Far too many people have spent their leisure time watching post-apocalyptic television shows. At the first sign of trouble they all immediately went shopping. I always imagined that having a stock of ammunition and Krugerrands would be essential for the end of days. But no. Toilet paper.
Without wanting to downplay the seriousness of the medical crisis facing the world it is important to talk about the broader implications of the crisis. A lot of people are using the opportunity to peddle their pet hobby horses.
No. This is not the end of globalisation. Nor should it be. Some are making mischief by pointing to the medical epicentre being in China. Irrespective of what one may think of the Chinese government, there is no justification for racist outbursts against the Chinese people. Oppressive government is a human rights tragedy and the Chinese people are victims too.
The medical crisis does not demonstrate that free trade, open capital accounts and liberal immigration policies are a mistake. People taking to social media to suggest that closed economies could have better protected themselves are plain wrong. The fact of the matter is that toilet paper is manufactured in Australia. I have yet to see a shortage of imported manufactured goods.
The arguments for free trade remain as strong today as they did last year. The notion of comparative advantage is just as true today as it was in the 19th century. Australia exports agricultural goods, minerals and services to the rest of the world in return for manufactured goods. Think of our education exports – we charge foreigners top dollar to sit in classes that we would be offering to Australian kids anyway. We sell coal and iron ore that we could never use ourselves to foreigners – again charging top dollar.
In return we enjoy one of the highest living standards in the world. Ever-increasing leisure time with varied entertainment. Trade has made us rich. Those riches allow us to spend more money of our own health and well-being. Yes the COVID-19 virus targets the elderly and immuno-compromised. Large numbers of such people are sustained by our wealth. Poorer societies tend to have fewer such individuals.
Arguments that the crisis demonstrates that “we have become too reliant on China” are just silly. Any trading entity is reliant upon having paying customers. This is a criticism that has especially been levelled at universities. Usually by the same people who otherwise complain that universities are too reliant on government and should be more market orientated and business-like. Intellectual consistency is often in short supply. Having paying customers is always a good thing.
Hand in hand with anti-globalisation arguments is a call for greater government intervention in the economy and across society. The “strong-man takes charge” theory of government has been a poor investment throughout human history. Yes, the Australian government was slow to respond to the emerging crisis. This is a feature of liberal democracy, not a bug.
Ironically, once government started seriously responding, panic levels increased. People seem to think that government has better information and greater knowledge and understanding than everyone else does. Sometimes, but not normally in an open democratic society. Scott Morrison telling everyone to stop hoarding was good advice. Supermarket chiefs telling us for days before that was good advice too.
If this isn’t a story about free trade being risky, what does the crisis tell us? Seems to me that there is a profound trust problem in our society. Many people do not trust that the free market is resilient enough to provide for their needs in a time of crisis. People also do not trust politicians and other leaders in civil society when they urge calm. It is something of a paradox that many of those same people want “strong government”, while not trusting the government they already have.
There is a fragility that underpins our prosperity. Maybe because elites have spent the past 10 years or so bagging the business sector. Non-stop criticism of business as being monopolists, profiteers, crooks, tax-evaders and the like have all paid off. We have become seduced by prosperity. However many years of GDP growth have come to mean that there is no level of red tape, or green tape, or taxation that the economy cannot bear.
So this time lets be smarter than what we were after the GFC. This is not an economic crisis per se, but let’s use the opportunity to be thankful that we are very wealthy, and reflect on why we are wealthy. More importantly, let’s stay wealthy.