"Soft" Factors in Pandemic Response: Comparative Intercountry Analysis

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"Soft" Factors in Pandemic Response: Comparative Intercountry Analysis

Nataliya A. Kravchenko and Almira T. Yusupova

Institute of Economics and Industrial Engineering of SB RAS Novosibirsk, Russian Federation Novosibirsk State University Novosibirsk, Russian Federation

Abstract

The article discusses the challenges of the COVID-19 pandemic response that has engulfed most countries, highlights and analyses the response strategies adopted by governments. Using the example of the United States, Russia, Great Britain, Spain, Italy, Germany, Japan and China, the authors have analysed the adopted restrictive regimes, models of enforcement to comply with them, schemes and tools to support the economy. According to open sources, the authors estimated the duration and severity of the restrictive regimes for economic and social activity, the severity of punishments for violations of restrictive regimes, the scale of assistance to the population and business, and compliance with restrictive regimes. The article pays a special attention to identifying the role of “soft” factors, such as trust and national culture, in the implementation of the pandemic response policy. The authors used the index of ethnic fractionalization to characterize the homogeneity of society.

The article confirms that more collectivist, long-term and less masculine cultures tend to strictly comply with restrictive regimes, but the penalties imposed in countries with such a cultural code have been more severe. The analysis showed that in countries with a more individualized and masculine culture, large packages of support for the population and business were allocated with a moderate severity of punishment for non-compliance with restrictions. In these countries, the tension and discontent of the population, which had accumulated during the period of the restrictive regimes, became more pronounced. The results obtained give grounds to assert that “soft” factors play an important role in shaping the policy of responding to the threat of a pandemic; the strategies chosen by countries in an explicit or implicit form reflect national, cultural and institutional characteristics.

Keywords: pandemic, support measures, restrictive regime, trust, cultural differences.

«Мягкие» факторы в борьбе с пандемией: сравнительный межстрановый анализ

Н.А. Кравченко, А.Т. Юсупова

Институт экономики

и организации промышленного производства СО РАН Российская Федерация, Новосибирск Новосибирский государственный университет Российская Федерация, Новосибирск

Аннотация. В статье обсуждаются проблемы борьбы с пандемией COVID-19, охватившей большинство стран, выделяются и анализируются стратегии реагирования, принятые правительствами. На примере США, России, Великобритании, Испании, Италии, Германии, Японии и Китая проанализированы принятые ограничительные режимы, модели принуждения к их соблюдению, схемы и инструменты поддержки экономики. covid pandemic economy restriction

По данным открытых источников оценивалась длительность и строгость режимов ограничений экономической и социальной активности, жесткость наказаний за нарушения режимов ограничений, масштаб помощи населению и бизнесу и соблюдение режима ограничений. Особое внимание уделено выявлению роли в реализации политики борьбы с пандемией «мягких» факторов, таких как доверие и национальная культура. Для характеристики однородности общества использован индекс этнической фракционализации.

Было подтверждено, что более коллективистские, долгосрочно ориентированные и менее маскулинные культуры склонны строго соблюдать ограничительные режимы, однако и меры наказания, введенные в странах с таким культурным кодом, оказались более жесткими. Анализ показал, что в странах с более индивидуализированной и маскулинной культурой были выделены крупные пакеты поддержки населения и бизнеса при умеренной жесткости наказания за несоблюдение ограничений. В этих странах сильнее проявилось напряжение и недовольство населения, накопившееся за время действия ограничительных режимов. Полученные результаты дают основания утверждать, что «мягкие» факторы играют важную роль в формировании политики реагирования на угрозу пандемии, выбранные странами стратегии в явной или неявной форме отражают национальные, культурные и институциональные особенности.

Ключевые слова: пандемия, меры поддержки, ограничительный режим, доверие, культурные различия.

Introduction

The COVID-19 pandemic in a short time has spread to almost all countries of the world, destroying human life and health, social interactions and economic activity in a wide range of economic sectors. The world situation is described in terms of “uncontrollable uncertainty” and “uncontrollable shock”, when it is unknown what events are possible, how they will develop and how they can be influenced (EC, 2020; World Bank, 2020).

Most of the countries affected by the pandemic have taken extraordinary measures to stop the spread of the infection and reduce the severity of the disease for those who catch the virus. This implies a sharp increase in the burden on the health care system, a rapid creation of new hospitals, the provision of medical materials and equipment, the attraction of additional medical personnel, and much more. In order to limit and slow down the spread of the virus, for which there is still no specific cure, a sharp reduction in contacts between people in general and potential sources of infection in particular is required.

