De-globalization vs. global capitalism: Lessons from the pandemic

De-globalization vs. global capitalism: Lessons from the pandemic

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One of the consequences of the COVID-19 pandemic has been calls against globalization, particularly, global free trade, and for increased economic nationalism: government central planning for self-sufficiency in critical goods (such as food, medical supplies, and energy), and widespread supply management. (See articles in the National Post here and here).

Governments are heeding these calls. For example, the United States government has banned the export of health-care supplies and equipment that are needed to fight the pandemic. But such restrictions on global trade are harmful. Recognizing this, some companies have pushed back. 3M, the US multinational that makes the N95 and other masks, has warned that ceasing exports of all masks would invite retaliation from other countries and reduce the supply such masks in the United States.

One reason for commentators’ urging de-globalization is the role of China as the global manufacturing hub, including for drugs and medical equipment. As a recent National Post article by Terry Glavin reports, 97 percent of the antibiotics consumed in the United States and the vast majority of common painkillers and other drugs is sourced from China.

China also produces most of the ventilators and respirators in the world, as well as a half of medical masks. Shipments of these ended when the Chinese government imposed an export ban on all medical equipment after it had released the virus onto the world (by lying about it and thus preventing other countries from preparing appropriately). This, and the Chinese government’s entire authoritarian handling of the SARS-CoV-2, constitute the main lesson from this crisis, argues Glavin.

According to him, that main lesson is “that thriving liberal democracies cannot co-exist within a model of neo-liberal globalization that admits into its embrace such a tyrannical state-capitalist monstrosity as the People’s Republic of China.” Not seeing any other way to prevent or handle global pandemics such as COVID-19, Glavin blames globalization and predicts its ending in the aftermath of the current crisis.

Totalitarian dictatorships such as China pose a threat to freer countries in the world, and some de-globalization is likely as a consequence of the pandemic. But is the long-term decline of global free trade inevitable?  I argue: no.

Despite the draconian measures (such as indefinite shutdowns of economies with mind-blowing amounts of stimulus spending) many governments have taken in response to the pandemic and their greater future involvement in the economy now, there is an alternative lesson that can be drawn from the current crisis.

That lesson is the role global capitalism could play, both in preventing pandemics and in responding to them, should they occur.

Although the current pandemic has made the threat of dictatorships to human health and well-being clear, the positive role of capitalism is not well understood—because capitalism itself is mostly unknown (as Glavin’s characterization of China’ system as “a tyrannical state capitalism”—a contradiction in terms—indicates).

Defined by Ayn Rand as “a social system based on the recognition of individual rights, including property rights, in which all property is privately owned”, capitalism was most closely approximated in the 19th century America, a period of tremendous innovation and wealth creation. While there are no purely capitalist countries today, elements of capitalism exist in the politically and economically freest mixed economies, such as New Zealand, Switzerland, Hong Kong, and others (Human Freedom Index 2019).

Under capitalism, government’s sole role is to protect the individual rights of its citizens against the initiation of physical force and fraud. The government does not play a role in the economy: markets operate freely.

Hiding information about the new coronavirus and silencing those who were warning about it, as the Chinese government did, would not have been possible under capitalism with freedom of speech and a free press.

The response by private companies to produce needed supplies (test kits and medical supplies and equipment) to cope with the pandemic has been rapid and effective. (See my post on the South-Korean test kit developer Seegene). It reflects what is possible when individuals and markets are free, in contrast to the damaging delays caused by governments’ attempts to dictate what should be produced and by whom.

Yet, the world is unlikely to embrace capitalism after the crisis, as governments will try to orchestrate economic recovery through bailouts and stimulus spending. But if we want economic prosperity and human flourishing, we need to understand capitalism and advocate for it globally—and to shun countries like China that continue to violate individual rights.

 

Photo credit: Max Pixel

 

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.