China’s Attacks on Tech Are a Losing Strategy in Cold War II

 Forcing DiDi and Alibaba to toe the Communist Party line may help Xi build a police state but will stall the nation’s dynamic industry.

Fiddle Didi. Source: AFP/Getty Images.

“Investors have to rethink the entire China structure,” David Kotok of Cumberland Advisers said last week. For Hong Kong, the One Country, Two Systems principle was “dead.”  As for the crackdown on some of the nation’s tech giants, the Beijing government’s treatment of Alibaba “is not a one-off. Neither is DiDi. Everything China touches must be viewed with suspicion.”

Wait, you’re saying that investing in the other side in the early phase of Cold War II might have been a bad idea? You’re telling me that “long totalitarianism” was not a smart trade?

For the past three years, I have been trying to persuade anyone who would listen that “Chimerica” — the symbiotic economic relationship between the People’s Republic of China and the United States of America, which I first wrote about in 2007 — is dead. The experience has taught me how hard it can be for an author to kill one of his own ideas and replace it with a new one. The facts change, but people’s minds — not so much.

Chimerica was the dominant feature of the global economic landscape from China’s accession to the World Trade Organization in 2001 to the global financial crisis that began in 2008. (I never expected the relationship to last, which was why I and my co-author Moritz Schularick came up with the word: Chimerica was a pun on “chimera.”)  At some point after that, as I have argued in Bloomberg Opinion previously, Cold War II began.

Unlike with a “hot” war, it is hard to say exactly when a cold war breaks out. But I think Cold War II was already underway — at least as far as the Chinese leader Xi Jinping was concerned — even before former President Donald Trump started imposing tariffs on Chinese imports in 2018. By the end of that year, the U.S. and China were butting heads over so many issues that cold war began to look like a relatively good outcome, if the most likely alternative was hot war.

Ideological division? Check, as Xi Jinping explicitly prohibited Western ideas in Chinese education and reasserted the relevance of Marxism-Leninism. Economic competition? Check, as China’s high growth rate continued to narrow the gap between Chinese and U.S. gross domestic product.  A technological race? Check, as China systematically purloined intellectual property to challenge the U.S. in strategic areas such as artificial intelligence. Geopolitical rivalry? Check, as China brazenly built airbases and other military infrastructure in the South China Sea. Rewriting history? Check, as the new Chinese Academy of History ensures that the party’s official narrative appears everywhere from textbooks to museums to social media. Espionage? Check. Propaganda? Check. Arms race? Check.

A classic expression of the cold war atmosphere was provided on July 1 by Xi’s speech to mark the centenary of the Chinese Communist Party: The Chinese people “will never allow any foreign force to bully, oppress, or enslave us,” he told a large crowd in Beijing’s Tiananmen Square. “Anyone who tries to do so shall be battered and bloodied from colliding with a great wall of steel forged by more than 1.4 billion Chinese people using flesh and blood.” This is language the like of which we haven’t heard from a Chinese leader since Mao Zedong.

Most Americans could see this — public sentiment turned sharply negative, with three quarters of people expressing an unfavorable view of China in recent surveys. Many politicians saw it — containing China became just about the only bipartisan issue in Washington, with candidate Joe Biden seeking to present himself to voters as tougher on China than Trump. Yet somehow the very obvious trend toward cold war was ignored in the place that had most to lose from myopia. I am talking about Wall Street. Even as China was ground zero for a global pandemic, crushed political freedom in Hong Kong and incarcerated hundreds of thousands of its own citizens in Xinjiang, the money kept flowing from New York to Beijing, Hangzhou, Shanghai and Shenzhen.

According to the Rhodium Group, China’s gross flows of foreign domestic investment to the U.S. in 2019 totaled $4.8 billion. But gross U.S. FDI flows to China were $13.3 billion. The pandemic did not stop the influx of American money into China. Last November, JPMorgan Chase & Co. spent $1 billion buying full ownership of its Chinese joint venture. Goldman Sachs Group Inc. and Morgan Stanley became controlling owners of their Chinese securities ventures. Just about every major name in American finance did some kind of China deal last year.

And it wasn’t only Wall Street. PepsiCo Inc. spent $705 million on a Chinese snack brand. Tesla Inc. ramped up its Chinese production. There were also massive flows of U.S. capital into Chinese onshore bonds. Chinese equities, too, found American buyers. “From an AI chip designer whose founders worked at the Chinese Academy of Sciences, to Jack Ma’s fast-growing and highly lucrative fintech unicorn Ant Group and cash cow mineral-water bottler Nongfu Spring Co., President Xi Jinping’s China has plenty to offer global investors,” my  Bloomberg opinion colleague Shuli Ren wrote last September.

Recent months have brought a painful reality check. On July 2, Chinese regulators announced an investigation into data security concerns at DiDi Global Inc., a ride-hailing group, just two days after its initial public offering. DiDi had raised $4.4 billion in the biggest Chinese IPO in the U.S. since Alibaba Group Holding Ltd.’s in 2014. No sooner had investors snapped up the stock than the Chinese internet regulator, the Cyberspace Administration of China, said the company was suspected of “serious violations of laws and regulations in collecting and using personal information.”

The cyberspace agency then revealed that it was also investigating two other U.S.-listed Chinese companies: hiring app BossZhipin, which listed in New York as Kanzhun Ltd. on June 11, and Yunmanman and Huochebang, two logistics and truck-booking apps run by Full Truck Alliance Co., which listed on June 22. Inevitably, this nasty news triggered a selloff in Chinese tech stocks. It also led several other Chinese tech companies abruptly to abandon their plans for U.S. IPOs, including fitness app Keep, China’s biggest podcasting platform, Ximalaya, and the medical data company LinkDoc Technology Ltd.

To add to the maelstrom, on Thursday Senators Bill Hagerty, a Tennessee Republican,  and Chris Van Hollen, Democrat of Maryland, called on the Securities and Exchange Commission to investigate whether DiDi had misled U.S. investors ahead of its IPO. Also last week, U.S. tech companies such as Facebook, Twitter and Google came under increased pressure from Hong Kong and mainland officials over doxxing, the practice of publishing private or identifying information about an individual online.

For several years, I have been told by numerous supposed experts on U.S.-China relations a) that a cold war is impossible when two economies are as intertwined as China’s and America’s and b) that decoupling is not going to happen because it is in nobody’s interest. But strategic decoupling has been China’s official policy for some time now. Last year’s crackdown on financial technology firms, which led to the sudden shelving of the Ant Group Co. IPO, was just one of many harbingers of last week’s carnage.

The proximate consequences are clear. U.S.-listed Chinese firms will face growing regulatory pressure from Beijing’s new rules on variable interest entities as well as from U.S. delisting rules.

The VIE structure has long been used by almost all China’s major tech companies to bypass China’s foreign investment restrictions. However, on Feb. 7, the State Council’s Anti-Monopoly Committee issued new guidelines covering variable interest entities for the first time. Recognizing them as legal entities subject to domestic anti-monopoly laws has allowed regulators to impose anticompetition penalties on major VIEs, including Alibaba, Tencent Holdings Ltd. and Meituan. This new framework substantially increases risks to foreign investors holding American deposit receipts in the tech companies’ wholly foreign-owned enterprises. For example, Beijing could conceivably force VIEs to breach their contracts with their foreign-owned entities. In one scenario, subsidiaries of a Chinese variable interest entity that are deemed by Beijing to be involved in processing and storing critical data could be spun out from the VIE — just as Alibaba was reportedly forced to spin out payments subsidiary Alipay in 2010.

