Managing Systemic Risks During Pandemic
Posted on April 7th, 2020

by Asanga Abeyagoonasekera*

The oldest form of systemic risk, which is that arising from viruses and pandemics”  Ian Goldin & Mike Mariathasan, The Butterfly Defect (Princeton 2014)

‘Pain of one nation is the pain of another; as we are all interconnected’ was the opening sentence of  my 2015 book ‘Towards a better world order’. We are experiencing this today as the collective pain of humanity.

Geopolitics and Interdependence

Pandemics have no respect for borders nor individual social status. Pandemics killed world leaders including Pharaoh Ramses V of Egypt, Emperor Marcus Aurelius of Rome, Ferdinand IV of Spain, Emperor Fu-Lin of China, Queen Mary II of England, King William II of Orange, Tsar Peter II of Russia, and King Louis XV of France. In the present context Coronavirus (COVID-19) has infected close to a million including the British Prime Minister. Pandemics can infect anyone anywhere.  

The 21st Century has faced four pandemics. The first case was in February 2003 as SARS was reported in Guangdong province in China. SARS spread in four months to 26 countries with 774 deaths and 8000 cases. The second was the H5N1 Bird Flu triggered in 1997 during a poultry outbreak in Hong Kong. The third near pandemic was H1N1 Swine Flu which emerged in April 2009 in Mexico City and New York spreading to 30 countries in weeks. Unlike the previous two, the Swine Flu pathogen originated in the West rather than in the East Asian provinces. This was a clear early warning to how dangerous supercities and airport hubs can be in terms of health risks- it was a warning ignored. The virulence and severity of H1N1 influenza killed 570,000[iii]. The fourth is the Coronavirus that has killed more than 40,000 people around the world as of 2nd April according to WHO.

Larry Klayman [i] , a former federal prosecutor under the administration of President Ronald Reagan, said in an interview that he was willing to work with Sri Lankans and others to build international pressure on China. He was accusing China that the novel coronavirus was designed  to be a biological weapon of war… creation and release, accidental or otherwise, of a variation of coronavirus known as COVID-19 by the People’s Republic of China and its agencies and officials as a biological weapon in violation of China’s agreements under international treaties, and recklessly or otherwise allowing its release from the Wuhan Institute of Virology into the city of Wuhan”. These are baseless allegations. It will create geopolitical tensions and disunity at a time of human distress.

 One may wonder who was behind or which nation released the past outbreaks in our human history? It is a time for trans-national cooperation and coordination since national governments alone will not be able to manage the magnitude of this global challenge. While the exchange of physical goods and services will be reduced due to the Pandemic you cannot halt the globalization and the globalized interdependent world we have created. According to Robert Keohane and Joseph Nye, ‘complex interdependencies[ii] is what the world has experienced during the past few decades. If managed insufficiently will lead us to overly complex interdependencies and will trigger systemic risks such as the present Pandemic.

Interdependence in such times is evident even from the past. One of the first epidemics in the recorded history which started in Athens in 430 BC did not start in Athens but in Ethiopia and travelled to Egypt and then to Athens. Spanish Flu did not start in Spain, Spain was open to reporting the cases. Globalisation is not a new phenomenon. It has transported pathogens to many nations. The Spanish Flu in 1918 came in three increasingly deadly waves with nine months intervals between them, killing 50 to 100million people worldwide. This deadly outbreak killed 17 million in India alone. 

Butterfly Effect to Butterfly Defect

 American mathematician Edward Lorenz[iv] work in Chaos theory which found the ‘Butterfly Effect’, explaining how a hurricane formation is influenced by minor perturbations such as flapping of the wings of a distant butterfly several weeks earlier. A small change in one place can lead to major differences in a remote area. In the same manner negative unintended ripple effects of Coronavirus that triggered in Wuhan ended up affecting many nations including Iran, Italy, Spain and USA currently holding the highest infected cases.

I was introduced to the concept of  the ‘Butterfly Defect’ by Prof Ian Goldin at the University of Oxford[v]. It is a remarkable work of scholarship co-authored with Mike Mariathasan and published by Princeton University which predicted in 2014 that the next financial crisis will arise from a Pandemic. His book examines how globalization creates systemic risks from

micro distresses from the closely-knit systems and connections we have built and the importance of significant investment in mitigating the risk factors arising from such a system.

