Coronavirus pandemic is showing that strong central governments are as important as strong markets

Consider what Fareed Zakaria wrote this week, in the Washington Post, about the American government and its poor performance in controlling the Coronavirus outbreak.

“The United States is paying the price today for decades of defunding government, politicizing independent agencies, fetishizing local control, and demeaning and disparaging government workers and bureaucrats.”

The weakness of US governance is being exposed, in comparison to the likes of South Korea, Taiwan, and Germany, which enjoy “governments that are well-funded, efficient and responsive.”

For a foreign observer, this is not unexpected.

And it’s not just an issue involving President Trump’s administration and its many blunders regarding the EPA and other state agencies. It’s something deeper, that goes to the American penchant for economic libertarianism.

Libertarian economics has been good for American economic growth during past decades: low taxes, small government and little to no regulation have attracted capital and powered investments, and generated jobs and economic growth and wealth.

But it has also impoverished America: libertarian economics has fueled speculation and instability; it has hampered the creation of a decent healthcare system; it has ruined the possibility of a social insurance system; it has led to extreme social inequality and has favored the creation of parasitic economic sectors.

And it has also led to strange side-effects that conservatives and libertarians are now downplaying.

Think for instance in the massive move of American companies for China and Asia, during the last decades.

This movement is now seen as tragic by many westerners, which is not the right way of looking at it. But let’s pretend that yes, that the offshoring and outsourcing of western industries to Asia have been a tragedy for the West, and that it should not have happened.

And let’s also ask the fateful question: Why did it happened? How to explain it?

The answer is rather obvious. It happened because of deregulation, free-market ideology and the shift to shareholder primacy. In other words: it is an outcome of the libertarian thinking.

If you are in doubt, consider the moment it all began: the 1980s, when Ronald Reagan was the American president, when Margaret Thatcher came to power in England, and when they and other libertarians led a push for more laissez-faire economics with the active ideological support of pro-libertarian economists like Milton Friedman.

In other words: the industrial move to Asia is largely the result of Western libertarian economics and libertarian thinking.

It’s the continuation of unexpected and unintended events brought by libertarian moves, along the last centuries. We should not forget that libertarian economics is just the modern formulation of the laissez-faire economics and the assumption of the historical mechanisms that brought humanity to the present.

Past big plans – those associated to Nazism or Stalinism, or even other more specific economic plans like the Plan Marshal – have always been short in scope or in space. Our civilization is mostly the result of unplanned interactions, powered by collective ideas and self-interest.

Somehow humans have replicated nature, and its evolutionary mechanisms: no big plans, no watchmaker.

But we can’t continue to follow the paths of our ancestors (and nature).

If we want to survive and avoid climate change and halt epidemics like Coronavirus, we need strong governments, cooperating with each other at a global scale. And we need strong global institutions. Not just strong markets.

The widespread idea, especially common in the US, that state structures and bodies are inherently bureaucratic and inefficient, isn’t simply true.

What’s true, about states but also about large administrative and business bodies, is that to be efficient they need proper challenges, controls and leadership. Without these features, yes, they in fact tend to inefficiency, abuses of power or opportunism.

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