The stakes are high. There are currently 244 U.S.-listed Chinese firms with a total market capitalization of around $1.8 trillion, equivalent to almost 4% of the capitalization of the U.S. stock market.

Tumbling Tech
Major Chinese companies have seen their U.S.-listed stocks crater this year (Baseline=100)

Source: Bloomberg

And the pressure on them is coming from the American regulators, too. The Holding Foreign Companies Accountable Act passed last December empowers the SEC to require foreign companies to disclose shareholder information and auditing records to the Public Company Accounting Oversight Board. Three consecutive years of noncompliance will force a delisting. The SEC’s new regulations went into effect in April, so the earliest delisting could be in 2024. But the requirements extend to revealing information about companies’ boards of directors and their affiliations with the Chinese Communist Party, as well as about the extent to which Chinese companies are owned or controlled by “a government entity.”

This is in direct conflict with Article 177 of the revised China Securities Law, which “prohibits foreign regulators from directly conducting investigations and collecting evidence” in China, and restricts Chinese firms from releasing documents related to their securities outside of China without approval from the China Securities Regulatory Commission. The combination of new regulatory pressure from both Beijing and Washington seems likely to force a significant number of Chinese companies to delist from U.S. exchanges over the next decade. Indeed, Washington has already delisted  China’s three big telecommunications companies, China Telecom Corp., China Unicom and China Mobile Ltd., on the ground that they have Chinese military ties.

The fight over U.S.-listed Chinese firms has coincided with another sign of impending decoupling. Tesla’s love affair with China appears to heading for a rocky end. There has been a marked increase in criticism of the U.S. electric vehicle company, both in mainland newspapers and on social media, focusing on concerns about Tesla’s safety standards. In February, Chinese agencies, including the State Administration for Market Regulation, China’s most important market watchdog, summoned Tesla executives to discuss what they said were quality and safety issues in their vehicles. In March, the government was reported to have banned employees of state-owned enterprises and military personnel from using Tesla vehicles.

There has also been speculation in Chinese media that Teslas may be prohibited from entering certain “sensitive” areas. And last month, the Chinese government ordered a recall of almost all the cars Tesla has sold in China — more than 285,000 in all — to address an alleged software flaw. According to the China Automotive Technology and Research Center, Tesla’s share of the Chinese market for battery electric vehicles fell from 23% in the first quarter of 2020 to 11% in the second quarter of 2021.

To Wall Street’s way of thinking, China’s behavior makes no sense, especially in the context of a potential check to China’s economic recovery. Expansion in manufacturing slowed in June, as export demand weakened and supply bottlenecks held back production, according to official statistics released last week. China’s services sector, which has lagged behind manufacturing since the pandemic began, also showed signs of renewed weakness, partly because of recent outbreaks of Covid-19 in Guangdong and elsewhere.

Moreover, these short-run wobbles are trivial compared with the much bigger economic problems that American China-watchers detect. In a new piece for Foreign Affairs, the Rhodium Group’s Daniel H. Rosen paints a dark picture:

Since Xi took control, total debt has risen from 225 percent of GDP to at least 276 percent. In 2012, it took six yuan of new credit to generate one yuan of growth; in 2020, it took almost ten. GDP growth slowed from around 9.6 percent in the pre-Xi years to below six percent in the months before the pandemic began. Wage growth and household income growth have also slowed. And whereas productivity growth … accounted for as much as half of China’s economic expansion in the 1990s and one-third in the following decade, today it is estimated to contribute just one percent of China’s six percent growth, or, by some calculations, nothing at all.

The standard view, to which I also subscribe, is that the combination of accumulating private-sector debt and demographic decline — a trend made significantly worse by the pandemic — condemns China to significantly lower growth in the coming years. So why, burnt investors ask, jeopardize China’s access to Western capital, not to mention the access to Western technology that comes with large-scale U.S. foreign investment in China?

The answer has to do with the political calculations of the Chinese Communist Party, a way of thinking that could hardly be more foreign to the wolves of Wall Street.

As one hugely successful Chinese tech investor put it to me on a visit to Beijing in September 2018, there are three Chinas: the “New New China” of the dynamic technology sector; the “New Old China” of the most profitable state-owned enterprises, such as banks and telecoms; and the “Old Old China” of the heavy industrial, rust belt state-owned enterprises.

“We are New New China,” he told me. “We have U.S. passports, we cross the Pacific often, we are in California a third or half of the year.” In short, the Chimericans. But “New Old China” is the Communist Party elite — the “princelings” descended from the senior party figures who survived the madness of Mao, and their children, whose wealth comes from the state-owned cash cows. “Old Old China” is everyone else, whether in the miserable rust belts or the impoverished countryside.

Three years ago, my friend correctly predicted growing pressure on New New China from the Communist Party, which had begun to regard the big tech companies as so large and powerful as to pose a political threat. Jack Ma’s decline and fall — from an Elon Musk level of stardom in China to near invisibility — has proved that prediction right. It was Ma’s blunt and public criticism of the Chinese financial regulators last year that led to the cancellation of the Ant Group IPO and his eclipse as a public figure.

If you thought the CCP’s top priority was global economic dominance, cancelling Ant’s IPO made no sense. Ant had the potential to become the most powerful financial services platform in the world, its artificial intelligence technology honed on the vast trove of Chinese data harvested by the Alipay app, its game plan simple but brilliant, as its chief executive Eric Jing once explained to me over dinner in Hangzhou: to make Ant the default online market for all financial products throughout the world’s emerging markets.

So why did Beijing decide to abort this potentially world-beating mission? The answer is that the Communist Party’s top priority is domestic: specifically, the preservation of its own power.

The CCP did not plan for China to become home to the only tech companies in the world big enough to compete with Silicon Valley’s. It just happened because there was enough freedom from regulation for Ma to create, with breathtaking speed, “Amazon with Chinese characteristics.” Such are the consequences of allowing a free-market system to flourish even as you retain control of state-owned enterprises that you assumed would always be the economy’s commanding heights. Already in 2018, however, it was becoming clear to Xi and his fellow princelings that Jack Ma and his arriviste counterparts at the other big tech companies were getting too big for their boots. And the crux of the matter was their ownership of all that data generated by their Chinese users.

Significantly, China’s new data-security law, which was completed in June, gives the government greater power to get private-sector firms to share data collected from social media, e-commerce, lending and other businesses by classifying such data as a national asset. That ended the ambiguity that had led some big tech representatives to suggest that users’ data might not be available on demand to the government.

A similar logic explains Beijing’s sudden iciness toward Tesla.  According to Article 36 of the Data Security Law, data stored in China cannot be transferred to foreign law-enforcement authorities or judicial bodies without prior Chinese government approval. “Provisions on the Management of Automobile Data Security,” released in May, specifically targeted automobile data storage and processing. The new rules state that geographic and mapping data collected by smart cars could constitute critical infrastructure information — again a matter of national security.

A cynic would say that Tesla is merely receiving the treatment previously meted out to many other Western companies. It has been welcomed into China just long enough for homegrown companies to copy its technology; now the future will belong to the likes of BYD Auto Co. Yet this is to understate how seriously the government takes the data issue. If you are intent on building a new kind of surveillance state, applying the power of artificial intelligence to all the data you can harvest from your citizen-helots, it makes perfect sense to ensure that the Communist Party has complete control over the data. And if you believe you are in the early phase of Cold War II, it makes perfect sense to ensure that companies based in the other superpower are cut off from the data.

