The record suggests that, after periods of massive non-financial disruption such as wars and pandemics, GDP does bounce back. It offers three further lessons. First, while people are keen to go out and spend, uncertainty lingers. Second, crises encourage people and businesses to try new ways of doing things, upending the structure of the economy. Third, as “Les Miserables” shows, political upheaval often follows, with unpredictable economic consequences.
The Communist Party has long known that, partly as the result of its brutal birth-control policies, China’s population would soon peak and start to shrink. It has been startled, however, by how rapidly that moment has drawn near. Now, it looks as if it might have arrived.
There are also indications that China’s total fertility rate (the number of children a woman is expected to have in her lifetime) has dropped faster than previously thought. Chinese planners have assumed a rate of 1.8, but some Chinese scholars (and the World Bank) say it between 1.6 and 1.7. A working paper released in March by China’s central bank suggests the rate is no more than 1.5.
Governments raise most of their money by taxing wages, but President Joe Biden has his eyes fixed on the rich, big business and Wall Street. He proposes to fund his $2.7trn infrastructure plan in part by raising the corporate-tax rate from 21% to 28%. And to help pay for more spending on child care and support for parents, he wants to roughly double the top rate of federal tax on capital gains and dividends. For Americans earning more than $1m per year, he would bring levies on capital income into line with the top rate on wage income, which he wants to put up from 37% to 39.6%. That is about double the rate that is currently levied on rich investors, who are only a small fraction of the population but a large proportion of shareholders.
Tax capital lightly and it pays to disguise wages as capital income — a particularly lucrative pastime for the rich. One problem is the “carried interest” loophole. It lets private-equity and hedge-fund managers class their fees as capital gains rather than income. Another issue is the explosive growth in “pass through” firms, for example partnerships, which accounted for more than half of American business income by 2011, up from about a fifth in 1980.
More disturbing still, India’s soaring official covid-19 count represents the tip of an iceberg. Because of low testing rates outside big cities, say epidemiologists, the actual caseload could be anything from ten to 30 times higher. A national serological survey conducted in December found 21% of Indians were carrying covid-19 antibodies, compared with an official tally which suggested that only about 1% of India’s people had been infected by that time. More recently, local journalists who have cross-checked hospital and funeral records against government numbers have found similar, gaping discrepancies across the country. One report revealed that in the second week of April, when authorities in Vadodara, a city in the state of Gujarat, announced seven covid-19 deaths, the count in two hospitals alone was more than 300. This suggests that India could be facing not 2,000 deaths a day, as the current official count shows, but something much higher.
INDIA’S SECOND wave of covid-19 continues to set grim new records. On April 25th India detected more than 350,000 new cases—the most in a single day in any country at any stage in the pandemic. This number has reached new highs for five days in a row (see chart). So bad has India’s outbreak become that it now accounts for some 38% of global cases—up from just 9% a month ago. That is the highest share reached by an individual country since the early stages of the pandemic.
April 14th was a big day in India. Hindus and Sikhs gathered to mark the new year. Many Muslims celebrated the first day of Ramadan at late-night feasts with friends and family. In Haridwar, a temple town that this year hosts the Kumbh Mela, an intermittent Hindu festival that is the world’s biggest religious gathering, between 1m and 3m people shoved and jostled to take a ritual dip in the Ganges. And across the country, the number of people testing positive for covid-19 for the first time surpassed 200,000 in a single day. It has continued to surge since, reaching 315,000 just one week later—the highest daily figure in any country at any point during the pandemic. Deaths, too, are beginning to soar, and suspicions abound that the grisly official toll is itself a massive underestimate. Makeshift pyres are being constructed on pavements outside crematoriums to deal with the influx of bodies.
THE LATEST results for China’s CoronaVac vaccine, developed by Sinovac Biotech, a Beijing-based pharmaceutical company, were disappointing for the aspiring scientific and technological powerhouse. Phase-three trials, which were conducted on health-care workers in Brazil, yielded an efficacy rate of just 50.7% (with a 95% confidence interval of 35.7% to 62.2%), just barely above the 50% threshold set by the World Health Organisation for covid-19 vaccines (see chart). The results of a real-world trial released a week earlier were even worse: the vaccine was estimated to be just 49.6% effective (11.3% to 71.4%) against symptomatic covid-19 cases; when asymptomatic infections were included, this figure dropped to a dismal 35.1%.
