Thursday9 April 2020 ★ FINANCIAL TIMES 17

Opinion

C

ount the ways in which the

US Democrats stand vindi-

cated before voters. John

Maynard Keynes could not

make a more fluent case for

government than the news of the day

does. Unelected experts appear ever

more as lifesavers and not the knaves of

populist demonology. Even the bidding

among states formedical goods ash

brought home the indispensability of

federal leadership.

The atmosphere is ripe for a party of

big government to sweep elections in

post-pandemic America. But then so it

has been before.

Looking back at the past century or

so, two political facts seem to hold

across several rich democracies. One is

the ideological supremacy of the left.

The other is its electoral underper-

formance. In 1900, the US government

devotedless than 1 per cent f nationalo

output to healthcare, housing and other

varieties of social spending. Bar its

militarisation, the state was still the

wraithlike thing envisaged by some of

those who founded it.

By 2016, the number was touching 20

per cent. Through the 1980s, that right-

wing imperium, that lean-government

Eden, the social state grew. For all the

noise around the conservative “move-

ment”, the best this paper tiger has ever

done is slow the rate of the other side’s

progress. (In the culture wars, its record

is even worse, as a married gay couple

might attest between tokes of legal pot.)

And below those spending numbers:

an ineffable change in attitudes. In 1933,

the government asked the writer

Lorena Hickok totour the Depression-

stricken heartland. Most testing to read

about in her dispatches is not the

medieval hardship but the embarrass-

ment of those who took public aid. One

indigent walks past a relief office day

after sheepish day before finally going

in. A laid-off teacher draws a terse

conclusion from her own dependence:

“I’m just no good, I guess.”

Self-reliance to the p oint of

masochism has not gone from Ameri-

can life, but it is no longer central.

Surveys showthat most citizens like

federal social programmes, thanks.

Taking the shame out of need: this, as

much as the spending data, attests to the

ascendancy of leftwing thought.

Yet how meagre have been the

electoral spoils. Republicans have held

the presidency for more time than Dem-

ocrats since 1900. If we use the Depres-

sion as the baseline, Democrats have

had the better of it, but not by a margin

commensurate with their ideological

dominion. You might assume from the

electoral record that social spending has

oscillated between growth and

shrinkage. Instead, it has obeyed a steep

and secular trend of increase.

We are left with one of the oddest

quirks in politics. Voters often choose

the party that is less keen on govern-

ment to oversee its expansion. This is

not an American eccentricity. Christian

Democrats have run Germany for all

but 20 years since the dawn of the

republic in 1949. In the similarly one-

sided UK, a Tory leader has to be

supremely inept or luckless to not end

up as prime minister. And, in both coun-

tries, the rise of social spending has been

even steeper than in the US. France,

with its mutating parties, is harder to

judge, but presidents we can safely call

centre-right have nurtured the welfare

state to its current grandiosity.

It is true enough that conservatism

varies across territories. Gaullism and

Christian Democracy were never as

laissez-faire as America’s Grand Old

Party. Even so, each of these parties is at

least somewhat warier of the state than

its domestic rival. And still each is

favoured, more often than not, to

augment that state or at least to

maintain its parameters.

Perhaps this is the jabbering incoher-

ence of hoi polloi that democracy-

sceptics always anticipated. More likely,

there is a subtle hedge going on. Voters

trust that parties who enlarge the state

reluctantly are likelier to do it sensibly.

The zeal of the believer is the nightmare

to be swerved.

Either way, this strange pattern

should give Democrats some anxiety to

go with the intellectual coup of the

moment. Yes, millions are about to have

their livelihoods saved by the state, and

cherish it ever after. Or else the efforts

will fall short, and rage will set in as to

why more was not done. A third future,

in which voters demand no change or a

freer market post-virus, requires a

grander imagination than mine. At no

point since the Depression have

attitudes seemed surer to tilt towards

the public realm.

It is just a mistake to assume this tells

us anything about elections, that’s all. If

the past century has been clear on one

point, it is that vindication is not the

same as victory.