Like the Soviet Union in Cold War I, China believes that the U.S. will behave the same way it does. Maybe it’s true —maybe Tesla would make data gathered by its Chinese vehicles available to the U.S. National Security Agency. But you can be absolutely certain BYD would make U.S. data available to the NSA’s equivalent in Beijing if they had sold a lot of Chinese electric vehicles to Americans.

Xu Zhangrun, who was a professor of jurisprudence and constitutional law at Tsinghua University until he was fired last year, believes that Xi has restored tyranny in China, by removing the constraints on his power — such as informal term-limits — that his predecessors had imposed after Mao’s death. “Tyranny ultimately corrupts the structure of governance as a whole,” Xu has written, “and it is undermining a technocratic system that has taken decades to build.” That may well prove to be true.

In the short run, however, the big losers from Xi’s tyranny and the Cold War that he is waging will be those Western investors who foolishly believed that Chimerica could survive not only a global financial crisis made in America, but also a global health crisis made in China.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.


Get Ready to Live With Covid’s Hassles Forever

 Just as with airline security after 9/11, many "temporary" pandemic regulations are with us to stay.

Unfriendly skies. Photographer: Koen van Weel/AFP/Getty Images

“I just want my life back,” said the singer Britney Spears on Wednesday.

In 2008, Ms. Spears’s father was granted a conservatorship over her because of concerns about her mental health. According to her testimony last week, the arrangement has been used to force her to go on tour, to undergo psychiatric evaluations and to take medication.

“I don’t feel like I can live a full life,” she told a Los Angeles judge. She could not even visit with friends who lived “eight minutes away.” The conservatorship was doing “way more harm than good,” she said.

The parallel is not exact, I admit. But one woman’s desire to be free of conservatorship sounded to me a lot like the rest of humanity’s desire to be free of Covid-19. Since the novel coronavirus began spreading throughout the world nearly a year and a half ago, we have all, to varying degrees, been subjected to regular evaluations of our health (tests) and encouraged if not required to take medication (in the form of vaccines). As for not seeing our friends … Well, I think we all want our lives back.

It would probably be wrong to conclude that lockdowns did more harm than good in the developed world, though they could certainly have been avoided or shortened by earlier reliance on testing and tracing. But a new working paper published by the National Bureau of Economic Research strongly suggests that lockdowns did do more harm than good in developing countries. “In low-income countries,” the authors argue, “a lockdown can potentially lead to 1.76 children’s lives lost due to the economic contraction per Covid-19 fatality averted.”

There was an “intergenerational tradeoff” in the developed world, too, in the sense that younger people suffered significant educational and economic losses because of restrictions imposed mainly to limit sickness and mortality among the older age groups most vulnerable to the pandemic.

Regardless of our age, we all want this to be over. But it so isn’t. I knew when I was finishing my book on the history of disasters late last summer that the pandemic had some way still to run.

There was a chance, I wrote, that it might be over by Easter 2021, and that “the world economy would snap back to life once this became clear.” However, “there was a worse scenario, in which we would spend years playing whack‑a‑mole with an endemic, evolving SARS-CoV‑2, with no vaccine that really worked and no immunity that really lasted. By the standards of past pandemics, this one might still be at an early stage — perhaps not even at the end of the first quarter.”

I wrote those words nearly a year ago, on July 6, 2020. It turns out that the vaccines (well, some of them) work better than I had dared to hope, and the world economy is indeed snapping back. And yet we may still be languishing in the second quarter of this pandemic — or maybe it’s early in the second half.

My struggle last week to get from northern California to South Wales to see family and friends after 18 months of separation has convinced me that the return to normality is going to be a lot slower than most of us would like to believe — and not only because of this virus’s shape-shifting character.

I have a bad feeling that even if we succeed in containing the spread of SARS-CoV-2 — to the extent of bringing mortality rates back down to normal levels everywhere — we may be unable to get rid of many of the pandemic-induced constraints that now restrict our freedoms as much as Britney Spears’s conservatorship restricts hers.

Let me illustrate the point with some personal experience, which I offer here not as a Britney-style lament but as an example of what most international journeys are like these days. My wife and I have been fully vaccinated since March. Our sons, who are both under 10, have not been. In order to fly to the U.K., of which three of us are citizens, we had to fill in a great many online forms, take PCR tests, and arrange and pay for two further rounds of testing during the 10-day quarantine imposed by the Welsh government.

We arrived at the airport very early, bearing a file full of documents that were carefully scrutinized by airline staff before we could board the aircraft. During the entire 10-hour flight, all of us — including our 3-year-old — had to wear face masks. The cabin crew insisted that we could only remove these momentarily to sip a drink or take a bite of the rations that were served. (Warning: When it comes to food and drink, all flights appear now to be operated by EasyJet.) Following our arrival at Heathrow, the documents were once again examined by U.K. border officials.

To say that this was fun would be a lie. It was in fact quite stressful. At each stage of the process, we saw other travelers fall foul of the health bureaucracy.

One couple were prevented from checking in at San Francisco as they lacked the correct documentation for a connecting flight to Croatia. At the departure gate, another woman’s test results were found in some way deficient. I heard more oaths and saw more tears than I can ever remember on such a trip.

Since arriving at our vacation home, we have been quarantined. This is supposed to be for 10 days but, as one’s arrival day is “day zero,” it will in effect be for 11. We have all passed the first test; our noses and tonsils will be swabbed again later today. When the landline rings, it is nearly always a polite lady from the Welsh test-and-trace service making sure we’re still there and not gallivanting around the fleshpots of Swansea.

Even when we get out of Covid jail, government rules will limit how many of our relatives and friends we can see in our remaining time here. Restrictions on social life that were supposed to be lifted on June 21 were extended, just before we set off, for another four weeks.

Masks are still required in many indoor settings and on public transportation. Outdoor gatherings of up to 30 people are allowed but, if you want to meet indoors, the maximum number is six, unless you restrict the gathering to members of just two households.

The police can break up gatherings that violate these rules and impose fines up to $14,000. At first sight, the “rule of six” poses a significant challenge to the planned rehearsals of the jazz septet to which I belong.

In short, if you are thinking of taking a long-haul flight anywhere in the world right now, my advice is: stay home.

Now, don’t get me wrong. I am not saying that all these restrictions are unnecessary. True, the U.K. Office for National Statistics recently confirmed that daily Covid deaths have fallen to the lowest level since last September (the seven-day average is just 16). But daily cases, which fell below 2,000 last month, have surged above 16,000, due mainly to the rapid spread of the more contagious Delta variant.

Paradoxically, the U.K. now leads Europe in terms of both vaccine doses per hundred and cases per million. Hospitalizations are also up.

My 22-year-old son and his friends have spent much of their university careers at Bristol in a shared house, studying remotely and observing the social distancing rules. But the end of exams (cue parties, albeit outdoors) coincided with the arrival of the Delta variant. Last week he and several of his friends tested positive. Maddeningly, he had only just had his first of two vaccine shots.

In his case, as for many other young Britons, vaccination came too late. The U.K. not only left the 20-somethings until the later stages of its vaccination rollout. It also prioritized getting first shots to as many adults as possible, rather than aiming for earlier full vaccination of a smaller proportion of people.

At first, this seemed smart. The problem is that, compared with earlier variants such as Alpha (B.1.1.7), the Delta variant is significantly easier to catch if you’ve had only one shot. Indeed, it turns out to be easier to catch even if you’ve had both shots.

A new study published in the Lancet — based on 19,543 confirmed infections and 377 hospitalizations in Scotland between April and June — shows that implied vaccine efficacy 14 days after the second dose fell for both the Pfizer and AstraZeneca vaccines. For the former, efficacy fell from 92% to 79%; for the latter, from 73% to 60%.