Prof Goldin explains, ‘Systemic risks cannot be removed because it is endemic to globalization. It is a process to be managed, not a problem to be solved’. Out of the risks, he identified Pandemics and the health risk from Globalization. What triggered in Wuhan ended up in so many countries so fast due to globalization. Despite the immense health benefits we have felt from globalization, world health officials did not identify the systemic risk from a Pandemic such as Coronavirus. According to Goldin and Mariathasan ‘Globalization, population growth, and urbanization have facilitated the transmission of infectious diseases. The complexity of Global travel and global integration any patient zero is now but a few degrees of separation from formerly isolated communities’ was clear from the present Pandemic we all are facing. There are three lessons to be learned for systemic thinking regarding the health risks arising from globalization according to Prof.Goldin. First, to identify risks, mechanisms for early detection are essential. Second, once a pandemic is detected mechanisms for early response must be enacted. Third, systemic risks require systemic responses. The COVID-19 was picked up too late, the communication was late and systemic responses to fix was late. This is a wake-up call to WHO and global leaders.

Multilateralism during Pandemic

While national borders are shut, each nation has adopted their way of containing the Coronavirus. After Italy’s death rate, all of Europe was on Curfew and lockdown. According to Judy Dempsey, Senior fellow at Carnegie Europe ‘Whenever there is a crisis, European Union leaders have the habit of saying that the bloc will emerge stronger. They have been repeatedly

disproved of this slogan, which has lost all meaning[vi].’

The importance of Multilateralism is discussed from Europe to South Asia where leaders have dismantled multilateral organisations such as SAARC in the past is now finding ways of discussing activating health funds and strengthening regional cooperation. The ultra-nationalist narrative is weakened by the Pandemic showing a direction towards cooperation and promoting multilateral efforts are the only way forwards. Ambassador Rajiv Bhatia who is a Distinguished Fellow from Gateway House identified four main points which is relevant and timely. First, COVID-19 is a global challenge and needs to be addressed on a national and international level. Second, The Government of India has been studying the approach of affected countries and assimilating elements that apply to India in its strategy of containment. Third, India is adopting a sober view vis-à-vis China, maintaining a constructive spirit, sending assistance where required – rather than falling prey to disputes – as the pandemic has affected all of mankind. Finally, Prime Minister Modi is proactively initiating multilateral cooperation through the South Asian Association of Regional Cooperation (SAARC) and G20. Appreciating the multilateral directive taken by ‘Prime Minister Modi’s prompt convening of a video summit of SAARC countries for a more coordinated containment response to the pandemic was, therefore, a bold diplomatic step: other countries are now replicating this in combating the geopolitical, economic and health dimensions of the disease’[vii]

At the video conference as a blanket security measure, PM Modi pledged US$10million while Sri Lankan President Gotabaya Rajapaksa contributed US$5 million the second-highest contribution from South Asia even at a time when Sri Lankan economy is the lowest-performing in the region. Sri Lanka’s  exports and tourism sector have been affected by multiple risk factors starting from the  Easter Sunday terror attack in April 2019.

A twice slapped economy from Easter attack and Pandemic- Sri Lanka will need to navigate a global recession this year. Hopefully, another wave of the Pandemic will not trigger in the coming months. While developed nations such as Singapore will prepare for the next several waves the developing countries with their squeezed health budgets will find its limitation in facing the next several waves of the Pandemic if it triggers. 

Local to Global leadership to manage systemic risks

Sri Lankan authorities started taking strict measures to contain and manage the virus from 19th March, after soft-pedalling until election nominations were submitted for the upcoming Parliament election. As explained by  S. Ratnajeevan H. Hoole member of the election commission, ‘Mr. Deshapriya was insisting that April 25 is possible. It seemed that he was afraid to disagree with the President. Here is the strategy that was finally agreed upon. It was decided to accept nominations as announced, and then gazette the names of candidates and polling booths as required in Section 24(1) of the Parliamentary Elections Act of 1981……The country is functioning with Votes on Account without a Parliament’ [viii].

If we had the Parliament functioning, we would have many stakeholders including the opposition discussing the mitigating strategy and perhaps would be able to recalibrate a better strategy than the curfew in place. How long does the Government wish to continue the Curfew strategy? What are the short and long-term impacts to the economy from a lockdown or curfew strategy? Importance of a mitigating strategy rather than a suppression(curfew) strategy? How do we protect the elder community the most vulnerable? How can we sustain as a nation if there are multiple waves of the Pandemic in the future? How do we have better sustainable debt management practices during and post Pandemic? Are some critical questions that could have been discussed in the Parliament by enabling and echoing multiple expert stakeholder advice from our society.