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At no point since the

Depression have attitudes

seemed surer to tilt

towards the public realm

Vindication of the state does not spell Democratic victory

production of more popular two and

four pint bottles, and cut its toilet roll

selection from 33 products to 10. The

grocer is also ordering in quantities that

fill entire pallets and trucks, to avoid

wasting delivery capacity.

Meanwhile, it is also working with its

main egg supplier, Noble, to take less

popular white-shelled eggs that would

ordinarily go to McDonald’s. “We are

incredibly grateful for everything that

our suppliers are doing to help our cus-

tomers get the food and essentials they

need,” says Andrew Yaxley, Tesco’s chief

product officer.

It is obviously more financially

rewarding to help suppliers boost out-

put than to support them in crisis.

But those smaller vendors will be vital

if we are to have any hope of a rapid eco-

nomic restart. They also can help solve

our longer term sustainability prob-

lems. Companies must seize this chance

to rewrite the rules of engagement. This

is not a time for penny-pinching.

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they cannot function safely without it.

For those critical suppliers, compa-

nies should pull out the stops — help

them redesign their processes and give

them a boost financially, Ms Vakil

advises. “Pay early, improve your pay-

ment terms, loan money, buy the raw

materials for them if they do not have

the necessary credit,” she says.

Faced with an extraordinary surge in

demand — an enviable problem to have

when other sectors are mothballed —

UK supermarket chains are already

starting to do this. Morrisons has dra-

maticallysped up payments o supplierst

with turnover of less than £1m. They are

receiving funds immediately, rather

than having to wait up to 60 days.

For its part, Tesco is working with

suppliers of key products — eggs, milk,

sausages and toilet roll — to meet the

increased demand from shoppers eating

at home. The changes include increased

production at farms and dairies all over

the UK and simplified ranges.

Tesco has encouraged dairies to

drop one-pint bottles of milk to boost

because no one could get in or out”.

Companies should be talking to their

suppliers to locate and alleviate poten-

tial pinch points ahead of a restart. They

also need to rethink the way they view

their suppliers, says Bindiya Vakil, chief

executive of Resilinc, a supply chain

data and management group. Rather

than prioritising vendors with whom

they spend the most money, they should

concentrate on those that supply parts

and raw materials that are critical to

revenue generation.

Consider personal protective equip-

ment. It is relatively cheap and abun-

dant, so few hospital administrators

previously worried about how and

where their distributors obtained it.

They now know, to their chagrin, that

most production lines have only been

shut down for two weeks. Another exec-

utive said that his company was count-

ing on state aid to keep its suppliers

afloat because “we can’t let them con-

tinue producing for us if there is no

demand from our customers”.

Although corporate leaders have been

spouting platitudes bouta caring about

their stakeholders, including suppliers,

the story is similar in most other indus-

tries. UK retailer New Look hassus-

pended payments or existing stock andf

cancelled orders. Swedish fast fashion

group H&M has tried to do a bit more:

while cutting back orders, it is taking

delivery of already produced goods

without seeking changes to payment

terms. “The suppliers, and their

employees, are extremely vulnerable in

this situation,” H&M said. “We are in a

close dialogue with several partners and

industry stakeholders... with the aim

of finding a joint industry solution.”

Supply chain experts warn that com-

panies may find their level of detach-

ment comes back to haunt them when

they want to resume production. “It’s

not a matter of just being able to say ‘we

can start up again’, but rather finding

out who can start shipping,” says Roger

Dennis, author of a2015 report n theo

impact of crises on supply chains.

He points to the experience of the

2011 floods in Thailand. Factories that

had been built to withstand natural

disasters, with their own power sources

and storm surge protection, ended up

becoming literal “islands of resilience

C

ontinental, one of the

world’s largest car-part

makers, sits smack in the

middle of many global sup-

ply chains. Geographically

diversified and relatively well capital-

ised, the German-listed manufacturer is

about as well positioned to survive the

coronavirus pandemic as a company in

its sector can be.

Yet its chief executive Elmar Degen-

hart warned last week that profit mar-

gins at its auto division will probably

drop to zero nd that smaller suppliersa

were in danger of going out of business.

History suggests he knows what he is

talking about. ACase Western Reserve

studyof the US auto industry’s experi-

ence around the financial crisis found

that the total number of suppliers fell

from just under 15,000 in 2007 to

around 12,000 in 2011. Individual busi-

nesses reported that their average

number of direct competitors fell from

eight to six in the same period.