The Chinese authorities’ reaction did little to boost confidence. After news broke of the discouraging results, Gao Fu, head of the Chinese Centre for Disease Control and Prevention, admitted at a conference on April 10th that current vaccines “don’t have very high rates of protection”, and suggested that vaccines could be mixed to improve efficacy. Mr Gao later backtracked from the comments, claiming that it was “a complete misunderstanding”.
WHEN INDIA presented Bhutan with a generous gift of covid-19 vaccines in January, the neighbouring kingdom made an unusual choice. Rather than rushing to inoculate all 800,000 of its citizens, the government sought advice from the Zhung Dratshang, a body of Buddhist monks. The stars were not auspicious, they ruled. Better to wait two months, and then to make sure that the first dose be both administered by, and given to, women born in the Year of the Monkey.
So Bhutan waited until March 27th before Tshering Zangmo administered the first jab to Ninda Dema. The injection took place at a school in the capital, Thimphu, at the auspicious hour of 9.30am, after prayers were chanted and butter lamps lit. But then there was no dallying. Within a single week a world-beating 85% of Bhutan’s adult population had received a first shot. Only two countries, Israel and the Seychelles, have vaccinated a (slightly) higher proportion of people, but both took months to do so (see chart).
LAST YEAR was a woeful time for people suffering from a drug addiction. Government shutdowns brought job losses and social isolation—conditions that make a transportive high all the more enticing. Those who had previously used drugs with others did so alone; if they overdosed, no one was around to call for help or administer naloxone, a medication that reverses opioid overdoses.
Fatal overdoses were marching upwards before the pandemic. But they leapt in the first part of last year as states locked down, according to provisional data from the Centres for Disease Control and Prevention. Deaths from synthetic opioids—the biggest killer—were up by 52% year-on-year in the 12 months to August, the last month for which data are available. Those drugs killed nearly 52,000 Americans during the period; cocaine and heroin killed about 16,000 and 14,000, respectively (see chart). Once fatalities are fully tallied for 2020, in a few months’ time, it is likely to be the deadliest year yet in America’s opioid epidemic.
ON MARCH 5TH at its annual parliament, the National People’s Congress (NPC), China’s government revealed an economic-growth target of “more than 6%” for this year, a bar it is expected to clear with ease. Take the latest data. China’s key economic indicators for January and February, published on Monday, were buoyant. Industrial production and retail sales, for example, are soaring—35.1% and 33.8% higher than a year ago, respectively, beating consensus forecasts. Fixed-asset investment surged by 35% year on year, but still fell below expectations.
This year’s rocket-fuelled figures are even harder to decipher than usual because they are compared with record lows last year, during the first wave of covid-19 outbreaks. Macquarie, a bank, says that if you remove the effect of the pandemic, underlying retail sales were up by 3.1% for the first two months of 2021. This implies consumption accelerated after a few small outbreaks were brought under control in Beijing in January. Oxford Economics, a research group, says it expects household consumption to become the main engine of economic growth from the second quarter of 2021, as travel restrictions are eased. But in the first quarter, growth will remain sluggish.
LAST YEAR’S clear spring skies foreshadowed it and the numbers bear it out: covid-19 lockdowns caused a sharp drop in emissions from burning fossil fuels, the largest such drop since the second world war. The latest data, published on March 3rd by the Global Carbon Project, an international consortium of climate researchers, puts industrial carbon-dioxide emissions produced in 2020 at 34bn tonnes, 2.6bn tonnes (7%) lower than in 2019.
Clearly, 2020 was an unusual year and emissions have already started to rebound. What is more, the drop came at a huge cost to economies and societies. Yet, in order to meet the Paris agreement’s goal of limiting global warming to between 1.5°C and 2°C above pre-industrial levels, more big cuts will be needed for the rest of the decade. “We need a cut in emissions of about the size of the fall [from the pandemic] every two years, but by completely different methods,” said Corinne Le Quéré, of the University of East Anglia, one of the lead researchers on the study.