Elimination vs Suppression – Effects on the Market and Society

by Oct 20, 2020Market Reviews

Elimination vs Suppression – Effects on the Market and Society

Elimination vs. suppression – What’s the difference?

A dance club in Wuhan, China after stamping out the virus.

In short, Elimination and Suppression can be categorized by “Hard and Fast” and “Low and Slow.” Elimination is akin to ripping the band-aid off, in which one hopes the intense pain is short and quick and can be over and done with. Suppression is akin to slowly ripping off the band-aid in hopes of spreading out the problem over time.

The goal of the Elimination strategy is to enact measures to eliminate all community transmission in society. Unsurprisingly, this would require stringent community movement restrictions, consistent contact tracing, and effective quarantine measures for the infected.

Suppression attempts to balance economic damage and the spread of the Virus. Suppression is almost the opposite of Elimination, in which measures are enacted, which would allow businesses to operate as much as possible while minimizing the spread of the Virus.

New Zealand officially was the only country that perused a full elimination strategy. However, we will include countries that implemented a significant and early lockdown as an attempt to “eliminate the virus.” We will try to see its effect on the local economy, the relative stock market, and society. For the sake of this piece’s length, we will not include small islands and populations who eliminated the Virus as a function of their size.

New Zealand

The poster child for how all countries should have handled the Coronavirus, New Zealand, led by Jacinda Ardern, was the only country which directly opted for a full Elimination strategy. The Director-General Ashley Bloomfield and Prime Minister Jacinda Ardern tend to get all the love regarding New Zealand’s success. Regarding the Coronavirus. However, one doctor initially formulated New Zealand’s elimination strategy – Michael Baker, a Public Health expert at the University of Otago, was the doctor who initially drafted the elimination strategy. He stated we should “throw everything at the pandemic at the start.” His plan got criticism, with “some likened it to using a sledgehammer to kill a flea,” he says.

The government ended up going with his plan due to his track record. On the March 25th, New Zealand had no deaths and 205 Coronavirus cases, when Prime Minister Jacinda Ardern, over a couple of days, closed the borders and ordered everyone to confine themselves at home, only allowed to leave their homes for essential reasons – buying food, going to the supermarket and if you were an “essential worker” (Doctors, Supermarket workers, Nurses, etc.)

Everyone was concerned about the disastrous Economic calamity that such a strategy would bring. Estimates by the government were around a 24% fall in GDP year over year – however, September figures showed a 12.2% contraction. There was a second flare-up of community transmission cases around August – however, the government was more or less expecting a second wave of community transmission with no links to any clusters. Again, they went hard and fast and locked down Auckland for a couple of weeks to stamp out the Virus. Currently, cases are controlled, with many off-cases coming from individuals entering New Zealand.

In New Zealand, life is back to a relatively normal, with most businesses that lasted the lockdown back in full trade with no more social distancing mandates to follow. Sports are back on, with large crowds. Economic recovery is fully underway, with voters voting in Jacinda Ardern for a second term in hopes that her leadership during the peak of the Coronavirus Pandemic can follow through in the economic recovery. The NZX 50 is positive year to date, around 6.83%

China

If New Zealand is the poster child for how all countries should have handled the Coronavirus, China is the older child everyone forgot about but is equally successful.

With the Coronavirus originating from Wuhan, China, the government quickly controlled and stopped the Virus from spreading to other places in China. They altogether stopped the movement of 60 million people in and out of Wuhan and 15 other cities in the Hubei provinces. However, soon after, just like New Zealand, the government implemented a lockdown in most cities, only allowing citizens to leave for essential supplies and food. China was ahead of the rest of the world in implementing measures to curb the Coronavirus. On March 25th, just as New Zealand started to enter their first lockdown, China was a couple of weeks into their lockdown.

China has received some flack for allegedly withholding information from the WHO and not allowing scientists from other countries access to crucial information regarding the Coronavirus and its makeup. However, their shutdown of the economy has otherwise been as effective as New Zealand, with stated daily figures dropping shortly after implementing their lockdown.

Figures released yesterday show China’s GDP growth rate at 4.9% – slightly off the markets’ estimates at 5.5% growth. However, this is nevertheless close to pre-Coronavirus GDP growth. Morgan Stanley cites “very strong exports and the gradual improvements in domestic consumption.” The Shanghai Composite is positive this year, up 9.8%.

