About the authors: Jay Clayton is the former chairman of the U.S. Securities and Exchange Commission. He is senior policy adviser and of counsel to Sullivan & Cromwell, non-executive chairman of Apollo Global Management, and an adjunct professor at the Wharton School of Business and the Carey School of Law at the University of Pennsylvania.
Mark Wiseman is the chair of the Alberta Investment Management Corporation and is a senior advisor to Lazard, BCG and Hillhouse Capital. Until 2019, he was a senior managing director at BlackRock and Chairman of BlackRock’s Global Investment Committee.
Throughout history, we have faced floods, pandemics, financial meltdowns, terrorist attacks and other devastating crises. In 1871, a fire that started in a barn on the southwest side of Chicago killed 300 people and burned down 17,000 buildings. Like the pandemic today, the Great Chicago Fire revealed key weakness in public and private sector risk management: Building codes did not mandate fireproof materials; fire departments were unprepared and under-resourced for an inferno of this scale; and fire insurance was not universally adopted.
It is now, as it was then, the role of governments to learn from crises and modernize risk-management practices.
The U.S. has expended somewhere in the range of $5 trillion to as much as $10 trillion in government funds, depending on whether and how one accounts for Federal Reserve stimulus measures, to reduce the potential death toll and mitigate the economic effects from Covid-19. While we can count many successes, including the development and distribution of effective vaccines in record time, as well as continued general economic stability, these expenditures are so high that taking the same path again is not an option. Our economic strength, which we tapped rapidly and effectively in response to Covid-19, must be replenished or future monetary and fiscal tools will be constrained. This economic strength also is essential to our international standing and, as distasteful as it may sound, our enemies are constantly assessing whether they are better positioned to assert their will on the world stage.
Now is the time to ask: What have we learned and how do we more effectively respond to a future crisis, be it a pandemic, a natural disaster, a cyber event or a systemic financial crisis?
We should begin with self-reflection. A shared mission and consensus objectives are the bedrock of effective public sector crisis management. With Covid-19, no Western government has fared well on this score. There is wide agreement that political debate has become harsh and absolute. This fractured political dynamic undermines every key aspect of crisis management, starting with a shared mission and common objective to instilling and maintaining public confidence.
A Pew Research Center survey found “feelings of division increased significantly” in a dozen advanced economies during the pandemic.
This should not come as a surprise. Efforts to combat Covid-19 widened, not narrowed, political and social divides. Predictably, this dynamic undermined the shared sense of mission that is essential to effective crisis management. Public sentiment focused on various blunt, daily metrics, such as numbers of tests and case counts, with little attention to much more illuminating and decision-useful metrics such as the severity of cases among various cohorts. The long-term stresses on our healthcare and educational systems were mentioned in passing but rarely referenced in day-to-day decision making. This failure to identify consensus objectives often led to abrupt, inconsistent, and uncoordinated decisions, including to fully lock-down or fully open-up and, in many cases, vacillate between those extremes.
This dynamic was again disappointingly evident in the widely varying, yet blunt, early responses to the highly transmissible Omicron variant. Although, encouragingly, recent decision making and communications appear to incorporate more comprehensive and nuanced analysis, providing an opening for greater consensus.
With this healthy dose of self-reflection, as well as the knowledge that our domestic welfare and international standing are in the balance, our analysis of how to better respond to the next crisis should include four key elements.
Improve Real-Time Public Analysis, Planning, and Decision-Making
In the uncertainty that is a hallmark of virtually all crises, crisis management is a dynamic exercise. As more information becomes available, risks, objectives and plans must change, along with public expectations. In March 2020, producing ventilators was believed to be the most pressing objective. By mid-summer, acute supply needs had changed dramatically, with personal protective equipment and reagents for testing becoming the focus of our response efforts. In the late fall, with the promise of effective vaccines, plans changed again, with production and supply chain capacity coming into focus. And, throughout our efforts, hospital capacity has been a constant focus. Of course, some, including former Food and Drug Administration Commissioner Scott Gottlieb, informed us early that we should view our response efforts as a multi-faceted journey with continuous effort and discovery where the search for absolutes is a fool’s errand. We must trust citizens to understand that path through a crisis is never clear at the outset and, in hindsight, the “best” decisions at the time are always far from perfect.
Conducting this analysis and planning in public should also better prepare us for crisis-level risks that we have not yet experienced, such as a potentially debilitating cyber event, an unanticipated natural disaster, or a devastating humanitarian event. Said another way, experience in overcoming the uncertainty inherent in any kind of crisis will leave us better prepared for all types of crises.
Draw on Expertise and Establish Public-Private Partnerships
When there is the potential for a big fire, we need the best fire department practicable. Early in the pandemic, the president, with input from legislative leaders, should have been in a position to immediately tapa group of people from both the public and the private sector with the requisite healthcare, economic, operational, and management experience to provide measured input to and guide our evolving response to Covid-19. Key performance metrics identified by such a group likely would have provided a focal point for coordination across our cities and states, had a dampening effect on the divisive nature of the political debate, and enhanced the confidence of the American people in the efforts of its government.