Nevertheless, these are still pretty good efficacy numbers. I therefore remain skeptical that fully vaccinated people need to be confined to barracks for 10 days, especially when they fly in from a country like the U.S. where the Delta variant is (as yet) not very widespread. The rule of six also seems excessively restrictive for fully vaccinated Britons.

When both clinical trials and real-world data point to high vaccine efficacy, especially for the Pfizer and Moderna vaccines, and when governments are keen to persuade people to get vaccinated, why on earth make the social benefits of being vaccinated so negligible?

The answer is clear. Such restrictions persist not because they have any foundation in scientific research. They are the products of one of history’s most powerful but often underestimated phenomena: bureaucratic inertia.

The medical reasons why the pandemic could drag on much longer than we would like to face are obvious enough. First, the virus simply cannot be eradicated because we are not its only hosts. Good luck vaccinating the minks. Second, to quote a sobering new piece co-authored by the great American epidemiologist Larry Brilliant, “The world will not reach the point where enough people are immune to stop the virus’s spread before the emergence of dangerous variants — ones that are more transmissible, vaccine resistant, and even able to evade current diagnostic tests.”

Looking back on last year’s published research, I would say that nearly everyone underestimated just how much this virus could mutate in ways that would cause problems. It is only a couple of months ago that I was worrying about how fast B.1.1.7 would spread from the U.K. to the U.S. Then there was B.1.351 (now Beta) in South Africa. Then P.1 in Brazil (Gamma). Now it’s time to worry about Delta (formerly B.1.617.2), which was first detected in India and is now dominant in the U.K.

Delta illustrates the problem of new variants very well. In the U.K., first doses have been administered to 64% of the population and both doses to 47%. But this has not sufficed to prevent the latest wave of infections, even without a full lifting of “nonpharmaceutical interventions,” or NPIs. Delta presents two challenges. First, the mutation to its spike protein allows it to attach to human cells more effectively, thus increasing transmission. Second, as we have seen, it reduces the efficacy of existing vaccines, especially the first dose.

Both of these factors push up the reproduction number, i.e., the number of people to whom an infected person will typically pass the virus. Imperial College London has published an estimate of the basic reproduction number for the Delta variant of 7.8, compared with 4.5 for the Alpha variant. Lockdowns plus vaccines can bring that number down, but to get it below 1 is not easy.

India had a disastrous spring because very few people had been vaccinated. Delta spread like wildfire, killing hundreds of thousands. The U.K.’s 2021 experience has been much less severe thanks to a very successful vaccination rollout, but the effective reproduction number still rose from 0.9 to a peak of 1.48.

In the U.K., according to estimates by J.P. Morgan Securities (published on June 21), a further 4.9 million people need to be fully vaccinated to bring the effective reproduction number back down to one, which will take 19 days at the current pace of vaccination, assuming that the current levels of mobility and NPIs are held steady. In the U.S., 47 million more people need to be fully vaccinated to hold the reproduction number at one if the Delta variant spreads as it has in the U.K. That will take 54 days.

It will take another 11 days of sustained vaccination to allow the U.K. to return to pre-pandemic levels of mobility (less in the U.S., because mobility is already nearly back to normal). With around 60% of the total population vaccinated, a new normal is achievable — with current nonpharmaceutical interventions remaining in place. But to get to the old normal with pre-pandemic mobility and no NPIs, we would need to see vaccination rates of around 86% to 88% of the total population.

Bear in mind that the Greek alphabet has 24 letters, and Delta is only the fourth. We already have Kappa (B.1.617.1), first identified in India, now spreading in Australia — but did I miss Epsilon, Zeta, Eta, Theta and Iota?

Bear in mind, too, that there are certainly other variants out there that have yet to be identified. Whereas in the past month the U.K. has sequenced over 27% of its recent positive Covid-19 tests, in Italy that figure is less than 1%, according to Gisaid, a global public-private effort for sharing information on viruses.

As I said to a medical friend last week, it’s Omega I really worry about. Do we seriously think Delta is the worst variant of this virus we’ll see?

It is in this context that governments all over Europe are bowing to public pressure and easing restrictions. Outdoor mask-wearing is ending in France and Switzerland. France will lift its 11 p.m. curfew. Americans will be allowed into the European Union, and Europeans from the 26-nation Schengen area into Switzerland. Italy will re-open nightclubs by early July. In Hungary, the government has lifted all restrictions on crowd sizes.

Followers of European soccer will have noticed that stadiums are filling up. If, like me, you love the sound of football fans chanting, this has been exhilarating. But it also probably means that the Delta variant will spread even faster across Europe this summer.

Meanwhile, in the U.S., with restrictions rapidly being lifted, the delusion is widespread that Covid is over. That seems most unlikely. Daily vaccination rates have declined from a peak of more than 4.6 million doses given in a single day in mid-April to just around half a million daily doses last week. According to Centers for Disease Control data, 80% of adults older than 65 had been immunized by May 22, compared with just 38.3% of 18- to 29-year-olds.

The variation is also enormous between states. The South and West are far behind New England. In Bristol County, Rhode Island, 95% of over-65s have been fully vaccinated. In Billings County, North Dakota, the figure is 21%.

The principal obstacle is a suspicion of vaccines that has been recklessly fueled by misinformation and disinformation on social media platforms such as Facebook and YouTube. Over a quarter of Americans are unvaccinated and unwilling to get vaccinated (more than twice the U.K. share); another 11% are unvaccinated and uncertain. Case numbers are already surging in Missouri (the seven-day average is up 65% in the last month), Arkansas (up 61%) and Oklahoma (45%).

According to the latest projections from the Institute for Health Metrics and Evaluation, there could be at least another 25,000 American deaths by Oct. 1 — and that leaves out the possibility of a further wave in the fall and winter. Yet the projection for the world as a whole is a terrifying 1.1 million additional deaths by the end of September. This reflects much more than vaccine hesitancy. Just as significant are vaccine insufficiency and vaccine inefficacy.

The U.S. and other developed countries bought many times the number of doses they needed from several manufacturers. At the same time, some countries imposed restrictive export regulations. Lack of support means that Covax, the international initiative to accelerate global vaccination, is far short of its goal to get a billion doses of vaccine to 92 poor countries.

Only 22% of the world’s population has received one shot and just 10% is fully vaccinated. A third of vaccine shots have gone to high-income countries, 52% to upper-middle-income, 14% to lower-middle-income, and just 0.3% to lower-income.

True, China has exported more than 200 million doses of its four homegrown vaccines to 90 countries. But recent outbreaks in Mongolia, Bahrain, Chile and the Seychelles — even after majorities of their populations have been vaccinated — are raising hard questions about how well the Chinese vaccines work. Funny how the Chinese pharma companies never published Phase 3 trial results, isn’t it?

The longer all this goes on, of course, the harder it will become to peel away the layers of regulation that have accumulated in the past year and a half. I fear that, as in the years after 9/11, we are already getting used to restrictions that at first seemed intolerable. Nearly 20 years on, I can still remember how irksome those first Transportation Security Administration checkpoints were. Now I go into a kind of trance, doomscrolling on my iPhone or reading a paperback, whenever required to form an orderly line at an airport.

And the spirit of today’s bureaucracy — “out of an abundance of caution” is the key phrase used by officials who have been taught that even a 0.01% risk is too much — will ensure that at least some rules and regulations stay in place even when they do little or no good (or even net harm).

This, as the government-reform advocate Philip K. Howard has long argued (most recently here), is one of the most distinctive features of the modern era: the ratchet effect that means new regulations are easy to add, very hard to subtract. Does a state of emergency such as the one declared last year ever end? True, many governors are formally ending the emergencies in their states (including New York on Thursday). But at the national level it’s a different story.

