Of O-Rings and quarantines

Dr Eric Crampton
18 August, 2020

Almost thirty years ago, economist Michael Kremer proposed a (then) new theory of economic development. It has always worried me a bit in relation to New Zealand. And it is a bit of a problem in New Zealand’s response to Covid-19.

Normally, economists will model things simply – simple models can explain rather a lot of the world. Production will be some function of the number of machines or capital goods available (and their quality), the number of workers available (and their skills) and the technological recipes meshing those together. Improvements or increases in any of those will lift the value of whatever is produced, but generally at a decreasing rate.

So far so good.

In some sectors, there is room for error. If the cleaners do a particularly bad job at the offices one week, it is hardly the end of the world. The office work is not much affected. But the exact same error in a hospital operating room, or in a tech lab’s clean room, would be a problem.

Kremer wondered what happens with a production system where, if any one part falls over, the whole thing falls apart.

He illustrated by example: a small defect in the Challenger space shuttle (the O-rings separating the rocket fuel from the hot gasses that could ignite them) proved disastrous.

In firms where every single part must work well, salaries are higher across the board. When no single element can fail, staff are paid enough to ensure nothing fails. Saving dollars an hour on paying the cleaners could cost rather more since the costs of failure are higher. The standard “she’ll be right” approach is not good enough in those cases.

This is Kremer’s O-Ring model of development. A lot of higher tech and higher value production requires getting the O-Rings right. Places unable to manage it, for whatever reason, are left behind.

This puts New Zealand in a difficult spot. Running a ship tight enough to get all the O-Rings right is a valuable skill – and one that pays rather more abroad than it does here because market size matters. The Productivity Commission in 2016 pointed to work suggesting managerial quality in New Zealand was roughly on par with that in Mexico, a bit behind Australia, and leagues behind Germany, Japan, and the United States.

Kiwis may be too accustomed to letting things fall over, even when they matter.

Now, let’s bring this all back to the border.

Anyone who stops to think about it for a minute must realise that is important to test workers who come into contact with travellers in the Managed Isolation and Quarantine (MIQ) system. Even the best protocols followed by diligent workers can slip. Frequent testing is a safeguard against that kind of slip.

While workers were regularly asked about symptoms, and were meant to be tested in cases of symptoms, forty percent of workers at the Jet Park quarantine hotel had never been tested. Jet Park is reserved for those arriving into the country who wind up testing positive for Covid-19. It is the highest risk place, and almost half of the staff at the facility had never been tested. And we know some cases can be asymptomatic.

As yet, nobody knows the source of the current outbreak. And that is part of the problem. If the Government were serious about managed isolation at the border, an audit trail of test results of all at-risk MIQ staff would quickly rule in, or out, those workers as the source. Weekly PCR tests would substantially reduce the number of infections before the source is found. That would drastically shorten the contact tracing time and increase the chances of containing an outbreak without a lockdown.

Alert Level 3 restrictions for Auckland cost about $440 million per week, according to ASB. That means it is worth spending up to $4.4 million on measures that reduce the likelihood of a week-long lockdown of a major city by even a single percentage point.

It is difficult to understand why testing all MIQ workers every week was not happening. It would easily have been worth the cost. And Finance Minister Grant Robertson said at Budget 2020 that every dollar necessary for the health response had been allocated. Money was ready for racetracks, but the Government nickel-and-dimed when testing border staff?

And why would the Government require visitors from Covid-free places, like Taiwan, to enter costly managed isolation while Kiwi MIQ workers in contact with visitors from high-risk places, like the US, were never even tested?

The public sector is adept at coming up with reasons for not doing something it does not wish to do. The civil servants will usually couch their reasons within whatever resonates with the popular mood.

Requiring workers to be tested might be too difficult if their employment contracts do not allow it.

Or they could frame a Covid test as a medical procedure and claim it is unethical to force anyone to undergo a medical procedure.

Or they could simply say requiring all at-risk staff be tested seems a bit harsh.

Those reasons are full of holes. Plenty of jobs require drug testing and travellers are already required to undergo testing. So it is a bit odd to argue that employees are exempt. Besides, lockdowns are far harsher on everyone than testing requirements.

But the even bigger problem is that a Public Health Order can mandate testing for anyone who has been in contact with arrivals in the MIQ system. This rule could have been made at any point. And it would have cut through all the usual public service objections.

Most obviously, the order could have been part of the Air Border Order decreed on 22 June. Section 7 of that order requires everyone arriving into New Zealand by air, barring a few exceptions, to submit to medical examination and testing. A subsection requiring regular testing of all those in regular contact with recent arrivals is an obvious addition.

But it could have come from an independent order as well.

On 14 August, the Minister of Health issued a Public Health Order requiring all MIQ workers, port employees or transport workers to present for Covid testing on or before Monday this week. The order was issued after the outbreak, too late to avoid the over a billion-dollar cost of Auckland’s second lockdown.

But there’s a second problem with this order. It provides no ongoing requirement for regular testing. It assumes MIQ workers stop being infectious on 18 August – in which case the border might as well be opened.

Less flippantly, the Government may be preparing a second Public Health Order to require ongoing testing. But it has not earned the benefit of the doubt and may well try to brazen its way through this with the current testing push.

What about Kremer’s O-Ring?

Managing the border well matters. Everything needs to work, with regular testing of staff to guard against any lapses.

When I was in primary school, the big TV was wheeled into the classroom so we could watch the first teacher sent into space. And then the O-ring failed. That failure was followed by investigations so it would not happen again. Stopping a repeat seemed to matter.

Today, the country is watching, in real time, spectacular, obvious, foreseeable failures that happen without consequence.

A layperson watching the shuttle launch would not expect the O-ring to fail – though experts had warned about it. But today, not only have experts like David Skegg warned about weak border processes, Kiwis more generally are astonished to find the country’s quarantine system does not regularly test at-risk staff.

It is the most obvious way a virus might escape into the community. Testing is relatively cheap. Everyone expected it was being done.

The MIQ system has capacity to test. On 8 July, Radio New Zealand reported 1641 people were tested the day before – far short of Minister of Health Chris Hipkins’ target of 4000 tests per day. The general view was that the public had become complacent and those testing numbers needed to rise. People were ready and waiting to perform tests, and labs were waiting to run the tests. So, where the hell were the staff most at-risk of catching Covid-19?

When the Government that chided every untested Kiwi with a sniffle was found to be even more complacent about its own testing, New Zealanders shrugged their shoulders.

Have Kiwis become so inured to failure – so complacent that things will somehow be right despite obvious dysfunction – that this kind of thing is okay?

Or is it that accountability is impossible during an election campaign where partisan exigencies dominate – and will dominate for another horrible month?

Or it could be even more dire. The alternatives might make things worse.

Being a nation capable of getting the O-Rings right matters during a crisis. It also matters in normal times when the failures are harder to see and are instead missed opportunities. Kiwis should expect better of themselves and of their Government.



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