The scale of economic consequences depends on many different conditions and factors, among which the most significant ones are the time of penetration and the rate of spread of the pandemic, the existing structure of the national economy, the organization and capabilities of the health care system, the severity and duration of the restrictive regime for economic activity, the duration and magnitude of the reduction in demand and supply of goods and services. The social consequences of the current situation (health of the population, unemployment rate, increase in poverty) are inextricably linked with economic ones. The governments of all countries use various combinations of the severity of restrictions, enforcement of compliance with them, as well as schemes and tools to support the population and business (Liberal

Mission..., 2020; Zhulin, 2020). Public policy measures can have a significant impact on the depth and duration of an economy's decline, as well as its recovery. In different countries, the spread and consequences of the disease occur in different ways, and the priorities and forms of support for business and the population are differentiated.

The pandemic response policies implemented by states are complex, that is, associated with the multiplicity and contradictions of goals and tools that change over a short period of time. The reaction of the population and business to the proposed restrictive regimes and support measures is ambiguous; we assume that it is associated, among other things, with “soft” factors accumulated in society, such as trust and national culture.

The purpose of our work is to highlight the role of “soft” factors in the implementation of the pandemic response policy using a comparative analysis of the experience of countries with different cultures and institutions. We have analysed eight countries that have been hit hard by the pandemic: the United States, Russia, the United Kingdom, Spain, Italy, Germany, Japan, and China.

The policy analysis was based on open source data and published operational statistics as of May 2020, when the countries of the group had already experienced a period of the most stringent isolation measures and production shutdowns and moved to relax the restrictive regime (IMF, 2020; COVID-19, 2020; Hale, Angrist et al., 2020; Hale, Webster et al., 2020).

We believe that the effect of the policy depends on the scale and direction of restrictions and support, as well as on the readiness and ability of businesses and the public to comply with the requirements in an emergency situation and comply with the restrictive regime.

Thepandemicresponse: restrictions, punishments, support

The World Health Organization classified the COVID-19 outbreak as a pandemic on March 11, 2020. About 60% of the disease control action taken by most governments took place within three weeks from 8 to 27 March (Hale, Webster et al., 2020). Perhaps it was the announcement of a pandemic that prompted some countries to take restrictive measures to a greater extent than the development of a pandemic in a single country.

In conditions of “uncontrollable uncertainty”, governments are forced to make quick decisions, the consequences of which are difficult to estimate, to balance between different priorities and goals: preserving life and health icines and protective equipment (Roser et al., 2020).

Areas of state support cover the health care system and medical institutions, provision of vulnerable segments of the population, assistance to affected industries and enterprises, as well as maintaining the stability of the financial system. In particular, in most countries, certain categories of enterprises are offered subsidies to save jobs, grants, soft loans, tax deferrals (Anderson et al., 2020). However, countries differ significantly in the scale and form of measures taken by governments, as well as in the speed of adoption and implementation of decisions taken.

Table 1 presents a summary of the scale of restrictions, the magnitude and direction of support measures.

Table 1. Restrictions and economic measures to support the population

and maintaining economic well-being. The pandemic response measures include restrictive measures, measures to support the population and businesses, and measures to enforce to comply with restrictions. General pandemic response measures include restrictions on economic activities and social contacts: shutting down businesses and organizations that provide personalized services, closing schools and universities, restrictions on movement within countries and closing borders, bans on mass events, contact tracing, and other measures to contain the spread of the pandemic, as well as mobilization of the national health care system, investment in hospitals, production of med-

The duration of the strict restrictions is the number of days from the moment the restrictive regime is announced (quarantine, emergency, “stay at home”, and other forms) until the first relaxation of the regime. The duration of the restrictions, even without considering the economic consequences, has a strong influence on people's behaviour. Studies of past epidemics (Blendon et al., 2006) show that people in isolation generally face psychological problems that increase over time.

The severity of the restrictionswas estimated using the Stringency index The index ranges from 1 to 100 and aggregates nine indi-cators (school and university closures, business closures, bans on public events, restrictions on the number of participants, termination of public transport's operation, self-isolation, restrictions on internal movement, restrictions on external movements, and support for information campaigns)., which is maintained in the monitoring mode by a group of researchers at Oxford University (Hale, Webster et al., 2020).

The amount of support reflects the entire amount of support, excluding government guarantees, in relation to the country's GDP in 2019 as of May 1, 2020 (Duffin, 2020).

