Everyone seems to have their own particular spin on coronavirus. Depending on who you listen to the disease has the potential to scupper Donald Trump’s election chances, shatter the Chinese people’s confidence in their government or hobble the Iranian regime.
Though each of those belongs in the realm of speculation, the short-term economic impact of the crisis, from disrupted supply chains to travel restrictions, now looks pretty clear – and the Treasury has already been forced to hastily rewrite next week’s Budget in the light of changed circumstances.
More worrying than the short-term shocks, however, is the suggestion that the outbreak will put the brakes on globalisation, interconnectedness and trade – and that some people think that is a good thing.
Take the recent piece from prominent author David Goodhart, who argues that the pandemic “illuminates a wider retreat from full-on free trade that has been gaining in support and legitimacy over recent years”. He goes on to say, among other things, that the UK should be producing more domestically in areas such as food and vaccines, to mitigate these kind of supply shocks. A similar sentiment has been voiced by the prominent Brexiteer, Rupert Lowe, who claims that the outbreak shows “the strategic error of relying too heavily on food imports”.
Beyond the practical difficulties of the UK growing enough food to feed 70 million people, the idea that this outbreak weakens the case for importing things seems very odd. If anything, a ‘hyper-globalised’ economy means consumers can access goods from a whole range of sources. If one area is disrupted, another can ramp up production to fill the gap.
By far the biggest failing of the economic nationalist narrative, however, is how much it underplays the benefits of openness and liberalisation: there is not a country in the world that has enriched itself by embracing protectionism or shutting itself off from international trade. The list of countries that have prospered by being more open, however, is very long indeed. And, as CapX contributor Ryan Bourne has noted elsewhere, it is the very prosperity engendered by trade that has given us the resources to fight this pandemic.
The idea that more trade has been bad for the West does not really stand up to scrutiny either. In the US, although some places have undoubtedly born the brunt of deindustrialisation, the American Dream is not nearly as dead as the likes of Bernie Sanders would have you believe. As Oliver Wiseman noted this week, between 1990 and 2016 incomes for the middle class rose 44% in real terms, and for those in the bottom fifth of the income distribution by 66%.
As I’ve written elsewhere, if American consumers are getting a raw deal, it’s not because of trade agreements, but the profusion of maddening bureaucracy which stifles innovation, restricts competition and offers a few big players enormous pricing power. Likewise, here in the UK the biggest pressure on British budgets is the high cost of housing, which has very little to do with our openness to imports.
All in all, the evidence for the benefits of trade and connectedness are overwhelming. For the sake of our long-term prosperity, both in the UK and elsewhere, we must not allow coronavirus to embolden the forces of economic reaction.
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