According to a Mercatus Center paper published last year by Weifeng Zhong, Christos Makridis and James Diddams, “The eight presidents since 1976 have declared a total of 64 national emergencies under the National Emergencies Act, 35 of which are still in effect to this day and most of which outlasted their motivating emergencies.” The oldest of the 35, “Blocking Iranian Government Property,” was declared in 1979. I was 14 years old.

In short, get used to the online forms. Get used to the tests. Get used to the test-and-trace calls. You probably should get used to the vaccines, too, as you’ll doubtless need a booster shot before the year is out. Above all, get used to the increasingly elaborate regulations because, let’s face it, there are hundreds of thousands of people employed for the sole purpose of generating such rules and almost none whose job it is to scrap them.

The good news is that, if you have the patience to struggle through the bureaucratic jungle, you will every now and then find a precious loophole. In Wales, renowned the world over as the “land of song,” it turns out that choirs and brass bands are now permitted to rehearse in groups of up to 30, albeit with somewhat stricter rules for wind and brass players than for pianists and bassists.

I am now printing out the relevant pages and look forward to presenting them, stapled together and with appropriate highlighting, to any police officer who attempts to interrupt our septet on Saturday night. For one British jazz band, if not for Britney, the Covid conservatorship is over.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Politics in the Time of Corona

 Latin American leaders on the right and left have not fared well against Covid. In other ways, too, the U.S. is increasingly resembling its neighbors to the south.


Bolsonaro dropping the ball. Source: Bloomberg

In “Love in the Time of Cholera,” Gabriel Garcia Marquez imagines an enduring love triangle between two passionate people — Florentino and Fermina — and a punctilious doctor, Juvenal Urbino, whom Fermina is persuaded by her father to marry. Trained as a physician in Paris, Dr. Urbino is a national hero for having saved the Colombian port where the story is set (based loosely on Cartagena and nearby Barranquilla) from recurrent cholera epidemics.

“When [Urbino] returned to his country,” writes Marquez, “and smelled the stench of the market while he was still out at sea and saw the rats in the sewers and the children rolling naked in the puddles on the streets, he not only understood how the tragedy had occurred but was certain that it would be repeated at any moment.”

In cities all over the world in the late 19th century, men like Juvenal Urbino were fighting the same battle, struggling to persuade city governments and urban elites to take the essential measures necessary to limit the spread of cholera. In Western Europe, these battles were won after 1892, the year of the last great cholera outbreak there, in Hamburg. In Latin America, the struggle was much more protracted.

“Dr. Urbino wanted to make the place sanitary, he wanted a slaughterhouse built somewhere else and a covered market. But even the most complaisant of his notable friends pitied his illusory passion. That is how they were: they spent their lives proclaiming their proud origins, the historic merits of the city, the value of its relics, its heroism, its beauty, but they were blind to the decay of the years.” Marquez’s leitmotif — “that the symptoms of love were the same as those of cholera” — seems almost to suggest that the Colombians could not quite distinguish between plague and passion.

Latin America has had an exceptionally bad time of it since the first Covid-19 case was confirmed in Sao Paulo on Feb. 26 last year. Rank the world’s countries by deaths per million, and only a few Eastern European countries look worse. But the Latin American excess mortality figures are especially shocking. Overall, U.S. mortality since January last year has been about 18% above normal, according to estimates by the Financial Times. For the U.K., the figure is about the same (17%). But for Brazil it is 34%.

For Western commentators accustomed to heaping opprobrium on the Brazilian president, Jair Bolsonaro, this confirms the view that he is like former U.S President Donald Trump or U.K. Prime Minister Boris Johnson, only worse. But the theory that populist leaders are responsible for high Covid deaths begins to look less compelling when you realize that the excess mortality rates for a number of other South American states are even worse: Peru leads (123%), followed by Ecuador (67%), Bolivia (56%) and Mexico (55%). There is a political story here, but it is not the familiar one in which madcap right-wing populists excel at exposing their own people to the virus.

As Marquez’s famous novel implies, there is nothing new about Latin America’s rough ride through this pandemic. When the Spanish influenza swept the world in 1918-19, the mortality rates in Guatemala (39 per thousand) and Mexico (20.6) were among the highest in the world, according to the estimates published by Niall Johnson and Juergen Mueller in 2002. Only in Africa, Indonesia and the South Pacific islands were the rates higher. By comparison, they estimate the mortality rate for the U.S. at 6.5 per thousand.

Similarly, in the 1957-58 Asian flu pandemic — which was in some ways closer to Covid in its global impact than the much worse 1918-19 episode — Chile, Colombia, El Salvador, Mexico, Panama and Venezuela all had mortality rates significantly above the global average, according to research led by Cecile Viboud.

So how do we explain this? My first foreign trip in 16 months was to Mexico City last week. It is a city I’ve had a crush on since I first visited it 40 years ago, as a callow 17-year-old on a gap-year adventure loosely based on Jack Kerouac’s travels in “On the Road.” And although the city has grown explosively since then, it has not lost its charm.

There is a verdant, overgrown quality to the center of the city. The stormy mountain weather in summer keeps the air surprisingly clear. And the cuisine remains irresistible to me, not least the inspired madness of chicken in chocolate sauce (mole). Is there a better aperitif than mezcal?

Yet you can see as you walk the streets why pandemics hit Latin America so hard. On the one hand, the populations of Central and South America are older on average than those of most developing countries. Whereas the median age in Africa is 19.7 years and in Southern Asia 27.6, according the United Nations, in Latin America and the Caribbean it is 31. People are also much more likely to be obese than in South Asia or Africa. The age-standardized prevalence of obesity among adults in Mexico is 28.9, not far behind the U.S. (36.2). In India the figure is 3.9, in Nigeria 8.9. On the other hand, Latin America has significantly patchier health-care coverage than most developing countries with comparably old and unhealthy populations.

All over the world, it is now clear, Covid kills the poor more than the rich, and darker skinned people more than lighter skinned people. Latin America, with its high levels of inequality — where poverty often correlates with skin pigmentation — has therefore presented the disease with a lot of vulnerable people in many big and crowded cities.

Finally, vaccination in Latin America is pretty much a mess. In the U.S. more than half the population has now been vaccinated; in both the U.K. and Canada it is 59%. The figures in Latin America are far lower: 22% in Argentina and Brazil, 18% in Mexico — not much ahead of India (13%). Even where vaccination has gone well (Chile: 57%), the Chinese vaccines they have relied on have proved to have much lower efficacy than the vaccines produced by Moderna and Pfizer/BioNTech.

But these differences should not be regarded as God-given. To explain them, you need to look at the region’s politics. To say that the problem is populist leaders is too simplistic. True, Brazil has a right-wing populist president and Mexico a left-wing populist.

But in Peru it is Congress that wields the power, so much so that it has brought down three of the country’s last four presidents, including Martin Vizcarra, who was impeached twice in 2020 and finally forced to resign despite an approval rating above 50%. In Ecuador, too, President Lenin Moreno did not conform to the populist stereotype last year, and in last month’s presidential election he was replaced by a center-right candidate, pro-market banker Guillermo Lasso. In Bolivia, the pandemic struck after the populist President Evo Morales had been ousted from power.