The indicators of the level of support of the population were considered in accordance with the approach of the Oxford researchers, who propose to combine them in two directions. The first reflects direct payments to those who have lost their jobs or are unable to get one due to the introduction of a restrictive regime. Such payments may not be used at all, may be less than or more than 50% of the lost wages. The second concerns the introduction of deferred payments for obligations, and can be limited (deferral for one type of contract) or broad (cover consumer loans, mortgages, tuition fees, utility bills, etc.) (Hale, Webster et al., 2020).

Table 1 reflects the situation on May 1, 2020; by this time large-scale support programs had been deployed everywhere and almost all countries began to gradually reduce the severity of restrictions.

The overall level of restrictions was the highest in Italy, Russia, Spain and China; the lowest level of restrictions was announced in Japan; the restrictions in Great Britain, USA and Germany were stronger than in Japan, but weaker than in the first group of countries.

Punishments for violations of the restrictions included fines, the possibility of imprisonment, and even the death penalty (in China). In terms of the severity of punishments for violations, China leads; the largest monetary fines are announced in the United States, followed by Spain, Italy and Russia in terms of the severity of punishments; the smallest sanctions for violations are applied in Germany and Great Britain; Japan has no penalties for citizens for violating the recommendations on restrictions.

Governments have used various combinations of tools to reflect strategies for responding to the pandemic crisis. We have highlighted several options reflecting different response strategies:

1. Reimbursement of a small part of losses, combined with a delay in fulfilling obligations under a narrow range of financial contracts. This is the least costly response strategy, which has been implemented in Italy. Note that this country is one of the three countries in our sample with the smallest total amount of support (in relation to GDP) to the population and economy, which found itself under the most severe restrictions in Europe, where quarantine spread throughout the country.

2. Reimbursement of a small portion of losses and deferral of a wide range of financial contracts. This is how the Japanese government acted, where the amount of support (in relation to GDP) was the highest against the background of a low level of restrictions and the absence of enforcement to comply with them. The Japanese Constitution does not provide for the possibility of restricting the freedom of citizens, so the government used exclusively methods of persuasion and requests to limit activity and reduce walks, public events, travel.

3. Reimbursement of a significant part of losses, combined with a temporary release from obligations under a narrow range of financial contracts, which was carried out in the United States. The country is among the three leaders in our sample in terms of support (relative to GDP). O. Blanchard and co-authors also note differences in the direction of support between European countries and the United States (Blanchard et al., 2020). In European countries, support schemes are more flexible, they protect workers more and maintain the existing balance of interests between companies and workers. In the United States, the support scheme is more complex and less focused on protecting workers (for example, laid-off workers may lose access to health insurance), which does not help to maintain a balance of interests between the employer and workers.

4. Reimbursement of a significant part of losses in the freezing of obligations under a wide range of financial contracts. This is how the governments of Great Britain, Germany and Spain acted, but in Germany and Great Britain, unlike in Spain, the duration of strict restrictions was minimal, and the amount of support was significant. In addition, in Great Britain, the main method was to convince the population of the need for restrictions, which resulted in significantly fewer punished violators of restrictions.

5. China used such forms of compensation for lost income as unemployment benefits, disability benefits, but the scale of support was less than in other countries. By the beginning of May, China had already loosened restrictions, and loosened the severity of restrictions at the peak of morbidity, but the punishment for their violation was called “draconian”. Direct payments in China were minimal, as support for the people relied heavily on the social security system.

6. In Russia, the powers to impose restrictions, and later to reduce them, were transferred to the level of the constituent entities of the Federation; fines are provided for violations of the self-isolation regime, infecting other people, as well as for fakes about the coronavirus. Direct payments to the population (those who have lost their jobs, families with children, self-employed, etc.) started in May and are not reflected in the data (Hale, Webster et al., 2020). The support system was deployed gradually, new measures and tools were added within the framework of three packages, with a gradual increase in direct payments to the population. Directions included support to healthcare organizations - purchase of medical equipment, medicines, construction of hospitals; medical and pharmaceutical industries; small businesses in the most affected industries, as well as backbone enterprises; population - families with children, the unemployed, the self-employed; regional budgets, etc. Forms of support at the first stages were aimed at facilitating access for companies to loans and guarantees, reducing business costs (taxes, payments on loans and borrowings, insurance payments, rent, etc.); reducing the financial burden of borrowers, and later the government added direct payments to workers in affected industries and families with children.

