgy politicians. 

Old family firms with reputations to protect not only must avoid dealing with this underworld, but also get outbid by it in the contest for influence. 

A report from cicig in 2015 estimated that three-quarters of campaign donations were linked to corruption and drug-trafficking. 

No “business-friendly” candidate has made the run-off of a presidential election since Óscar Berger, who won in 2003. Similarly the private sector’s choice for president has lost every election in El Salvador since 2005.

By contrast in Honduras a century-old two-party system has produced a strong political class with dynasties of its own, leaving no obvious gap for business families to fill. However, the influence of drug barons has recently grown, especially since the coup in 2009. 

Most old business families have stayed away from drug money. 

The same cannot be said for some of the country’s politicians.

The Salvadorean elite is under siege, perhaps because the Arena party, its spiritual home, keeps losing elections. 

Leftist presidents ruled from 2009 to 2019; then came Nayib Bukele, a millennial demagogue who is rich but not part of the old elite. 

Mr Bukele has centralised power and made allies of a few top families, while demonising the rest.

Central American presidents these days now find it easier than ever to say no to the big families. 

For example, they were able to impose economically painful covid-19 lockdowns without much pushback. 

Mr Bukele, who won control of congress in February, plans to pass laws that the private sector dislikes on pensions, water and possibly taxes.

As the big families lose political influence, they may start to see more clearly the benefits of cleaner governance. 

“Nobody trusts anyone and no one seems to have legitimacy any more,” sighs a Salvadorean scion from one of the family balconies. 

In a region that is cursed with corruption and demagoguery, the quest to build an impartial state needs all the support it can get—even from oligarchs.