Herd immunity. The big political risk the government is running

Herd immunity. The big political risk the government is running

Amid all the panic buying, one thing that is still found in abundance is self-declared expertise. Social media is suddenly awash with new immunologists and virologists (BSc Twitter), all very ready to critique or bolster the government’s approach to the Covid-19 crisis. Is the government aiming for herd immunity? Should the government be aiming for herd immunity? What timeframe should we expect herd immunity in?

Let me draw on my own area of expertise as a pensions lawyer. For if there is one thing that pensions has a lot of, it’s herds. Pension scheme trustees are regularly accused of herding when they set their investment policy. Come to that, investment managers and investment consultants are also accused of herding. An awful lot of people seem to follow the same sort of strategy and an awful lot of people get the same sort of results. Outside observers have often suggested that pension scheme trustees are slow to take up opportunities as a result, whether using new investment techniques or new investment classes. So I’ve had the opportunity to study herds over nearly as long a period as David Attenborough.

And if life on the Serengeti teaches us anything, it’s that herds have big advantages. When you see the lions pick off the wildebeest, it’s not the ones in the centre of the herd who become lunch. The ones at risk are the weak and the wayward.
Pension scheme trustees know that. If they do the normal thing, it might not work but it will be safe for them personally.

The ones at risk are the mavericks. If you do something that is not mainstream and it doesn’t work, you’re in real trouble. When you’re judged with hindsight, few are going to waste time pondering the brilliance of your imagination if it didn’t work. They’re going to see that it didn’t work and that you didn’t do the normal thing. Regulators, courts and public opinion are all going to start from the position that you messed up big time.

This is the risk that the British government is currently running. It is not forming part of the herd of governments internationally. It is following a strategy in relation to Covid-19 that is being framed quite differently from the strategy of pretty well every other country. It seems carefully thought through. As with every option at this stage, however, it is undeniably high risk. It may very well fail.

If it does, the British government will have no hiding place. No one will be much interested in whether the strategy was intelligent or that it was formed with the backing of the government’s advisers. The public will see that it failed and that many other governments followed a completely different strategy. Since this is a matter of life and death, the pressure on the government in the event of failure would be enormous. Boris Johnson would probably be walking the plank.

It gets worse. If you’re a maverick, you don’t just have to be right, you have to be right at the right time. In the late 1990s, the stock markets were on an extended bull run. One of the doyens of the investment manager world was at PDFM, a man called Tony Dye. It was his thesis that the bull run at the time was utterly unjustified by fundamentals and a much more cautious investment strategy was called for.

Some of my pension scheme trustee clients invested with PDFM, so got to see him talk about this regularly. As the late 1990s wore on, his explanations at truste meetings became steadily more defiant and he looked ever more defensive in his seat. Finally, he was sidelined and PDFM switched to a more conventional investment strategy, about six months before the top of the market.

As of today, the FTSE-100 is no higher than it was in 1998. Tony Dye was, it seems, right. It did him no good at all.

So the government needs not only to be right but to be able to withstand pressure for a change of course long enough to be vindicated. It needs time, because the pressure will be intense.

This is where the government’s Covid-19 policy intersects with the rest of its approach. To date, the government has worked on the basis that it can pander to its own base and ignore the out group. So it starts its Covid-19 strategy with a solid wedge of the population already in a default mindset of insubordination.

The government now needs to be able to speak to the whole nation if its strategy is going to stand a chance of working. This applies particularly when the government is proposing to follow an unusual strategy. It appears not to realise that it is starting with its reservoir of goodwill already running at dangerously low levels. Even before the morgues start filling, 30% of the population already disapprove of the government’s handling of the Covid-19 crisis. As the deaths start mounting up (probably faster initially than in comparable countries, given the government’s stated strategy) and the government asks more of the public, that figure is likely only to rise. With that in mind, the government might well decide instead quickly to retreat to the more standard international approach.

Covid-19 is a confutation of the government’s strategy of constructing a majority through waging a culture war. It now wants the country to pull together, including all of those who it has treated as quislings and traitors. Boris Johnson needs to pause to consider not what more of his country can do for him, but what he can do for more of his country. Otherwise, he will be out on his ear.

Alastair Meeks

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