S. George Marano

Lessons from coronavirus pandemic will show that our economic models are deeply flawed

The Ricardian theory of comparative advantage, neoliberalism and location economics encouraged the outsourcing model and the pursuit of profit at the expense of attention to risk

Possible shortages in vital commodities, such as medicine, during the coronavirus pandemic call these policies into question

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A staff member arranges masks at a medical equipment company in Suining, in southwest China’s Sichuan province, on March 6. China has stepped up the production of masks amid a global shortage. Photo: Xinhua

S. George Marano

Published: 4:00pm, 1 Apr 2020Updated: 10:18pm, 1 Apr 2020

When the coronavirus pandemic is all done and dusted, one of the lessons learned will be the fragility of our global trading system. As the pandemic unfolds, nations will have to seriously reflect on their adopted economic models. Our current economic orthodoxy has encouraged a dispersed trading system that is built on an excess of opportunism at the expense of attention to risk.

The validity of these models, which are currently showing signs of system failure, should be reassessed. While what’s unfolding will not be the death of the global trading order, the butterfly effect can now be considered a defect.

The coronavirus, which was first reported in Wuhan, China, has now spread to over 170 countries due to the mass movement of people across borders. The ensuing panic has led to the spread of misinformation and, in some case, the beginnings of a breakdown in social order, with the weaknesses of Western countries clear for all to see.

For the governments of countries in which populations are susceptible to misinformation and panic, and which may face shortages, the threat to national stability is very real. Though the virus is discriminatory in nature, effecting mainly the very sick and elderly, it has put the world on notice. We have to acknowledge our system is fragile and too prone to risk.

Our global trading order is predicated on the Ricardian theory of comparative advantage, whereby countries should specialise in producing goods that they have a comparative advantage in; neoliberalism, which emphasises the value of free-market competition and minimal state intervention; and location economics, which answers questions of which economic activities are located where and why.

Additionally, the fetishisation of total shareholder returns, along with a multitude of other economic theories, have promoted the offshoring model, which excessively prioritised opportunism over risk in the pursuit of resource efficiency and profit.