Vietnam

Vietnam (like Taiwan, which we will talk about later) has an advantage over New Zealand – they were prepared for a pandemic. During the SARS outbreak in 2003, Vietnam was recognized by the World Health Organization as the first country to be SARS free. In the following months, Vietnam ramped up interventions and made sure they were prepared for a future pandemic.

On April 1st, Vietnam entered a nationwide lockdown for two weeks, with extensions to 3 weeks in a couple of provinces. However, even before the lockdown, they were implementing restrictions to travel in and out of the country and limit gatherings and businesses in the country.
Vietnams GDP growth rate dropped to 0.39% during the peak of the lockdowns. However, it recovered back to around 2.7% once they opened. Vietnam’s stock market, the Ho Chi Minh Stock Index (HOSE, HSE), is still down for the year, by around 13%.

What is important to note with the elimination cases is that the respective countries’ governments re-opened their economies after there were no traces of community transmission. This is the crucial factor showing the strength of the elimination method, as no community transmission gives the societies the confidence for businesses and the government to open businesses with little restrictions. However, what happens if governments try to implement a “business-lite” approach, trying to balance the daily case count and economic health?

United Kingdom

Five weeks after the first Coronavirus case in New Zealand, UK’s Prime Minister Boris John stated ‘It is very important that people consider they should, as far as possible, go about business as usual”. Nearly 300 deaths later, alongside himself contracting the Virus, he decided to put the country in a lockdown. However, the lockdown was relatively non-restrictive, initially allowing individuals to leave and enter the country.

After the lockdown, Boris focused on getting the economy back on track, providing incentives for people to eat at restaurants by providing subsidies alongside upholding job wage schemes. However, they did not consider the crucial factor that made Elimination successful – there was no community transmission coming out of the lockdown. When the UK exited lockdown restrictions, daily new Coronavirus cases were around 500-800 a day, nowhere near 0.

Now, the UK is paying the ultimate price for complacency. Daily cases are almost triple the initial wave. UK Citizens are again imposed to tiered restrictions relating to the region they live in – however, the UK has still not imposed a strict lockdown, even on the harshest tier 3 level. Unlike New Zealand, where they imposed University and Schools to close on their 2nd most severe level, the UK states that Schools and Universities to remain open even under tier 3. There have been around 43,700 deaths in the UK due to the Coronavirus. The FTSE is down 22% year to date.

The United States and Brazil

Surprisingly, the Coronavirus situation in the United States can be explained quite easily. President Donald Trump played down the Coronavirus. Once it reached the United States, he refused to enforce proper measures such as social distancing and masks. The Coronavirus started to spread and spread and spread. It has not stopped spreading. If the US Coronavirus were a CFD, it would be up 47% this year. United States’ total cases are around 8.2 Million, with a death toll of 220,000. They have a population of approximately 329 Million.

Similarly, Balsonaro played down the Virus, reacting to Brazil’s death toll at what point, stating, “So what?” – “I’m sorry. What do you want me to do?”. Brazil’s total cases are around 5.25 Million, with a death toll of approximately 154,000, of a population of roughly 210 Million.

Both Presidents have contracted the Coronavirus.

There have been some honorable mentions with nations initially seeing some success in suppressing the Virus, ultimately failing and seeing their cases spike.

Australia and Japan

Initially, critics of New Zealand’s harsh lockdown pointed to New Zealand’s next-door neighbor, Australia. In the early stages of the New Zealand lockdown, Australia achieved similar and sometimes even better daily reductions in cases without having to lock down its economy fully. However, near June, it became clear that the strategy was failing. Alongside accusations that outsourced security guards were sleeping with quarantined citizens, a second wave hit the state of Victoria like a rock. To this day, some citizens in Melbourne have been in lockdown for seven months.

Similarly, with Japan, the nation was admired for keeping their daily cases relatively low while many citizens continued with their daily lives. Many analysts cited Japan’s citizens having good hygiene habits, with many citizens wearing masks in everyday life. However, just like Australia, the lack of Elimination in community transmission led to cases spiking near June, ultimately leading to a second wave.

One lockdown is better than two

One can deduce that one lockdown is better for the economy than two. In hindsight, it is clear that the elimination strategy is more effective than the suppression strategy. If every country used the elimination strategy, chances are we would have been on the road to recovery, travel would have been reinstated, and most importantly, fewer lives would have been lost. The question becomes, why were New Zealand and China the only ones who implemented an Elimination Strategy? It would be reasonable to assume there are brilliant experts in every country, so why were experts in China and New Zealand the only ones to figure out that it was the best strategy forward? Economy > Human lives?

Do you rip the band-aid off, or do you slowly pull it off?

 

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