Gareth Vaughan on Michael Cullen's key moment in our history, how Asia's densest slum chased the virus, Hertz the pandemic zombie, airport ghost towns & could the US be headed for civil war?

This Top 5 COVID-19 Alert Level 1 special comes from interest.co.nz's Gareth Vaughan.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz. And if you're interested in contributing the occasional Top 5 yourself, contact gareth.vaughan@interest.co.nz.

See all previous Top 5s here.

1) Michael Cullen's key moment in our history.

Former Finance Minister Michael Cullen has written a think piece for think tank the McGuinness Institute looking at where New Zealand could, or should, head to from here. He has some interesting things to say and includes the type of one liner he was famous for when in parliament, describing NZ during lockdown as "a kind of Garden of Eden with wi-fi."

We need to develop a new high trust partnership model where government is seen as the facilitator, not the barrier, to progress and sustainable development. Many of the private, voluntary, and other sector lead organisations need to move out of their trenches and start to think about how they, in a partnership model, can contribute to New Zealand’s wellbeing.

A good place to begin this recovery would be the tourism sector. Its leadership during the crisis has done a fair impersonation of a wailing wall. It needs to sit down with government and others and start discussing what a realistic, viable future looks like for the sector and how to get there. Government needs to loosen the reins while sector organisations need to act more like grown-up citizens of New Zealand, and less like importunate teenagers, ever wanting more attention and more money.

Hopefully, looking ten years down the track, we could see a leaner, more agile, more interactive bureaucracy working with many different partners towards shared goals. At the moment we have a team of five million where part of the team wants to keep the ball all the time and the rest run around in circles.

Cullen concludes by saying the COVID-19 crisis will be looked back on in the future as a key moment in our history.

Whether it will be seen as a disaster or the beginning of a better age will depend on the honesty, courage, and unity we, as a nation, can show over the next couple of years. It is time to move beyond self-congratulation on what we did during the crisis. It is time to reckon with the much harder task of fulfilling the promise inherent in that time for our children and grandchildren.

2) How Asia’s densest slum chased the virus.

Bloomberg has the story of how Mumbai's Dharavi, India’s most crowded slum, has moved from coronavirus hotspot to potential success story, with lessons for developing nations battling to contain COVID-19. Authorities have apparently knocked on 47,500 doors since April to measure temperatures and oxygen levels, have screened nearly 700,000 people and set up fever clinics. Bloomberg says officials also realised the need to isolate people in a place where up to 80 share a toilet, with schools and sports clubs converted to quarantine centres.

Fresh daily infections are now down to a third compared with early May, half the sick are recovering, and the number of deaths plummeted this month.

The numbers are in stark contrast to the rest of India, whose daily tally of new infected cases has quadrupled since early May. Located near Mumbai’s financial district, Dharavi’s dogged approach to “chase the virus” borrows ideas from clusters such as those in China’s Wuhan or South Korea, and could be a template for emerging markets across the world, from the favelas of Brazil to shanty towns in South Africa.

“It was next to impossible to follow social distancing,” said Kiran Dighavkar, assistant commissioner at Mumbai’s municipality, who is in charge of leading the fight in Dharavi. “The only option then was to chase the virus rather than wait for the cases to come. To work proactively, rather than reactively.”

The Dharavi slums. Photographer: Indranil Mukherjee/AFP via Getty Images.

3) Hertz the a pandemic zombie.

In my last Top 5 I included a Bloomberg story about people buying shares in bankrupt companies such as Hertz. Writing for Vanity Fair, William D Cohan delves into this issue further.

Cohan points out the pandemic and its economic consequences have led to a number of counterintuitive events in financial markets. But he argues what's happening at car rental agency Hertz is in a class of absurdity by itself.

Between May 26 and June 8, Hertz’s stock—still trading on the New York Stock Exchange during bankruptcy although destined for delisting—exploded in price. During those two weeks the Hertz stock increased to $5.53 per share, from 56 cents per share, a ridiculous and inexplicable rise of nearly 10 times. Sometimes these kinds of crazy things happen to the publicly traded stock of bankrupt companies, where woefully uninformed retail investors—you and me—buy up the stock hoping other fools will too. And sometimes, as in this case, the speculators can make money. The stocks of other newly or near-bankrupt companies—J.C. Penney, Chesapeake Energy—have also rallied in recent weeks. It is all pure gambling. There is no circumstance—zero—where Hertz shareholders will ever get a recovery once a plan of reorganization with creditors is agreed upon, probably months from now.

