How should we build back? A way to economic recovery

How should we build back? A way to economic recovery

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After 18 months of the global COVID-19 pandemic, we now know that the latest coronavirus, SARS CoV-2, will not go away. It will continue as endemic, giving those who have developed immunity (from the disease or the vaccination) milder forms of the disease, much like the seasonal influenza. The pandemic killed over 4 million people and made close to 220 million ill. Most of those who got infected have recovered.

But the pandemic – and the measures taken by many governments to combat it – also devastated businesses and killed jobs, shrinking economies worldwide. For businesses, jobs, and economies to recover, economic growth is required.  As Joe Oliver observes in a recent Financial Post column, this fact is ignored by the Canadian government that has declared it is building back the economy (“better,” in its view) by increased public spending. Yet, increased spending under this government has led to average per capita economic decline in the last five years.

The Canadian government is not alone in believing that it should play a major role in combating the pandemic and building the economy back. The Biden Administration plans to spend trillions of dollars on social programs in the U.S., which has led to predictions of sharply slowing economic growth. Australia and New Zealand have resorted to strict economic lockdowns and border closures in a vain attempt to eradicate the coronavirus on their shores, with economists predicting weak economic growth as a consequence.

This pandemic has brought into sharp focus the inability of governments to perform their proper role – protecting their citizens’ individual rights to life, liberty, and property – both during and after the pandemic. Instead, many governments have violated rights by restricting constitutional freedoms, and then by trying to “stimulate” the economy by massive spending.

The pandemic has shown clearly that the classical economist Jean-Baptiste Say was right (and John Maynard Keynes was wrong): consumption does not drive economic growth – production does.

Governments hamstrung production by imposing either complete lockdowns on businesses or severe restrictions on their operations. These led to job losses and business closures or bankruptcies. At the same time, governments handed out welfare checks (drawn from taxes on previous production, from debt, or worse, by arbitrarily printing money).

During the pandemic, it was businesses that developed and manufactured vaccines, tests, protective equipment, and treatments (as I have written before, here). They also adapted their operations (think of rapid testing to keep everyone safe), supply chains (we never lacked food, or toilet paper, despite of initial hoarding) and delivery models (think of restaurants and telehealth) to keep providing us the goods and services our lives and wellbeing depend on.

Companies did this, not motivated by altruism to help others for free, but because they wanted to survive and maximize their profits. They knew that if they did not deliver what their customers needed and wanted and produce that profitably, they could not survive, and their owners could not earn the best possible return on their investment. Company executives were held accountable by the markets for their products and for capital.

Governments, on the other hand, don’t have that kind of accountability. (Yes, there are elections, but relatively infrequently, and voters often forget political mismanagement). Many political leaders and bureaucrats were caught completely unprepared (which is typically the case when any crisis hits – consider the recent exit from Afghanistan and the devastation it has caused), despite their assurances to the contrary. They didn’t want to believe that the pandemic was serious and told us so.

The politicians’ responses have varied by country, but in general they were incoherent mixes of travel bans, lockdowns, mask mandates, and government control of Covid test development or vaccine manufacturing). They were often designed to signal that the government was “doing something,” while ignoring the crucial principle of individual rights.

If we want to build economies back for continual growth and prosperity, we need the government to unchain businesses and set them free to produce again. Private businesses should be free to decide how to produce, including how to protect their employees and customers against the endemic coronavirus (and against future pandemics).

The government must step back to its proper role of protecting individual rights (primarily through the law courts and the police) and thus deter businesses from and punish for any violations of rights to life, liberty, and property. That, and the power of markets to hold businesses accountable, is a powerful incentive for them to maximize profits ethically, in win-win trades with its customers, employees, and other suppliers.

Photo by Laurenz Heymann on Unsplash

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One Response

  1. And many voters who do wake up are loose cannons – recall the organizer of a convoy of trucks from Alberta to Ottawa had to tell some yahoos to stay out of the effort (rebels without a clue). Some think like a two-year-old-with-hammer: action without purpose (a three-year-old understands purpose in the short term but does not integrate, such as thinking ahead about how to get home from their jaunt).

    Emotions are the method of knowledge of many voters, not facts and logic to further sound values for human life. So they fall for the lie of mis-using the term ‘science’ and bow to supposed authorities who behave like priests (not to be questionned, Stalin forbid questioning Lysenko’s bizarre botany despite it not working in a country short of food, he starved the most productive farmers in the USSR because they were indepependent of mind).

    It will be another ‘interesting’ election, may well be another instance of lesser parties determining an outcome of minority government – Singh comes across well to many people but perhaps not to rich socialists smart enough to recognize he will tax them, the People’s Party is outstanding in clarity of communication but its policies vary in quality (it will be attractive in Alberta and Saskatchewan because O’Toole panders to climate catastrophists – who Joe Oliver infers are right).

    As for the SARS2 panicdemic, it’s been a saga of failure to think clearly about risk and probability, and pandering to emotionalists instead of integrating (which would consider all factors, notably collateral damage). Most governments failed to shield the truly vulnerable. (A few care residence chains saw the inevitable threat looming so took early action with focus, as did Florida, but some officals even downplayed the threat then later deliberately exaggerated it to increase fear.) Governments couldn’t even communicate clearly, just babbled statistics and their precious ‘modelling’ which once again proved not to work at all. (Health is not the only area of failure to communicate and failure to function properly, in my direct experience.)

    Dear departed Norma liked to say that if the average housewide understood the impact on the family’s budget they’d be rioting in the street. (She wouldn’t, being objecctive she believed in defending individuals against initiation of force, the method that enables food and shelter – while ‘jefe’ Trudeau praised a lying killing hypocritical dictator.) Government profligacy will probably put many older people in the poor house by causing inflation, as happend in the 1970s and 80s.

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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.

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