The perception of government actions in the pandemic response and the willingness of people to support them depend on many conditions, among which the characteristics of the national culture and the institutional context play an important role.

Nationalcultureandcompliancewithrestrictions

Restriction of personal freedom and forced isolation is one of the difficult challenges for people, which can be accompanied by depression, frustration, aggression and other psychological and physiological disorders (Brooks et al., 2020; Lu et al., 2020). Of course, objective economic factors such as a decrease in income, unemployment and an increase in poverty, impose the main background, but the peculiarities of culture and institutions form expectations and a reaction to these expectations, which accumulates and increases over time.

Perception, “acceptance” and compliance with restrictions as a new way of life is associated with many factors, including prompt information about the situation and measures taken, support and punishment for violating the restrictive regime, etc. The information received is perceived and evaluated through the prism of trust in the government, and behavioural reactions depend (among other things) on the peculiarities of the national culture.

National culture is a complex phenomenon to analyse and interpret, there are many studies that prove that people's views and beliefs play a key role in the economic development of countries and regions (see, for example, a review in (Kosarev et al., 2019), the creation and the spread of democratic institutions and systems of social governance (Inglehart et al., 2014).

We used G. Hofstede's scheme, which identifies six characteristics of culture (Hofstede, 2020), which are rated in points from 1 to 100: individualism - collectivism, power distance, masculinity - femininity, avoidance of uncertainty, orientation towards the future, indulgence - restraint.

Generalization of the characteristics of culture at the level of the country seems to be more reasonable in the case when the people inhabiting it are close in their ethnic, linguistic, cultural and other characteristics. Can we talk with some degree of confidence about the national culture of the country as a whole? If a so

ciety is homogeneous, and its members speak the same language, belong to one ethnic group and one confession, then this is a more homogeneous society with a lower level of diversity. In this case, we can assume similar reactions of people to different life circumstances and similar patterns of behaviour. We included the index of ethnic fractionalization (Drazanova, 2019), which ranges from 0 (the country has a homogeneous population) to 1 (many different ethnic groups - factions). Among the countries under consideration, the level of population diversity varies greatly: from an almost homogeneous population of Japan to high levels of heterogeneity of the population of Spain and the United States.

We assume that countries with a higher level of heterogeneity of population and, accordingly, culture, in a pandemic, face greater risks of resistance to restrictions than more homogeneous societies. This assumption was confirmed by data from surveys of the population of 4 countries, carried out by scientists at Harvard in 2006, in the context of the spread of SARS (Blendon et al., 2006).

The level of trust is perhaps the most important indicator of social capital that affects economic and social well-being. A high level of trust in society contributes to economic growth, increasing confidence in the future, reducing regulatory and transaction costs of interactions between economic agents. The level of confidence is differentiated across countries and is fairly stable over time, which allows it to be used more confidently for estimates and forecasts than many other “soft” indicators. Most estimates of the level of trust in society are based on surveys, among which the Edel- man Trust Index is the most commonly used (Edelman, 2020). The index provides insight into four types of trust: trust in government, trust in the media, trust in people, and trust in business. The estimates of the level of trust presented in the World Values Survey (Inglehart et al., 2014) are no less valuable, but so far the estimates end in 2014.

To estimate the level of compliance with the restrictions, we used the results of a study by the consulting company Ipsos (Bricker, 2020), based on a survey of 28 thousand people in the 15 largest countries, conducted on the 2-4 April 2020, which record what proportion of the country's population complies with the regime of restrictions and self-isolation.

Table 2 presents estimates of the main cultural and institutional characteristics that, according to our assumptions, have an impact on the severity of restrictions and on the compliance with these restrictions by the population and business.

The “strength” of the impact of restrictions depends not only on their magnitude and severity, but also on the duration - the longer the isolation regime lasts, the harder it is for people. In Italy, Spain and the United States, the length and severity of the restrictions were greatest. In Great Britain, Germany and Japan, the situation was different - the duration and severity of the restrictions were to a certain extent stopped. “Fatigue” from restrictions, a feeling of imprisonment, a change in the usual way of life against the background of job loss and a decrease in income, of course, have a negative impact on a person. It can be assumed that this situation is most painful for people whose culture is dominated by the values of individualism and independent decision-making, who are forced to submit to decisions made regardless of their will and consent.

Table 2. “Soft” factors and indicators of the restrictive regime

In fact, the restriction regime was developed without an explicit cultural orientation, first of all, it took into account the scale and speed of the spread of the disease.