How do I know? Part of the reason is because I understand corporate restructuring. For nearly five years at Lazard, in the early 1990s, I worked on several of the biggest bankruptcies of the day, among them Revco Drug Stores and Federated Department Stores. What happens 99.9% of the time is that existing shareholders get wiped out and the creditors, most of which won’t get their money back, divide up what’s left of the carcass. It’s often a Darwinian battle of epic proportions, with creditors fighting over every scrap of value. What happens time and time again is that unless and until every creditor gets back every penny it is owed plus accrued interest, there will be no recovery for the shareholders. As in zero.

That’s what is going to happen to Hertz, too, and I know that because the Hertz bonds are trading at a severe discount. 

4) Could the US be headed for civil war?

Time has the story of Peter Turchin, a researcher who teaches cultural evolution at the University of Connecticut. In 2010 Turchin predicted the US would suffer a period of major social upheaval beginning around 2020. This has certainly come to fruition.

After spending the last 20 years studying crises in America and the structural defects that helped cause them, Turchin says many signs showed the U.S. was spiraling toward upheaval in this decade.

The nation, he says, has experienced stretches of turmoil about every 50 years between 1870, during heightened tensions of the Reconstruction Era, and 1970, in the aftermath of Martin Luther King Jr.’s assassination when women and many minority groups were fighting for equality amid protests against the ongoing Vietnam War.

Turchin looked at data analyzing peaceful and violent anti-government demonstrations that involved at least 100 people between 1780 and 2010. Using a computer model, he also factored in economic patterns—including declining wages, wealth inequality, exploding national debt and other social pressures that affect national stability—from the same time period. The model showed social and economic turmoil in the U.S. would come to a boiling point in the years around 2020, Turchin wrote in his 2010 paper.

And Turchin suggests the worst may still be to come.

On top of that, Turchin says the COVID-19 pandemic has further worsened the wellbeing of large swaths of the American population—a leading driver of national instability—and could make the public less likely to trust government institutions. As millions of Americans remain jobless, Turchin says there will be other triggers after this. He worries tensions “may escalate all the way to a civil war.”

“Unfortunately,” he says, “things are not as bad as they can be.”

5) Airport ghost towns.

The impact COVID-19 is having on aviation is well known. In an earlier Top 5 I included an article on how Anchorage Airport, an air cargo hub, had become the world's busiest airport. Auckland International Airport issued a traffic update on Wednesday. Not surprisingly it reported total passenger volumes dropped by 97.5% in April year-on-year. International passengers, excluding transits, were down 96.5%, transit passengers were down 98.5% and domestic passengers were down by 98.6%. Even though more domestic flights have resumed since then, here in Auckland the skies remain noticeably quieter than pre COVID-19.

The ABC looks in-depth at a very quiet Sydney Airport, complete with a series of eerie pictures and the tale of a young Spanish couple's efforts to get home.

Australia’s busiest airport normally handles around 1,000 flights daily.

“We’re now doing 10 flights a day, 20 if we’re lucky,” Sydney Airport CEO Geoff Culbert says.

“150,000 people were coming through the airport every day, we’re now seeing 100, 200 people a day.”

Parcels that are normally packed into the cargo holds of commercial flights are now being loaded in the cabins of empty aircraft, the ABC says. Quoted is Nigel Coghlan, the airfield operations supervisor.

Mr Coghlan’s worked at the airport for 21 years, through events including 9/11 and the collapse of Ansett. 

He’s never seen so many planes parked on the runways and taxiways.

Qantas, Jetstar and Virgin aircraft sit idle, their wheels wrapped in plastic, their engines covered.

Meanwhile the Spanish couple's "revised" itinerary is below.

A 12-hour drive from Keith, South Australia to Sydney.

Arriving at an empty Sydney Airport only to find another flight cancelled.

A night at an airport hotel, then back to the departures hall for a long wait.

From here, they hope to take a 14-hour flight to Doha and then a seven-hour flight to Madrid.

Then they’ll navigate the local COVID-19 restrictions in Spain and take a five-hour bus ride to Valencia.

At least, that’s the current plan.