So far, the sector’s big players have

done very little to prevent a repeat,

although no one wants to say so publicly.

One carmaker told me that it was too

soon for his company to step in, because

Supply chains

need some love

during the crisis

Businesses should pull

ut the stops for criticalo

vendors as they prepare

to resume production

AMERICA

Janan

Ganesh

T

he extreme measures taken

to shut down whole coun-

tries and ask citizens to stay

at home, with their painful

social and economic conse-

quences, are necessary to contain the

coronavirus utbreak. But they will noto

bring the crisis to an end. For that there

is just one way out:science.

This is the only exit strategy we have

from the pandemic. It is the route from

Covid-19 to Covid-Zero: no more deaths;

no more job losses; no more economic

disruption. Without it, we risk a rolling

cycle of lockdowns and distancing

measures as outbreaks ebb and flow

around the world for months, if not

years, to come.

The good news is that it is a solvable

problem. But it is only solvable if the

finance is there and, at present, it is

not. While governments are spending

hundreds of billions of dollars, most is

understandably focused on protecting

health and economies.

The science that will provide the exit

strategy is short of at least an immediate

$8bn, according to theGlobal Prepared-

ness Monitoring Board, an independent

expert group convened by the WHO and

the World Bank. It is a fraction of the

total cost of the pandemic. Scientists

around the world are mobilising at

unprecedented speed, but nations are

committing funds too slowly. If the gap

isn’t filled by the end of this month,

crucial opportunities to advance prom-

ising drugs and vaccines and scale up

production will be missed.

Corporations, investors and philan-

thropists can play a critical role in filling

the gap by helping fund this vital science

themselves, and influencing their gov-

ernments to do the same. In doing so,

they will save not only countless lives,

but businesses and economies too.

The Wellcome Trust istoday nvitingi

them to join the Covid-Zero initiative.

If corporations took just 10 per cent of

the funds they are spending on man-

aging the pandemic and gave it to the

science that will resolve it, we would

rapidly make up the financing gap.

Some businesses have already appre-

ciated the need. Mastercard has contrib-

uted $25m to ajoint initiative ith Well-w

come and the Bill & Melinda Gates

Foundation. Citadel, the investment

fund, has funded CEPI, the organisation

that supports vaccine research.

However, much of the business

world’s contribution to date has been

focused on managing the immediate

impact of the pandemic.

Many companies have made strong

commitments to support their employ-

ees, customers, suppliers and commu-

nities through what is perhaps the grav-

est global crisis since the second world

war. And all at a time when they are

themselves counting the costs of lock-

downs and physical distancing.

Others have joined more directly in

fighting the outbreak. Amazon is dis-

tributing coronavirus tests, Diageo is

making hand sanitiser, while Formula 1

teams are designing ventilators.

But business has a powerful opport-

unity to go further and play a critical

part in resolving the crisis — as well as in

managing it — by helping fund the vital

research that provides the only viable

exit strategy that can bring the world

back to business as usual.

We need a vaccine to halt the spread

of the virus and to protect people from

becoming infected. We need treatments

to stop sick people from dying, and to

keep them out of hospital and intensive

care, so relieving the pressure on health

systems. We also need better tests to

identify the infected and track the

course of the pandemic.

We must scale up production capacity

now, before we know which vaccines

and drugs will work, so that when

the breakthroughs come we can

swiftly manufacture the millions

of doses that the world will require.

And we must work together, treating

these vital medicines as shared

global goods which everyone receives

equitably.

No one can predict which efforts

will succeed, or in which country. But

everyone will want and must have

access these drugs. We must share the

risks and benefits.

I understand that global financial

instability, combined with economic

and social disruption, make this request

difficult for leaders in the worlds of busi-

ness and investment. But the resources

needed now are tiny compared to

the costs that businesses and instit-

utions of all kinds have incurred and

will continue to incur until the world

puts this crisis behind.

As it happens, this investment in

medical funding would be in keeping

with the rise in the belief instakeholder

capitalism: the idea that business exists

for a purpose beyond profit or share-

holder value and that its true calling is to

create shared social goods for the world

at large.

