As the COVID-19 pandemic moves across the planet, it threatens our economic and personal health. This small little virus that originated in another animal species, is now a human problem. With millions infected and tens of thousands already dead, the pandemic has inflicted significant casualties. The economic fallout is just starting to be felt and could devastate individuals, business and even countries. That tally is yet to be started.
The pandemic will pass as all others before. But the COVID-19 pandemic is unique in the annals of history. It is the first to occur on a planet that is now inextricably connected; both physically and economically. No prior pandemic had an assured pathway to traverse the planet this quickly and shutdown commerce almost completely. This may be a historic first, but it is also our new normal. And it will not be the last pandemic the world will see.
A world that saw a century pass between the Spanish Flu and COVID-19, won’t have to wait nearly as long for the next one. And if the world does not get enough time to recover from COVID-19 before the next one strikes, we may well experience a catastrophic economic meltdown on a global scale.
And if this is our new normal, we now have two distinct and mutually exclusive choices before us; either we change how global goods and people move across the planet or we must accept the risk of future pandemics as a cost of doing business. COVID-19 has exposed dangerous vulnerabilities in our economic and healthcare systems.
There are gaping holes in our supply chains that leave us vulnerable to critical supply shocks and our healthcare systems have nowhere near the capacity needed to effectively manage pandemics. And to make matters worse, COVID-19 has laid bare the fact that when push comes to shove, reliable trade partners like the United States are perfectly willing to deny us critical supplies and nations are completely willing to shut the border to global travel.
From Canada being denied American made N95 masks to cruise ships adrift at sea with sick and dead passengers on board, this pandemic has made it clear that when things start falling apart, we don’t play nicely with each other. If there was any doubt that humans are tribal, the behaviour of nations is ample proof of that fact. Nations have retreated inward and even within nations, regions and states have turned their back on each other.
For trading nations like Canada, the consequences are even more isolating. All of a sudden, Michael Porter’s treatise on the competitive advantage of nations has sprung a major leak. Porter suggested that each nation focus on what it does best and sell its wares to other nations while buying what others are best at making. This was exactly the rationale behind outsourcing manufacturing to places like China, Mexico and other low wage producers across the world.
However, a global pandemic that resulted in every nation needing the same critical supplies at the same time has left every nation scrambling for life saving supplies including gloves, masks, medicines, sanitizing materials and inexplicably, even toilet tissue. Trump’s order to deprive Canada and Latin American nations essential supplies has just made matters worse.
Among other things Porter missed, one was not anticipating the irrational behaviour during events like a global pandemic. If nations renege on trade agreements and international rules, or simply resort to tribalism and hoard critical supplies for their own citizens, nations that outsourced that production are left very far out in the cold. This is exactly what happened as India and China, the planet’s largest pharmaceuticals producers put severe restrictions on their exports.
As Canada struggles with depleting medical supplies, its own ‘just in time’ supply chain and healthcare capacity are leaving vulnerable Canadians at risk of not getting desperately needed treatment. Canadian provinces including Ontario, Quebec and Alberta are facing the real prospect of denying treatment to patients because there is no room to treat everyone. The harsh reality faced by Italy may soon become one for Canadians.
The COVID-19 pandemic will pass. And once the immediate risk has passed, there will be a day of reckoning and the emergence of a new ‘pandeconomy’. Canada, along with other nations, will have to reassess how their economies are structured. One of the lingering effects of COVID-19 will be a loss of trust in a global supply chain that assumed the market will work perfectly under all circumstances. And there is ample reason to have less trust going forward.
Canada will have to consider new strategic industries that cannot be outsourced leaving Canada at the mercy of offshore suppliers. For medically essential equipment, materials and pharmaceuticals, building larger stockpiles may not be a full solution. These materials are subject to expiration and maintaining a domestic manufacturing capacity is the only certain security of uninterrupted supply. Canada must mandate that a certain percentage of its critical medical equipment and supplies be domestically manufactured. That will give life to Canadian manufacturers and give us long term assurance of supply.
In addition to Canada’s supply chain issues, the design of our healthcare system, particularly its ability to handle large scale events, must come under closer scrutiny. Every Canadian jurisdiction has a well thought out disaster response plan. However, these plans are almost exclusively designed to respond to single, mass casualty events like mass transportation or industrial accidents. Major Canadian cities can activate these plans on cue in response to a major event. But even these plans would be quickly overwhelmed by multiple single events.
Pandemics, as COVID-19 has shown, are neither single events nor geographically contained. A pandemic is a sustained mass event that could cover the entire nation or indeed, the entire planet. And we are quickly learning that our systems cannot handle a pandemic like COVID-19.
Canada needs to a develop a rapid deployment action plan to ramp up capacity at the first sign of a pandemic. This will necessarily require the type of plan used for military mobilization. That means Canada has to maintain stockpiles of essential intensive care equipment and supplies to ramp up hospital bed capacity within a week to ten days. That is both prudent and given our new normal, essential to treat and protect and more Canadians in the future.
The last weakness exposed by COVID-19 is our ability to manage the economic and financial shock of a pandemic. While a pandemic had been long predicted, Canada had no insurance plan to cover the damages when it actually hit. Aside from some Employment Insurance reserves, both Canada and Canadians were caught with their pants down; neither had any meaningful savings and reserves to get them through the tough patch.
As with our supply chains, our budgets operate in a ‘just in time’ mode. As individuals and as a nation, we have long forgotten the value of setting something aside for a rainy day. While Canada’s debt to GDP ratio is manageable, Canadian households are amongst the most debt ridden in the world.
Over the past three weeks, the Canadian government and some of the provinces have announced relief measures totaling well over $100 billion in new spending. Aside from tapping our EI reserves, every cent of this is borrowed money. It will have to be paid back with interest. If we are really lucky, the next pandemic or series of natural events like foods, fires or droughts will wait until we have paid the piper for this one.
But good planning hardly relies on luck as the main ingredient. We need to revisit how we spend and how we save. The fact that we are heavily in debt obviously makes it harder to save. But we need to change how we establish reserves for these kinds of economic shocks. Canada’s EI program, provincial workers’ compensation programs and budgets at every level of government must consider establishing reserves that will serves as our insurance policies against these events.
COVID-19 has taught us that we cannot afford to fly by the seat of our pants. We need better planning and cannot expect doing as we have in the past. To manage our way out of this predicament, we will have to work hard and hope that nature gives us time to breathe before hitting us again. If we do all that right, we may end up being all right. For now, let’s hope that this pandemic will pass without inflicting more pain than it already has. Keep safe Canada and take care of each other.