June 28, 2020
The Washington Post ran a piece on how patterns of globalization may be changed due to the pandemic. It is more than a bit confused in not distinguishing short-term effects from long-term effects and its inability to distinguish between problems caused by fiscal policy and policies caused by the fallout from the pandemic.
The headline for the piece on the Post’s homepage is “Covid-19 is erasing decades of economic gains achieved through globalization.” The subhead is “The way we travel, work, consume, invest, interact, migrate, cooperate on global problems and pursue prosperity has likely been changed for years to come.”
Literally nothing in the piece supports the claim in the headline and insofar as items in the piece support the subhead it is at least as likely to be positive as negative. The gist of the piece is that we have seen a massive reduction in trade and travel as a result of the pandemic. While some of this may prove to be permanent, the piece gives us no reason to believe that the bulk of trade will not return to normal once the pandemic has been brought under control, either with effective treatments or with a vaccine.
In terms of travel, any enduring effect is likely to be largely positive. An enormous amount of resources is now wasted on business travel and conventions that can be just as effectively performed on-line. This realization will free up a large number of resources for more productive uses, such as health care, child care, and stopping global warming. Of course, less travel by itself will be a big help in reducing worldwide greenhouse gas emissions.
In addition, the increased use of telecommuting will allow tens of millions of people to avoid unnecessary trips to their offices, leading to both an enormous saving of both time and energy. This will also free up resources for more productive purposes. This change should also help reduce inequality since so much wealth and income that had been concentrated in major cities like New York and San Francisco will now be dispersed more widely across the country. There will undoubtedly be similar patterns in other countries.
At one point the piece warns of restrictions on foreign investment being considered in Italy and then offers the warning:
“The new restrictions have raised an alarm among Italian industrialists, who say their country’s long-stagnant economy will need more foreign capital, not less, to emerge from this crisis.”
While Italy does need more investment, the problem is that European leaders have chosen to limit the ability of eurozone countries like Italy to finance investment by running budget deficits. The problem here is that Europe’s leaders, most importantly the government of Germany, have insisted on policies to slow investment and growth, not an inherent lack of investment capital in Italy.
Incredibly, while the piece complains repeatedly about protectionism, it does not mention the most important forms of protectionism of all, patent and copyright monopolies. This is especially bizarre in the context of the pandemic since one of the big questions is whether any treatments or vaccines that are developed will be widely available or whether companies will use government-granted patent monopolies to charge high prices.
If China paves the way in developing a vaccine (it has as many vaccines in Phase III testing as the rest of the world combined) and carries through with its commitment to making any vaccine freely available to the whole world, then this will both be enormously important in and of itself, but also an incredibly valuable precedent. If a vaccine against the coronavirus can be distributed in a free market as a cheap generic, it is reasonable to ask why this should not be the case with all new drugs.
If this were to lead to new mechanisms for financing pharmaceutical research and a worldwide free market in prescription drugs, it would imply a huge increase in globalization and an enormous gain for developing countries. The gains would be even larger if we moved beyond patent monopoly financing of research in areas like medical equipment, pesticides and fertilizers, and software.
This sort of globalization would be bad news for many U.S. corporations and many highly paid employees of these corporations, which is perhaps why the Washington Post never talks about it. But if we want to seriously discuss prospects for the future in a post-pandemic world, moving beyond patent and copyright monopolies has to be on the agenda.