Looking only to the public sector for expertise is limiting. Our political leadership is now dominated by career politicians, rather than people, who before government service, gained operational experience in the private or military sectors. At the same time, our world has become more complex and specialist-dependent. As a result of the increased dominance of the political class in public sector leadership, with the notable exception of the military, we lack the functional experience necessary to respond quickly to many systemic risks. We benefit greatly from political discourse, but in times of crisis, operational excellence and pragmatism should come to the fore.
Incorporating third-party experts in our crisis response efforts can also instill confidence, and dampen the divisive effects of politically based championing and criticism inherent in government-only efforts. There are some who argue that private sector personnel must be held at arm’s length. In times of crisis, this presumptive disqualification is illogical and grossly suboptimal.
When calling on the private sector, governments must carefully identify people who will put societal interests first. But fear of those who might seek to profit from the country’s misfortune should not force the government to shy away from engaging the private sector. The current safeguards to prevent self-dealing are so stringent that those the public most needs in the game are kept on the sidelines. For example, owners of private biotech companies would have be required to sell their interests a discounted prices in order to join the Covid-19 fight. This divestment requirement may make sense for a long-term policy appointment but is absurd when lives are on the line and every moment counts. Subject to well-tailored ethical rules and clear disclosure of economic interests, governments should not be constrained in times of crisis in their ability to draw on the best of society.
It is beyond question that America’s—and the world’s—most important resource in responding to Covid-19 has been the United States’ robust, private pharmaceutical sector. Of course, this incorporation of private sector resources and expertise should have been brought to the rest of our response efforts, including testing and data gathering and analysis. And where is the public-private partnership in dealing with critical healthcare worker shortages? There should be no doubt in the authority to draw immediately on and fund industry efforts in similar circumstances. We all can agree that red tape should not cost time or lives in a time of crisis.
Modernize and Invest in Expert Agencies
Western governments should be making investments to ensure their expert agencies have the operational capacity to effectively respond to a crisis. In 1947, New York City vaccinated six million people against smallpox in less than a month, nearly 80% of the city’s population at the time. Now, more than a year after the first vaccine became available, less than 75% of New York City residents are fully vaccinated. We should have been able to do much better with the last mile of the distribution chain. Prior to the pandemic, we were not asking, “How fast can we deploy health solutions to the public at large?”
It is now obvious that, in our modern, globally integrated economy, effective crisis management requires having experts in supply chain management. The same can be said for information systems specialists. The better information decision makers have, the better decisions they tend to make. Our Covid-19 response has revealed substantial deficiencies in our collection and aggregation of health data.
Congress should be asking questions that get to the heart of these issues. Agency heads should have, or should have on their leadership teams, persons experienced in crisis management. Agency personnel should include those who are deeply familiar with current market and industry practice as well as women and men who have expertise in the most common tools needed in crisis response. Those experts need support and empowerment. Agencies should be encouraged to make clear, unambiguous recommendations as well as to take prompt action.
Coordinate Among Governmental Authorities
Crises generally have a broad impact, spanning the responsibilities, authorities, and expertise of various governmental bodies. Unfortunately, our federated model of governance has shortfalls when it comes to coordinating responses across authorities. Since we are not going to change the model (nor do we believe it should change), we must recognize this issue and ensure we have strong central leadership and pre-ordained coordinated mechanisms for crisis response.
Following the 9/11 attacks, the United States formed the Department of Homeland Security to facilitate anti-terrorism coordination across domestic law enforcement and various other agencies. In the wake of the global Financial Crisis, we formed the Financial Stability Oversight Council as a focal point among federal and state financial regulators. With hindsight, communication and coordination were found to be lacking.
These groups engage in scenario planning and tabletop exercises to examine hypothetical crises. Such exercises are invaluable. They demonstrate quickly that coordination is essential, reducing the risk of turf wars and other insular behavior. They cause authorities to examine their function, and judge their performance, as part of a larger effort. Perhaps most importantly, they build trust. If governmental bodies do not demonstrate trust for each other in times of stress, how can the public be expected to trust the government?
We are not advocating for another agency in the aftermath of Covid-19. What is more important is to recognize the need to develop communication channels and coordination protocols ahead of a crisis. If crisis preparation efforts are largely isolated, they likely are of limited value.
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It should not be acceptable to learn only narrow lessons from events like the pandemic, or to adjust our approach only after crises occur. Our leaders must take a more general and proactive approach to risk management and crisis response, investing in operational capacity and expertise in the public sector, developing deeper and more effective ties across the private and public sector and rigorously and regularly assessing governmental preparedness. Or, to put it plainly, our leaders must demonstrate that we have enhanced our fire prevention, improved our fire departments and, when that’s not enough, have systems and processes in place to ensure that better fire insurance is available and adopted.
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