The number of infected cases exceeded 100, at 143 by 31st March and curfew has been declared with the international airport shut. Sri Lankan citizenry is now aware of the significant threat while some senseless politicians started distributing face masks in public for popularity and certain individuals violating curfew laws, what people should understand is the effort taken by the authorities to bring the numbers down. People typically think of a linear sequence such as 2,4,6,8,10.. of growth but Coronavirus has a slow exponential growth rate 2,4,8,16,32,64..which needs to be understood by the public. Human beings are social creatures who admire to group in packs and crowds naturally rejecting social distancing would have to practice against their natural behaviour especially in the month of April where they get-together for Easter falling on 12th April, followed by Sinhalese and Tamil New Year in Sri Lanka and on 23rd April Ramadan. It is the first time in century every faith will be practised in isolation and quarantine. Practicing social distancing and the quick adaptation of the polity towards best practices will be a key factor for the success to bring down the curve of the outbreak in the Island.

Sri Lanka is far behind testing when compared to nations like Australia as compared by a Sri Lankan medical Dr Ravi P. Rannan-Eliya, Sri Lanka has done nearly 2280 tests as of 30th March and of these tests, 115 persons were positive which is 5.5% of tested cases found positive. ‘This is a relatively high rate compared to other countries such as Australia which has a population similar to ours has done 160,000 tests and found 3,966 positive cases– positive case rate 2.47%’ [ix]. Sri Lanka and many South Asian nations need to get the testing capacity increased to efficiently manage the spread of the outbreak, curfew and lockdown alone will not help.

While we suppress and manage the local threat we must prepare for the next wave or several waves of the Pandemic. Due to complex interdependencies of the global arena triggering systemic risks to our Island nation it’s time we prepare for such risks. The transition of the political environment from pre-pandemic to post-pandemic will require the national leaders who were inward-looking with their ultra-nationalist and populist agenda to move away to a global and multilateral agenda and understand the complex systemic risks we face. Not only the top leadership the next lot of Parliamentarians who will be elected in few months would need to understand that ‘we could harvest the benefits of globalization while building resilience and mitigating against the inevitable interdependency and vulnerability arising from increased connectivity and complexity’[x] .

The world we live has its complex interdependencies due to globalization. Managing these interdependencies is the key challenge which will get us ahead of the curve. Most leaders found a direction towards confining their focus and energy to local issues more than addressing global challenges to create a sustainable environment. It’s time to rediscover ourselves while nature is reset. While industrialists mourn, wildlife will be left in peace.  Was this a lesson to the fragmented human race?

End Notes

 [i] Klayman, Sri Lanka must ensure China is held accountable:US Lawyer

http://www.dailymirror.lk/hard-talk/Sri-Lanka-must-ensure-China-is-held-accountableUS-Lawyer/334-185719

[ii] Keohane and Nye, 1977, Power and Interdependence: world politics in transition

[iii] Jonathan Lynn,2010, https://www.reuters.com/article/us-flu-who/who-to-review-its-handling-of-h1n1-flu-pandemic-idUSTRE5BL2ZT20100112

[iv] Lorenz,1963,”Deterministic

Nonperiodic Flow”, Journal of the Atmosphearic Sciences 20(2):130-141

[v] Goldin, https://press.princeton.edu/books/hardcover/9780691154701/the-butterfly-defect

[vi] Judy Dempsey Carnegie Europe, https://carnegieeurope.eu/strategiceurope/81352

[vii] Rajiv Bhatia Gateway House, https://www.gatewayhouse.in

[viii] Hoole, Democracy In Crisis: Avoiding Dictatorship,https://www.colombotelegraph.com/index.php/democracy-in-crisis-avoiding-dictatorship/?fbclid=IwAR2K2nKiIA-BHblxYwIKLpDT7_HdEaRFfaqs-VGYrMATbBjXB4e3I5C7mr8

[ix]Dr Ravi P. Rannan-Eliya, Daily Mirror,

http://www.dailymirror.lk/news-features/Sri-Lanka-needs-rapid-expansion-of-testing/131-185909

[x]Goldin,https://press.princeton.edu/books/hardcover/9780691154701/the-butterfly-defect

*Asanga Abeyagoonasekera is an alumnus of the NESA Center, National Defense University, Washington DC, USA. He studied ‘Butterfly Defect’ under Professor Ian Goldin at Oxford University.
Asanga is the author of ‘Sri Lanka at Crossroads(WorldScientific,Singapore). He was the former Director General at the national security think tank(INSSSL) under Ministry of Defence and former Executive Director at the foreign policy think tank(LKIIRSS) under Ministry of Foreign Affairs Sri Lanka. He can be contacted at [email protected] The article was initially published by NESA Center Department of Defence WashingtonDC.

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