In any case, even the populists have very little in common when you compare their pandemic responses. Mexican President Andres Manuel Lopez Obrador, known by the abbreviation AMLO, may be a man of the people, but he has done remarkably little to protect Mexicans from either the virus or its economic effects. Unlike in Brazil, there has been almost no fiscal support for the Mexican economy. As the rest of the world commits itself to a “net zero” future of reduced reliance on fossil fuels, AMLO remains strangely preoccupied with restoring the dominance of the state-owned oil producer, Pemex, over the country’s energy sector.

By contrast, Bolsonaro has been forced by the Brazilian Congress to blow out the deficit while at the same time expressing views on Covid that make Trump look like Anthony Fauci. Last week saw large-scale protests against Bolsonaro in numerous cities. His chances of re-election have been further hurt by the return to political life of the former president, Luiz Inacio Lula da Silva, whose criminal conviction for corruption was recently overturned. Yet while 54% of Brazilians see Bolsonaro’s handling of the pandemic as bad or awful, according to a March 17 Datafolha poll, his approval remains well above the single digits that presaged the impeachments of previous presidents Dilma Rousseff and Fernando Collor.

Wherever you look closely, you see how complex Latin American politics really is. In most cases, populist presidents have to reckon with powerful parliamentary bodies, in which vested interests are well entrenched; more or less independent judiciaries and central banks; not to mention independent media companies.

The real political problem in Latin America is that the elites in most countries have proved — over the 200 years since they gained their independence from Spain and Portugal — remarkably reluctant or simply unable to address the problems of the lower classes.

The recurrent pattern is, after prolonged periods of paralysis, for a far-left alternative to present itself and tear everything down, leaving nearly everyone even poorer. That is what happened in once-rich Venezuela under Hugo Chavez and Nicolas Maduro. It might conceivably be Peru’s fate, if left-wing firebrand Pedro Castillo beats his right-wing rival, Keiko Fujimori, in Sunday’s run-off election for the presidency. (It is going to be close.) During his campaign, Castillo has threatened (at times and not consistently) to redraft the constitution, bring key mining and energy sectors under direct state control, and abandon free trade.

Typically for a Latin American election, Castillo has the support of rural voters in the interior, indigenous Peruvians, younger progressives, hardened Marxists and organized labor — including Peru’s powerful teachers union. Fujimori’s base is concentrated in the metropolitan Lima area, and is educated and urban. She also polls very strongly with older voters, practicing Catholics and the wealthy. The fact that she is the daughter of Alberto Fujimori, the imprisoned former dictator, and served as his first lady in the 1990s does not seem be considered disqualifying by such voters.

Sometimes the illiberal right wins, sometimes the radical left. In the latter case, eventually, the right is restored to power and sets about turning back the clock. Then, rinse and repeat.

Typical of the dysfunction is Chile, South America’s most successful economy since the reforms of the 1980s, where a great deal of energy is soon to be consumed by the writing of a new constitution, which I suspect won’t actually do much for poorer Chileans. Latin American states love new constitutions, but these seldom address the real issues of inequality and often send countries disastrously off course (see Venezuela). Why are the Chileans changing their constitution, despite the fact that it has worked rather well? Because the last one originated under the dictatorship of Augusto Pinochet — and because a wave of protest, beginning before the pandemic, sapped the strength of the center-right government of Sebastian Pinera.

Yet as I walked the streets of Mexico City last weekend, a question kept popping into my head. All of this may long have been true of Latin America. But is it finally starting to be true of the U.S., too? A decade ago, in a book titled “Civilization,” I tried to show why the variants of European settlement in the Americas after around 1500 had produced such different outcomes in North, Central and South America, emphasizing the very different approaches to land distribution that distinguished British colonialism from Spanish and Portuguese. Whereas the initial land grab by the conquistadores and early settlers ultimately established very small property-owning elites with vast tracts of territory, in North America land continued to be distributed in relatively small parcels as new settlers arrived.

The question I asked toward the end of the book, however, was whether the U.S. was beginning in some ways to resemble Latin American countries — not just because of large-scale immigration from south of the Rio Grande, but because American inequality and U.S. institutions were turning Latin.

This same question has prompted a brilliant essay on “The Brazilianization of the World” by Alex Hochuli in the latest issue of the journal American Affairs. Because of the pandemic, he argues, “hollowed-out state capacities, politi­cal confusion, cronyism, conspir­atorial thinking and trust deficits have exposed the crumbling legiti­macy that now makes rich and powerful states look like banana republics.”

We have reached “the End of the End of History.”

Far from the world converging on Francis Fukuyama’s idea of liberal democratic capitalism, we risk converging on the Latin American fever dream: “The only people satisfied with their situation are financial elites and venal politicians. Everyone complains, but everyone shrugs their shoulders. This slow degradation of society is not so much a runaway train, but more of a jittery rollercoaster, occasionally holding out promise of ascent, yet never break­ing free from the tracks.” (If that reminds you of Marquez’s Colombia, you’ve been paying attention.)

It seems to me, however, that Hochuli is not describing a phenomenon you would encounter in continental Europe or indeed in Canada. It is the U.S. he is really talking about. And the pathologies he identifies are not peculiar to Brazil. A better framing, I think, would be the LatAmization of the U.S. For all his invective against immigrants from Central America, Trump was in many ways a very Latin American figure, with strong caudillo instincts, even if his attempt at an autogolpe, or self-coup, on Jan. 6 was a fiasco.

How far this process can be reversed will depend on whether our own Dr. Urbinos — people willing to learn the real lessons of last year’s disastrous mishandling of Covid — outnumber those who, to paraphrase Marquez, spend their lives proclaiming their proud origins, the historic merits of the country, the value of its relics, its heroism, its beauty, but are blind to the decay of the years.

In Marquez’s Colombia, “the symptoms of love were the same as those of cholera.” In America today, I wonder if the symptoms of Covid are, in a similar way, akin to those of a morbid, suffocating patriotism.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

How a Brainiac and a Villain Became Covid Heroes

 Audrey Tang empowered Taiwan’s citizens. Dominic Cummings lost out to British bureaucracy.

Audrey Tang, virtual savior. Photographer: Sam Yeh/AFP/Getty Images

This is a tale of two very different islands, two very different people, and two very different responses to a single global disaster.

The current predicament of the two islands reminds us that great pandemics do not end, like great wars, with a single, glorious day of victory — or a single, ignominious day of defeat. Pandemics seem to end, only to begin again with sudden outbreaks. They necessitate a prolonged game of Whac-A-Mole against the infectious disease in question.

In the past few weeks, this has been playing out in both Taiwan, officially known as the Republic of China but claimed by Beijing as a province, and Britain, officially known as the United Kingdom of Great Britain and Northern Ireland, formerly a member of the European Union. In Taiwan’s capital of Taipei, there has been a sudden surge in cases of Covid-19. The same has been happening in the northern English town of Bolton as well as in London. For politicians and public health officials in both countries, these are anxious days.

Pandemics have fewer heroes than wars. For me, Audrey Tang — Taiwan’s minister without portfolio since 2016 — is one of the true heroes of the Covid crisis, because her pioneering use of information technology was one of the key reasons Taiwan did so very well at preventing the spread of the SARS-CoV-2 virus last year.

By contrast, Dominic Cummings — Prime Minister Boris Johnson’s key adviser from July 2019 until his abrupt and acrimonious departure from Downing Street last November — has frequently been represented as a villain in the British media.

If Tang is now one of the world’s coolest brainiacs, Cummings is more than ever the “career psychopath,” in the damning phrase of former Prime Minister David Cameron. Yet Cummings may in reality have been a hero, albeit an unlovable one. Tang and Cummings are the odd couple of the pandemic. To analyze the roles they played is to give a human face to the radically different experiences of the two islands.