It also makes hard-headed sense.

Science is the only way we will be able

change the course of this pandemic

and get the world back to business.

Funding that solution is the best poss-

ible investment that any business can

make today.

The writer is director of the Wellcome Trust

Science needs just $8bn to get the world to Covid-Zero

Jeremy

Farrar

O

ne “P” word has been dom-

inating economic policy

discussions for some time

now: not “pandemic”, but

“productivity”. Now that

coronavirus has dealt an unprecedented

blow to economies everywhere, policy-

makers are asking how it will affect

productivity at a national level.

The long-term effects of Covid-19 are

unknown — they depend on the length

of time for which economic activity will

have to be suspended. The longer lock-

downs last, the greater the hit to output

growth and increase in nemployment.u

Productivity — the output the econ-

omy gains for the resources and effort

it expends — matters because it is what

drives improvements in living stand-

ards: better health; longer lives; greater

comfort. Investment, innovation and

skills are the key ingredients, though

the recipe is still a mystery.

In the UK, the pandemic will certainly

cause a short-term fall in private-sector

productivity. This is not only because

many people are unwell or struggling to

work at home around children and pets,

but also because of a sharp decline in

output. Employment is falling too, but

many businesses are keeping workers

on their books so labour input will not

decline by as much.In general, produc-

tivity falls when output falls.

In the public sector, measuring

roductivity is hard. For services suchp

as health and education, the Office for

National Statistics looks at bothactivity

and quality —such as the number of

pupils and their exam grades, or the

number of operations and health out-

comes. But, at the best of times, these

measures depend on other factors.

How should we think of the produc-

tivity of a teacher preparing lessons for

online delivery, with all the challenges

that involves, and what will be the effect

on pupils’ attainment? It is easy to think

of new measures, such as the number of

online lessons delivered, but hard to

imagine pupil outcomes not suffering.

As for medical staff, who would argue

their productivity has not rocketed in

recent weeks? But for many patients the

outcomes that are measured will sadly

be tragic. The biggest “productivity”

boost may come from a new vaccine.

Public investment in infrastructure or

green technologies will ultimately help

productivity, but financial pain may

force businesses to retrench.Business

investment n the UK has been sluggishi

anyway, falling in 2018 and rising just

0.6 per cent in 2019. It is hard to foresee

anything other than a big fall from the

£50m-or-so-a-quarter last year.

Will supply chains unravel? The div-

ision of labour and specialisation that

comes withoutsourcing has driven

gains n manufacturing productivityi

since the 1980s, but it depends on fric-

tionless logistics and freight. Keeping

that system going through lockdowns

will take significant international

co-ordination, which seems unlikely.

Some recent work suggests that even

quite small shocks can causenetworks

to fall apart. This one will reverberate as

waves of contagion it countries at vary-h

ing times. One response would be for

importing companies to diversify sup-

ply chains. A less benign one — in pro-

ductivity terms — would be a shift to

reshoring production at home.

The pandemic and its aftermath will

raise profound questions. Productivity

involves a more-for-less (or, at least,

more-for-the-same) mindset — hence

the just-in-time systems and tight logis-

tics operations. Companies may rethink

the need for buffers as economic insur-

ance. Inventories could rise, increasing

business costs.Suppliers loser to homec

could be found, again at higher cost.

Perhaps the definition ofeconomic

wellbeing will also change. Conven-

tional economic output matters, as

people now losing their incomes know

all too well. But so do social support net-

works and fair access to services. With-

out them, everyone is more vulnerable.

Prosperity is more than productivity.

The writer is Bennett Professor of Public

Policy at the University of Cambridge

Defining

productivity

in a pandemic

is revealing

Output matters

ecause it is whatb

rives improvementsd

in living standards

ECONOMY

Diane

Coyle

COMPANIES

Brooke

Masters

FT series: Remedies for

a health crisis

Exploring scientific and

medical innovations

ft.com/remedies

APRIL 9 2020 Section:Features Time: 8/4/2020- 18:15 User:alistair.hayes Page Name:COMMENT USA, Part,Page,Edition:USA, 17, 1