Who’s worried now?

As the coronavirus pandemic loses steam, there seems to be a strange mismatch in risk perception, where people seem highly anxious about some risks and quite blasé about others. For instance, look at the supposed spectre of inflation now constantly raised by commentators, with observers watching the auguries from the US Federal Reserve like hawks for signs of whether, or how soon, the central bank will move to tame the menace. But the US inflation rate in May was 5%, less than half the rate in 1980. And its first-quarter economic growth of 6.4% feels utterly different from the stagflation of the 1970s. It seems only months, not years, since our key worry was not inflation, but rather deflation and the danger of shrinking economies worldwide. 

But there are good reasons to worry about the lack of worry around other risks. For instance, the unexpected surge in asset prices during the Covid-19 crisis seems to have left many with the impression that the global economy will soldier bravely through any black swan event. That’s by no means a given. The jump in asset prices after the slump of March 2020 may have had many drivers, including potentially a surplus of investable capital simply looking for a reason to get to work again, but there’s no reason to conclude that the next black swan event will see the same outcome. In the next crisis, asset prices may well take the dive they’re more typically expected to do, and catch a great many optimists unawares. 

Then there’s the seemingly nonchalant attitude towards the risk – and the human cost – of pandemics. Remember the 3.89 million who have lost their lives? Someone should. Because the buoyancy of the global recovery from the crisis looks to have left many not only sadly indifferent to the loss the world has sustained, but alarmingly indifferent to the possibility of another, worse pandemic. 

Arguably, those 3.89 million deaths were preventable with earlier and more resolute action. In any event, the planet may have soldiered through this pandemic, but there is no reason to believe it automatically could overcome another one. The (relatively) low fatality rate of Covid-19 compared to, say, the Black Death, is more a matter of luck than medicine. We would be looking at a very different situation if Covid-19 had a fatality rate more like the Black Death’s 30%. Who’s to say the next one won’t?