Statue of Adam Smith on the Royal Mile in Edinburgh, and by Edinburgh-born artist Alexander Stoddart – it was unveiled in 2008.
It took a while for British critics of free markets to start taking the virus sweeping the globe seriously. Once they realised, we began to hear that coronavirus would mean the end for globalism and the market economy, and usher in a new age of Big State control.
That is a lazy take. This pandemic proves that we need markets and globalisation more than ever before.
Covid-19 demonstrates the power of global networks to deliver. Countries today are highly interdependent, and much wealthier as a result. As the world has shut down, we’re seeing in real time how much poorer we’re becoming in isolation.
But in times of trouble, we can still use our global links, and the effects are amazing. One country alone could not manufacture all the materials we now need or innovate to create the vaccine that will ultimately save us from this nightmare. Doctors in ICUs across the world are connecting to one another via WhatsApp. Over 14,000 engineers are in a single Slack transforming knowledge of how to manufacture respirators and ventilators in record time. Biohackers are teaming up online to develop vaccine and testing ideas at a speed we’ve never seen before.
And the power of globalisation in fighting Covid-19 goes beyond healthcare front lines. As more and more of the world moves into lockdown, as we face labour shortages in our fields and our factories, we’re going to rely more heavily on imports. Trade must be as easy as possible. Our resilience rests on our ability to connect to those we need.
Free markets are helping on a domestic front too. One of the success stories of this crisis so far has been the ability of British companies to adapt. Wholesalers have used Instagram to connect with customers stuck at home as their restaurant trade dries up, securing jobs and avoiding food waste in the process. Supermarkets and delivery firms have reached out to workers laid off in sectors that have been shut down, and turbocharged their hiring processes.
Businesses are changing their models to suit the needs of the moment. As the government has made the biggest interventions into the economy ever seen in peacetime, businesses have responded with impressive flexibility.
The Big State advocates would do well to contrast the work of business with the top-down, centralised approach of Public Health England (PHE) on testing Covid-19 cases. The government body that usually lectures us about the amount of sugar in our fizzy drinks is also in charge of pandemic response. Its officials have had about as bad a war as could be imagined so far.
As the Adam Smith Institute’s report just over a week ago found, a centralising instinct meant that at first PHE didn’t even use NHS labs to test for Covid-19. It rebuffed offers from private and university labs that offered to help. In contrast, Germany and South Korea – countries held up for their widespread testing regimes – myriad small private labs ramped up testing to a world-leading level. And after a rocky start, in America the federal Centers for Disease Control relinquished control. Test rates duly rocketed.
PHE displayed completely the wrong sort of attitude to markets, and we are all suffering the consequences now. We’ll suffer even more if politicians take the same view of private business and free markets at the end of the crisis.
Because the fundamental truth is that free markets and global trade will be essential to get us back on track when this is finally over.
While we’re trying to hold everything in place to help the public health crisis, real costs are accruing in the real economy. An economic depression is a real and present danger. Jobs are being lost, debt is spiralling, almost every sector is suffering. At this critical moment, some are calling for yet more state control to rebuild the fractured post-Covid economy.
But the solution will not be Whitehall bureaucrats attempting to do everything themselves – as PHE did with testing. The flexibility required will only be provided by a varied and competitive system: the private sector.
Our country has a good shot at coming out of this well thanks to some key fundamentals: our supply chains have made themselves lean and responsive ahead of time thanks to the disruption of Brexit; our labour laws are flexible; it’s easy to set up a business; it’s relatively straightforward to access finance.
But Britain still puts too much pressure on companies, both with high taxes and with regulation that defines what is possible before you even start to innovate. We make it far too hard for companies to get the talent they need from wherever in the world. We tax investment from companies that could boost Britain’s growth potential.
The government wisely cut red tape to let businesses react quickly to this crisis. It is vital that this stays cut. Corporation taxes, taxes on hiring people, taxes on investment – all will need to be slashed to boost growth, along with regulations that strangle progress and trading restrictions that shut us off from the rest of the world.
We’ve seen what’s possible when the government says: “go for it, you can produce goods in times of need, you can operate a business from home, you can sell direct to customers, you can deliver goods, you can proffer services simply and directly”.
When we’re finally allowed out of our homes, when we’re able to rebuild our business, when we meet again, we must remember that lesson. Free markets at home and abroad are getting us through this crisis – and only free markets can help us recover after it.
Matt Kilcoyne is Deputy Director of the Adam Smith Institute.