According to the similarity of cultural characteristics, our sample distinguishes four groups of countries.

The most pronounced parameters are a low power distance and a high level of individualism in the United States and Great Britain, which are generally close in the cultural code.

A smoother picture is in Italy, where the level of individualism is also high, although slightly lower, and power distance is higher than in English-speaking countries, while in Germany, the level of individualism is slightly lower than in Italy, and power distance is as low as in Great Britain.

In Spain and Japan, the power distance is higher than in the previous groups, and the level of individualism is lower, which can be interpreted as a higher willingness to accept decisions from “above” and a willingness to follow collective interests.

The highest power distance is in Russia and China, where the traditions of collectivism and the lowest level of individualism are also strong. Collective values are perceived as more important than personal, personal interests and freedoms are more flexible and are not an absolute priority.

If we compare the characteristics of power distance and trust in government, we can clearly distinguish several countries in the sample with a relatively low level of power distance and low trust in government. These are Germany, Great Britain, which, as shown above, have adopted the most ambitious response strategies, and the United States.

Let us emphasize that the parameters of culture are interrelated, so that the estimates of one separate parameter need to be examined more closely, though they are attractive as a methodological method. We estimated the correlation of “soft” factors included in our analysis (see the correlation matrix in the Appendix).

Note the high correlation between individual dimensions of culture: individualism - collectivism with power distance (negative correlation), future orientation (negative) and indulgence (positive correlation); in turn, a high power distance and short-term future orientation demonstrate a strong negative relationship with indulgence in society.

Compliance with restrictions on social and economic activities is fundamental in the pandemic response. This indicator demonstrates a strong positive relationship with the severity of restrictions, which we interpret as an adequate response to epidemiological conditions and the spread of coronavirus, and this relationship can be regarded as the success of the restriction policy.

The strong negative relationship with the level of masculinity of the culture is also well interpreted - in more feminine countries, compliance with restrictions is supported by a strong motive of caring for other people, responsibility to vulnerable groups.

Correlation of cultural parameters, institutional conditions and characteristics of a restrictive regime

The strong positive relationship with the level of fractionalization turned out to be unexpected, and is explained by the small size of the group and the presence of Japan - an almost homogeneous country in terms of ethnic composition, in which restrictions were much softer and there was no enforcement to comply with them. If we evaluate the correlation excluding Japan, then the relationship between compliance with restrictions and ethnic diversity becomes negative and weak. Compliance with restrictions is negatively associated (medium relationship strength) with future orientation, that is, greater willingness to accept the unknown future contributes to less compliance with restrictions. And even if Japan is excluded this time too, the situation will not change.

Thus, representatives of feminine societies with a long-term orientation, that is, more adaptive to changing external conditions, comply with the restrictions on personal freedom and economic activity more willingly than others.

Governments of countries with a high level of individualism, low power distances and relatively low levels of trust have implemented the most advanced and large-scale support strategies, that is, in other words, practice confirms the importance of focusing on material incentives for these types of cultures.

The reduction of restrictive measures and the recovery of economic activity contribute to normalizing the situation; in general, the measures taken by governments to protect vulnerable firms and workers during the pandemic have largely achieved their goals.

Conclusions

The performed analysis has demonstrated the existence of various options for the combination of the magnitude and direction of government support and compliance with the restrictive regime, which can be interpreted using “soft” factors.

References

Our initial assumption that more collectivist, long-term, and less masculine cultures tend to strictly comply with the proposed rules has been confirmed, but its continuation that such countries need less severe penalties for violating the restrictive regime turned out to be not quite true. On the contrary, in conditions of uncontrollable shock, countries with such a cultural code use even more severe measures of influence, relying on the effect of threats of punishment to a greater extent than on voluntary compliance with the requirements of the restrictive policy.

Perhaps the role of the amount of support is important here. Countries with more individualized and more masculine cultures, and richer ones as well, have allocated unprecedentedly large support packages with a moderate severity of punishment or without punishment at all.

The tension and resentment that had accumulated during the period of severe restrictions were also significantly more pronounced in individualistic and masculine societies, but not all such societies imposed severe restrictions.

Of course, this is preliminary data, while it can be confidently asserted that “soft” factors matter, and national cultural and institutional characteristics are reflected in national policies in an explicit or implicit form.

The results obtained expand our understanding of the behavioural aspects of the economy and can be used when choosing tools for various types of stimulating policies, not only in turbulent conditions, but also in a more favourable situation.

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