Of course, Taiwan and Britain are scarcely peas in a pod. The U.K. is nearly seven times larger in area, fives time larger in terms of gross domestic product, and three times larger in population. The U.K.’s per capita GDP in 2019 was two thirds higher than Taiwan’s. Culturally, too, they are profoundly different, even if their inhabitants share a love of tea.

Yet it is hard to believe that simple differences in size, wealth or culture can explain the astoundingly divergent paths the two islands have taken since the outbreak of the Covid-19 pandemic.

Taiwan has thus far recorded fewer than 4,000 Covid cases and 15 deaths. The U.K. has had 4.4 million cases and close to 128,000 deaths. Yet the virus responsible for these deaths was first discovered in Wuhan, China, less than 600 miles away from Taiwan’s capital. London is nearly 10 times further away from Wuhan than Taipei.

We may think of a pandemic as a “natural” disaster, in the sense that most experts still think the SARS-CoV-2 virus evolved naturally rather than being engineered  (even if the allegation that it was accidentally leaked from a laboratory in Wuhan seems more plausible now than it did a year ago). But only human action can explain the vast discrepancy between the Taiwan and U.K. experiences of this disaster.

The Little Island That Could
Percent change in GDP

Source: International Monetary Fund

*2021 estimate

Another striking difference has been economic. Last year, the U.K. suffered one of the most severe contractions in its history, with GDP shrinking by close to 10%. Taiwan’s economy grew by 3.1%. The U.K.’s net public debt has jumped from 75% of GDP in 2019 to a projected 97% this year. Taiwan’s was 30.8% of GDP in 2019. It is likely to be 30.6% this year.

In short, even allowing for this month’s outbreak, Taiwan has been all but unscathed by Covid-19. In terms of both public health and economic performance, the U.K. has been hammered.

Bigger Island, Deeper Hole
General government net debt as percent of GDP

Source: International Monetary Fund

*2021 estimate

The great question of the plague 2020-21 is why so many Western countries — in the Americas as well as in Europe — did so much worse than a few East Asian countries at handling a novel coronavirus. There are a variety of simplistic answers to this question. One is that populist presidents and prime ministers messed up the Western pandemic response. Another is that Oriental collectivism was superior to Occidental individualism in the face of a new pathogen. Neither of these explanations is remotely sufficient, if they have any value at all.

True, Johnson doubtless made errors of judgment last year, though not as many as U.S. President Donald Trump or Brazilian President Jair Bolsonaro. But plenty of Western countries with centrist or technocratic leaders have done even worse than Britain, the U.S. and Brazil in terms of excess mortality.

Italian excess mortality exceeds British, to name just one of the European Union countries that has fared worse. Bolivia, Ecuador and Peru have all suffered higher excess mortality than the U.S. and Brazil. None of the leaders of these countries last year fit the populist paradigm. The idea that Britain would have fared much better with a different prime minister — whether Labour Party leader Jeremy Corbyn or Johnson’s predecessor, Theresa May — seems, on reflection, implausible.

As for the U.S., many Democrats would dearly love to believe that if Joe Biden had somehow been sworn in a year earlier — or if Hillary Clinton had won in 2016 — the country would have handled the pandemic much better. Leadership would doubtless have been far less erratic, but most of the really important mistakes by the U.S. public health bureaucracy would almost certainly still have been made, regardless of who was in the Oval Office.

The Centers for Disease Control would still have bungled testing. The government and the big tech companies would still have failed to enable digital contact tracing. The national and state authorities would still have failed to enforce quarantines. Democratic-controlled state governments, including those of New York and California, would still have failed to keep the infected away from the vulnerable, especially in elderly care homes.

If the swine flu that struck the U.S. in 2009 had been as deadly as Covid, how well would President Barack Obama’s administration have done? In the words of Ron Klain, then as now Biden’s chief of staff, “We did every possible thing wrong. And … 60 million Americans got H1N1 in that period of time. And it’s just purely a fortuity that this isn’t one of the great mass casualty events in American history. Had nothing to do with us doing anything right. Just had to do with luck.”

As for Western individualism, this is a cliche that starts to look absurd when you consider how people actually behaved last year. It was in the U.K., not Taiwan, that the population was placed under virtual house arrest by lockdown orders. To live in London was to be subjected to restrictions that at times recalled the Blitz during World War II.

To live in Taipei, by contrast, was to experience some of the lightest-touch restrictions on personal freedom of any developed country. The Blavatnik School of Government at Oxford created a “stringency index” to capture the scale of restrictions imposed by governments during the past year and a half. The average score for Taiwan has been 25, where 0 would be no restrictions and 100 would be total lockdown. The average stringency score for the U.K. to date is 65.

The key to what happened around the world in the plague year was how far governments and particularly public health agencies followed the epidemiologist Larry Brilliant’s maxim that, in the face of a new, contagious and deadly pathogen, the key things are “early detection and early action.” Taiwan — and other places in Asia and the Pacific — did both. The U.K. — and nearly every Western country — did neither.

In the East, it is true, they had learned the lessons of two previous coronavirus outbreaks, SARS (2003) and MERS (2012). But there was more to Taiwan’s success than that. For example, a website was used to ration face masks when they were scarce. Had there been an outbreak in Taipei, officials had a plan to subdivide the city into separated neighborhoods. Schools remained open, albeit with elaborate and strictly enforced precautions.

In the U.K., by contrast, there was late detection and late action. The responsibility for this double trouble surely lay with the government’s public health experts: Chris Whitty, the government’s chief med­ical adviser; John Edmunds of the London School of Hygiene and Tropical Medicine, and my near-namesake Neil Ferguson of Imperial College London, the key epidemio­logical experts on the New and Emerging Respiratory Virus Threats Advisory Group (Nervtag); and the Scientific Advisory Group for Emergencies (SAGE), which reported directly to the prime minister and whichever group of ministers he chose to assemble in the Cabinet Office Briefing Rooms (Cobra).

These experts would appear to have dithered: As late as Feb. 21, Nervtag recommended keeping the threat level at “moderate.” On March 9, four days after the U.K.’s first death, SAGE rejected the idea of a lockdown, as it would only lead to a “large second epidemic wave once the measures were lifted.” At this point, the experts were apparently still thinking of the coronavirus as if it were a new strain of influenza. On March 13, the government’s chief scientific adviser, Sir Patrick Vallance, told the BBC that the aim was to reach herd immunity, but in a managed way, so as to avoid overwhelming the National Health Service.

Then the experts pan­icked. On March 16, Ferguson published the most influential paper of his career, predicting that without both “mitigation” (social distancing) and “suppression” (lockdowns) — maintained until there was a vaccine — there would be “approximately 510,000 deaths in GB and 2.2 million in the U.S.” With public apprehension mounting, herd immunity was ditched in favor of an unprecedented shutdown of British social and economic life.

Events veered between farce and tragedy in the subsequent days. Fergu­son himself developed Covid‑19 symptoms, and both Johnson and Health Minister Matt Hancock tested positive on March 27. Johnson was hospitalized on April 5 and moved to intensive care the next day, though he later rose from his bed, with characteristically immodest timing, on Easter Sunday.

Ferguson was caught vi­olating the distancing rules he himself had recommended in a romantic tryst; Cummings was spotted infringing the lockdown on a cross-country trip. Private-sector computer programmers then got hold of Ferguson’s model and tore it apart. These dramas, manna from heaven for journalists, were no doubt diverting to a people confined to their homes. But they distracted attention from the true nature of the British government’s failure.

