Covid shots are at the forefront of political risk


Ten years ago, if analysts wanted to put a price on a pharmaceutical stock, they usually did so by looking at the company’s balance sheet, studying its cash flow, calculating its debt burden, and scrutinizing its pipeline. patents and drugs.

Today things are quite different. For weeks, newspapers across Europe have been filled with stories of the ‘vaccination wars’ between the UK and the EU over the distribution of the BioNTech / Pfizer jab and the safe use of the Oxford jab. / AstraZeneca.

Politicians on both sides are now working to stop this lose-lose fight. Hope they are successful. But even if they do, the saga illustrates a bigger point: Anyone who runs a pharmaceutical company these days, or invests in a business, not only needs to think about patent risk and debt repayment, but also needs to take take into account the political risk.

To put it another way, it’s not just the track record that matters to pharmaceutical companies now – it’s also questions like “Will there be a trade war?”, “How do we measure populism? ” and “Does politics in the region appear stable?”. The political risk is having an impact that the leaders of the pharmaceutical industry, engaged in what they believed to be a beneficial effort for the whole world, did not expect to see in the West.

Is it just a function of the Covid-19 shock? Perhaps. Over the past year, Western governments have bailed out their national economies to an extraordinary degree, which inevitably means that the nature of the political system and culture encroaches more than before. The pandemic has also forced us to think about the links that unite (or not) and define communities.


However, it can be dangerous to think – or hope – that these political risks will disappear when the pandemic ends. The year-long crisis has left most of us yearning for a sense of ‘normalcy’ as Covid-19 recedes, and it’s tempting to assume that such a state will bring a sense of political calm as well.

But this assumption could be wrong. Tina Fordham, a former political analyst at Citi who is now a partner at consultancy firm Avonhurst, points out that when the 2008 financial crisis ended, it did not lead to political peace. The – remarkable – economic recovery that followed in the United States was not the case either. On the contrary, the last decade has sparked a rise in populism, despite economic growth, which ultimately led to events such as the Brexit vote and the election of Donald Trump.

Fordham believes we could see a similar pattern unfold in the post-Covid world. After all, as she argues in a stimulating new report titled “Vax Populi” (a play about Latin Vox populi, or “voice of the crowd”), there is reason to expect more political upheaval. The pandemic has cruelly exacerbated the gap between winners and losers. And while some countries try to fix this problem (the Biden administration, for example, with a $ 1.9 billion stimulus package), it will be difficult to do so in the post-pandemic world as government resources will be limited. Either way, Covid-19 has revealed striking variations in the degree of government effectiveness and social trust, and countries where these are lacking could be prone to populism.

Fordham believes that China and Germany, for example, are likely to rebound quickly from the pandemic, with relative political calm, as they have functioning systems of government, though varying success rates to contain the pandemic and administer policies. vaccines. She also assesses the UK’s odds, which might surprise many Brits, but Fordham cites the success of the vaccination program as a factor that has strengthened social cohesion.

But countries like the United States and France seem more prone to upheaval, or the “risk of vax populi,” she says, due to a combination of strong reluctance to vaccination, a high number of deaths linked to Covid-19 and a polarized political landscape. Emerging countries like Turkey look much worse.

Any resulting domestic populism means that “vaccine nationalism, misinformation and trade-related tensions will also increase,” the Fordham report says. So much for the hopes of a summer peace.

Fordham isn’t the only one making grim predictions. Insurance company Aon and consultancy firm EY also recently warned clients about the risks of political volatility in a post-pandemic world. Financiers are stealthily discussing the possibility of an imminent populist attack; Just this week, the Bridgewater hedge fund published a study on past wealth taxes, noting that these can arise when populism coincides with sudden societal shocks, such as war.

Of course, the counterpoint to these warnings is that many also expect a post-pandemic economic rebound. Indeed, the hope among investors is that we will see a new “roar of the 1920s,” the type of party atmosphere that erupted in the aftermath of the 1918-2020 influenza pandemic. If so, it could reduce the likelihood of political volatility – or it will if the fruits of any bounce are distributed in a way that seems fair.

But “if” is the key word here. As the fight against vaccines in Europe shows, concepts of what is ‘right’ vary greatly today, both between and within countries. Hence the challenge of determining how political risks will play out in this new pandemic and post-pandemic landscape. Just ask AstraZeneca.

Follow Gillian on Twitter @gilliantett and send him an e-mail at [email protected]

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