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Israel Toughens Lockdown Measures As Coronavirus Cases Rise

Finance

Israel shows the way to build government efficiency over time

Published 26 March 2021 in Finance

At the peak of the COVID-19 pandemic, when the vaccine was not yet available and the number of infections and casualties was counted by the thousands around the world, some countries were featured as role models of good policies and performance. Singapore, New Zealand, South Korea, Portugal – by means of sometimes weak, sometimes severe lockdowns, contact tracing and health measures – were showing the way to the world.

Some of the countries that coped with the pandemic well at the beginning have now suffered terrible second and third waves. The good performers that have been able to sustain their success are either small countries (Singapore) or countries with geographical configurations (islands such as Taiwan and New Zealand) that made it easy to limit the rate of infection.

From an economic standpoint, countries such as the United States, China and Germany also implemented very successful policies that resulted in less-than-expected recessions. These policies involved financial assistance to individuals and small businesses through monetary transfers. After that, their approach, consisting of a combination of economic support, and fiscal and monetary policies, has been replicated everywhere. The International Monetary Fund has shown in its latest Economic Outlook for 2020 and 2021 that the economies that will suffer the least from the crisis come from two groups: either large economies with resilience to economic cycles (the United States, for example), or countries with a solid financial position pre-crisis (Switzerland or Singapore).

In the current stage of the crisis, and with available vaccines, it is the quality of governments and their policies that is determining which countries immunize populations faster The supply of vaccinations (both the number of providers and their manufacturing capacity) has in principle been able to satisfy the demand of most countries. The price of the vaccine was low enough to be financially sensible to invest as much as necessary in their purchase, at least in developed economies. The ability to vaccinate fast and to as many people as possible has been essentially determined by the overall competitiveness of the country. I will spare the reader statistics about which country is doing better: these data change every day, and they are well documented here by the Financial Times.

Much has been written about the reasons why Israel tops the list of countries that have administered the vaccine to the highest percentage of their population. Its success has been attributed to the small size of the country, its experience in dealing with enemies (human or not), and the social discipline that has emerged from years of geopolitical conflict. Last, but definitely not least, the country paid more than any other to ensure a sufficient supply of vaccines for its population.

Israel also shows how building a sustainable model of competitiveness pays off when bad times come. Our research at IMD’s World Competitiveness Center sheds some light on which factors specifically have contributed to Israel’s speedy vaccination campaign.

Economic resilience

On a scale of 1 to 10, Israel receives a score of 6.88 in our indicator of “resilience of the economy” to economic cycles. By comparison, the scores of Brazil and Japan are 4.63 and 4.24 respectively. Other countries with successful vaccination campaigns, like USA and UK, score 7.13 and 6.15 respectively. Resilient countries build capabilities and accumulate resources in good times to use them during crises, they learn from past crises, and react quickly to them.

Social cohesion

Social cohesion and discipline have been arguments used to justify why some countries follow rules, while others do not. My previous article in I by IMD shows that culture has played a lesser role than a given country’s political system; in fact policies designed to reduce the damage of COVID have worked better in totalitarian regimes. In Israel, for example, our indicator of “social cohesion” ranks the country (35 out of 63 economies) worse than Japan (#17) and the United Kingdom (#27). The impact of the pandemic on a country—the infection rate—is much more closely correlated with how stringent lockdowns have been (the less democratic, the tougher the lockdown), and political freedom (the more freedom, the less successful policies have been).

Healthcare focus

Instead, it is the quality of the health system that matters. The vaccination campaign in Israel has been championed by its Health Maintenance Organizations (HMOs), of which there are four. Every Israeli is obliged to join one of them. Such a semi-private structure is extremely efficient. Israel does not rank even among the top 20 countries in health quality in our rankings—the government invests just $3,140 per capita on health, compared to $4,300 in the UK and $10,600 in the US). Instead, competition among HMOs has made it possible that, in the fight for new clients, each HMO has been fast at providing the vaccine before the next one. It is HMOs, not the government, that are leading the process.

Digital dominance

Additionally, the digital competitiveness of the country is shown in its management of health data through the HMOs themselves. They maintain detailed information about patients, allowing them to deliver direct messages to people so they get vaccinated. To someone living in Switzerland, for example, which has a high-cost non-centralized private healthcare system, such organization sounds like a chimera. In Switzerland, despite excellent digital infrastructure, the effective use of data is not widespread. For example, while we saw widespread popular acceptance of the SwissCovid tracking app, actual tracing of infections has been very disappointing. The success of some national health systems is not due to the private vs. public ownership (the good performance of the UK National Health System comes to mind), but to its use of data and technology.

While some have argued that impending Israeli elections have been a driving force in the rate of vaccination, this seems speculative. Surely we should have seen a similar urgency by politicians in Italy, Germany, and France, whose top leaders are all up for re-election in 2022.

 

Ultimately, what really set Israel apart was that it did not rely on the HMO system at a time when testing was the priority. By building the right partnership between the private and the public sector, the country will likely be the first democracy to consider itself free of coronavirus. This achievement is not the result of last-minute decisions, but the outcome of years of building a competitive economy. 

Authors

Arturo Bris - IMD Professor

Arturo Bris

Professor of Finance at IMD

Arturo Bris is Professor of Finance at IMD. Since January 2014 he is also leading the world-renowned IMD World Competitiveness Center. He is Program Director of the Navigating Fintech Innovation and Disruption program.

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