Since the breakdown of their relationship, Johnson has found himself in a war of words with Cummings over a bewildering number of issues. Who leaked what to whom? Who paid for the redecoration of the prime minister’s private quarters in Downing Street? But the substantive issue is Cummings’s bitter critique of the government’s Covid response, which he unleashed as a lengthy and typically rebarbative Twitter thread last week.

Full disclosure: I have known Dom for years. We are both Oxford-trained historians, and we were both proteges of the great Norman Stone. But we were on opposing sides of the Brexit debate and it was only after he led the “Leave” campaign to victory that I began to pay attention to his writings on the problems of modern British government.

Earlier, bruising experiences as an adviser to Michael Gove when Gove was education minister had convinced Cummings that Whitehall — i.e., the British civil service — was a profoundly dysfunctional bureaucracy in desperate need of disruption. His latest broadside restates the case and argues that this — and not Johnson’s wayward leadership — was the principal reason for Britain’s poor Covid performance.

“The covid plan,” Cummings notes, “was supposed to be ‘world class’ but turned out to be part disaster, part non-existent.” This is fair comment. On paper, the U.K. and the U.S. ranked as the “most prepared” countries in the world in terms of global health security in a 2019 report. But not only did the U.K. government have, in Cummings’s description, a “joke borders policy” — almost no restrictions were placed on arriving travelers at Heathrow for most of last year — it also persisted with a failing plan long after greater public scrutiny would have forced a change of course.

“One of the most fundamental & unarguable lessons of Feb-March,” writes Cummings, “is that secrecy contributed greatly to the catastrophe. Openness to scrutiny wd have exposed Gvt errors weeks earlier than happened.” The problem is partly Whitehall’s “cultural hostility to openness” and partly its tendency to rate and promote civil servants on criteria other than actual results.

The one thing that the U.K. got very right — its very rapid and efficient vaccination procurement and rollout — was a success precisely because it was taken away from the career civil servants and given to a task force led by a venture capitalist, Kate Bingham.

Love him or hate him — and the haters overwhelmingly outnumber the lovers — Cummings’s critique of “the silent entropy of Whitehall” rings true. He is rightly skeptical of the proposed public inquiry into the U.K.’s handling of Covid because it “will at no point ask: how does the deep institutional wiring of the parties/civil service program destructive behaviour by putting the wrong ppl in wrong jobs with destructive incentives? It will all be about relatively surface errors. … The point of the inquiry is … to delay scrutiny, preserve the broken system & distract public from real Qs, leaving the parties & senior civil service essentially untouched.”

Cummings was one of those who urged the imposition of lockdown measures in mid-March on the ground that the alternative was a level of contagion that would overwhelm the National Health Service. But his preference would have been much earlier action that could have been much better targeted. As he rightly says, the “evidence [is] clear that fast hard effective action best policy for economy AND for reducing deaths/suffering.” Significantly, the “best example” he cites is Taiwan, which “shows that if you REALLY get your act together not only is econ largely unscathed but life is ~normal. But SW1 (Remain/Leave, Rt/Left) = totally hostile to learning from East Asia.” (SW1 is the London postcode for Whitehall as well as Westminster, where Parliament is located.)

Does Taiwan deserve to be held up as a role model for the Western world as whole? The events of recent weeks have proved that even the wizards of Taipei can be caught out by this wily, shapeshifting virus.

The proximate cause of the recent outbreak was lax enforcement of quarantine rules for air crews. Whereas passengers arriving in Taiwan must quarantine for 14 days — a rule that is strictly enforced — pilots and cabin crew are required to quarantine for just five. This was too short a time. A handful of infected pilots spread the virus to family members as well as staff at the airport quarantine hotel, which had failed to separate regular guests from guests undergoing quarantine.

By May 11, community spread was identified at a local chapter of Lions Club International. One gregarious member appears to have been a super-spreader, carrying the virus to a hostess tea shop in Taipei’s Wanhua district and a games hall.

Taiwan’s current wave of Covid infections is still tiny by global standards — a seven-day moving average of 321 cases as of Friday. However, this is by far the largest outbreak of the pandemic so far in Taiwan. The previous peak was only 20 cases per day, in late March 2020.

The near-vertical trajectory of the case curve over the past week indicates that the outbreak is being driven by community spread, not a few super-spreader events. So far, there have been just three deaths in the current wave, but more may follow, as a significant proportion of those infected are over 50.

Earlier this week, Health Minister Chen Shih-chung issued a Level Three alert (the second-highest level) shutting all gyms, bars, clubs and cinemas in Taipei. Gatherings indoors are now limited to five people, outdoor gatherings to 10, and foreigners have been banned from entering without a residency permit until June 18. Fines for not wearing a mask have been increased. School classes have been suspended in Taipei and New Taipei City since May 17. It remains to be seen if these measures will suffice to contain the outbreak.

“We are victims of our own success,” Audrey Tang acknowledged when I spoke with her on Monday night. For example, many people postponed getting vaccinated in the belief that a cheaper homegrown vaccine would be available by July and there was no risk in delaying. A tiny share of the population (0.1%) had received one vaccine dose on the eve of the outbreak.

However, the biggest sin of omission has been the failure to build adequate testing capacity. New Taipei City ran out of testing capacity after just 200 tests on May 17, and the government has accumulated a backlog of unprocessed tests (estimated to be around 30,000).

Yet I am willing to bet that, rather as South Korea did last year, Taiwan is going to be able to bring this outbreak under control within a relatively short period, because it has the key tools to do so.

Thanks to the work of Tang and her colleagues, Taiwan already has a contact-tracing app, officially called a “social-distancing app.” It informs all of a person’s close contacts from the last 14 days in the event of positive Covid test. It did not need to be used in 2020, but now it is being rolled out rapidly, with several million people already registered.

Taiwan’s open-source network for geek-to-government collaboration, G0V (pronounced “gov-zero”) has also created a website to track the outbreak, aggregating data from hospitals and other sources. And citizens have been using Google maps to create “risk maps” in order to help people better social distance.

The most appealing feature of Tang’s approach is her emphasis on using software and smartphones to empower ordinary people, rather than the government. This has its roots in the 2014 student protests known as the Sunflower Movement, which she supported. She was invited to become a minister after successfully creating a media and digital competence program for use in Taiwan’s schools

In an interview last year, Tang spoke of the way Taiwan uses open-source software tools to tap the “collective intelligence” of civil society through “participatory mechanism design.” Examples, such as Join and vTaiwan, are built on top of, a software program described by one of its co-founders as a “tool for turning crowds into coherence” — or “rough consensus.” This, Tang argues, is the exact opposite of the AI-enabled Panopticon under construction on the Chinese mainland. “The more they develop,” she says, “the more drawbacks that we see from our lens of human rights and democracy. We’re like, ‘OK, we should totally not go there.’”

Just as her approach to the pandemic was not only to help citizens be better informed but also to help better inform the government, so her approach to misinformation and disinformation was not censorship but satire. “We fought off the pandemic with no lockdown,” she said last year, “and the infodemic with no takedown.” The Tang approach was to deploy “humor against rumor” — funny memes against fake news.

I have learned a lot from the odd couple since I began thinking and writing about networks and contagions back in 2016. It’s not something I would previously have anticipated. There was a time when I regarded Dom Cummings as an incorrigible maverick, who had embraced Brexit mainly to show off his skills as a political wrecking ball. If you had told me that a transgender software nerd from Taiwan would one day be the heroine of one of my books, I’d have scoffed.

But such unusual people — brainiacs or psychos as they may seem to more conventional minds — turn out to be exactly the people you want to have around when disaster strikes. The fact that one is a government minister while the other is a jobless pariah neatly sums up this tale of two islands.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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