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    Last year Our World has Forever Changed – Vaccination Must Change This Year

    February 2021

    Some years are barely mentioned in history books; others get their own chapters. The last year certainly feels like the latter, and there is no doubt the COVID-19 pandemic will be long remembered. But what makes a year truly remarkable is not how it unfolds, but rather how it changes the world – government and societies. An anomalous year, after which the world returns to business as usual, means for less, historically, than an infection – point year that brings about a great transformation and marks the start of a new human epoch. Which will 2020 be?

    There is good reason to think the world has been irrevocably changed. In particular, the events of the last year may well have triggered a fundamental reshaping and rebalancing of the relationship between state and society, particularly in Western liberal democracies.

    Since the Cold War ended, Western democracies’ social and economic models have become increasingly unbalanced. Free markets, once viewed as a powerful means of strengthening liberal democracies – by creating a rights-demanding middle class are now an end in themselves – an ideal to uphold, no matter the cost.

    And the costs have been high. As free-market orthodoxy demanded, globalization brought looser capital controls, more open borders, large-scale privatization, and deregulation. Governance evolved into a more limited, technical endeavor, and increasingly influential private sectors stepped into public roles.

    Corporations thus became some of the most powerful global players, and governments have increasingly struggled to tax and regulate them. In some vital areas – from the spread of misinformation on social media to environmental sustainability – corporations have essentially been left to self-regulate.

    There has been an impulse to claw back oversight; yet it comes not from the state but from other actors. The push for “environmental, social, governance” corporate accounting and reporting is one example. Public pressure and increasing investor interest have made companies eager to tout their ESG credentials.

    The aftermath of the 2008 global financial crisis – when governments pursued largely half measures to shore up financial systems and prevent another meltdown – shattered the idea that liberal democracy is an automatic guarantor of stability and prosperity. Meanwhile China pushed its own competing model with a central state intertwined with the market, setting the stage for today’s global battle of ideas.

    From the financial-crisis earthquake rose a wave of populism and nativism – one that engulfed much of the West. With inequality continuing to rise and little effort been made to mend the relationship between citizen and state, faith in institutions dwindled, and demands for radical change – after reactionary, state-eroding change gained resonance.

    During the COVID-19 pandemic, however, the state has been mounting a comeback. When economies grounded to a halt, governments channeled huge volumes of public money toward propping up private industry and limiting layoffs. In Europe, country level interventions were buttressed by the unprecedented 750 billion euro pandemic-recovery fund, Next Generation EU.

    Supply-chain disruptions have raised the expectation that states should do more to ensure strategic essential commodities. As such, calls to re-shore production have not only grown louder; they now carry the implication of a reassertion of sovereign control over strategic goods.

    Similarly, for the first time in generation, governments revived their regulatory impulse, especially with regard to the increasingly distortionary Big Tech giants. The European Commission has unveiled landmark regulation – the Digital Service Act and the Digital Market Act – to curtail these firm’s power, and it has announced plans for further competition-based actions. In the United States, the Federal Trade Commission (FTC) and state governments have filed antitrust lawsuits against Alphabet, Google’s parent company and Facebook for using their market power to fend off rivals. Calls to break up these mega-firms are growing louder.

    The pandemic has shown that the market’s “ invisible hand “ cannot be counted on to deliver public goods, let alone defend the public interest. the visible hand of the state should contribute through functioning effective institutions and good governance.

    Fundamentally, health and safety measures are a reminder of the state’s presence some have embraced this invasiveness, while others have bristled; but all are aware of the government’s role. Sensibilities are changing, and this could be a foundation for broader shifts in the Liberal-Democratic model.

    Widespread vaccination could end the pandemic, and people, corporations, and governments may return to the pre pandemic status quo. Resentments will continue to fester and governments will keep muddling through. Not yet !

    For that to happen the coronavirus vaccines are coming too slowly, and the cost of waiting is enormous. Current production and procurement plans mean it will take up to two years before the world gets close to having enough doses for everyone. This may be optimal for manufacturers, but it is not for society.

    There needs to be a Plan B.

    The world needs 10 billion doses of the BioNTech / Pfizer or the Moderna jabs, which are over 94% effective, to give two shots to 5 billion people, enough to curb the disease globally. But their targeted annual production in 2021 is about 2 billion units combined. The Chinese, Russian and Indian vaccines are hard to judge, given doubts about their efficacy and safety.

    Most countries’ hopes therefore rest on the Oxford / AstraZeneca jab which is also relatively cheap and easy to distribute. This joint venture plans to ramp up production to 3 billion jabs through 2021. But so far they have only produced about 4 million, as of last month. Moreover, the vaccine’s two shots have an average efficacy of 70% while problems with the trial design could delay US and EU approval.

    Even if AstraZeneca’s production comes fully on stream, and other vaccines from companies such as Johnson & Johnson or Novavax are opposed and produced, the world will lack sufficient doses for a long time. Yet every month in lockdown costs economies billions of dollars. It also increases the risk that more virulent strains emerge, as with the UK and South Africa variants. This danger will only subside when people everywhere are vaccinated.

    Given the huge costs, the best economy policy would be to mobilize and coordinate global resources to ramp up vaccine production as fast as possible. Capacity needs to be expanded, subcontracting to more companies if needed or even setting up new factories. If we were really “at war” with the virus, governments would focus all their resources on this one task. Instead, there is a gulf between the rhetoric and reality of vaccine production.

    There are good reasons to rely on commercial producers, so long as the incentives are right. But they are in my opinion not. Vaccine manufacturers have little interest in expanding production massively. In fact, they would be financially worse off if they did. If they ramped up production capacity so that the whole world was supplied within six months, the newly built facilities would stand empty immediately afterwards. Profits would then be much lower compared with current scenarios, where existing plants produce at capacity for years to come.

    In short, the current plan is suboptimal for society. The current plan sucks. This must change, because there is an overriding health and economic interest in rapid production expansion. Quicker vaccination would provide a public good that, in the jargon, is valuable “externality” that private companies do not internalize.

    There are in my opinion two models to increase capacity more quickly. The first is for governments to give additional subsidies for production, or premiums for faster deliveries. That would enable producers to pay suppliers for the costs of speeding up their production too. After all, they also have to work overtime to create new capacity. Clearly, this approach would be expensive. Yet it would be far cheaper than the ongoing cost of lockdowns.

    Even so, there is no guarantee that companies would expand production to the social optimum. In the second model, governments would switch to a “Covid war economy” and order mass production. Compensation payments to companies whose patents have been used could be sorted out later, when the virus has been defeated. Here, too, there are risks. For one, it is unclear how efficiently governments would manage such complex production tasks. Also, what about the next pandemic when it eventually comes? There is no doubt researchers would race to develop new vaccines. Whether financiers would fund them is another matter. It would depend on the final settlement reached between governments and companies this time.

    A mix of carrots and sticks may be needed. Financial incentives to expand production could come first. These could be followed by direct interventions, such as government patent use or forced licensing of production, if the financial incentives by themselves are not enough.

    Either way, the cost of suboptimal vaccine production cannot be justified from either a public health or an economic point of view. Sooner or later, the political cost will in my opinion also become unacceptable. There is an urgent need for a plan B to produce sufficient vaccines quickly so as to protect us all.

    If, however, this disruption of spurs deeper reflection on the relationship between government and the governed, an brings about a genuine strengthening of institutions, then last year will come to be viewed as a focal point, and this year as a data point with more statistical infections and deaths rates continuously rising.