The medical crisis created by COVID-19 is creating pressure for countries to move toward isolationism, including restricting the export of medical supplies and other materials. But Chicago Booth’s Raghuram G. Rajan points out that the novel coronavirus is a global problem, and that solving it will require international cooperation.
What have policy makers gotten right this time?
As they’ve become aware of the size of the problem, they certainly have reacted on the medical side by trying to bring more resources to bear; on the financial side, by flooding the markets with liquidity; and on the fiscal side, by making direct transfers to households in many countries, postponing tax payments, and also trying to make loans to small and medium-sized enterprises, as well as some large enterprises, to make sure that they can survive.
So, all this, with varying degrees of competence, has been achieved by governments across the world. That’s good.
What they haven’t gotten right, of course, is seeing the magnitude of the problem early enough. Western democracies perhaps were a little complacent that it wouldn’t reach their shores and took time to react.
But also, one of the things that’s really missing this time is any sense of international cooperation. Countries are putting bans on medical supplies and medical equipment leaving their countries, which is sort of natural, but is also self-defeating at the global level, because really, to kill this virus internationally, you have to kill it everywhere. Otherwise, it comes back to infect you in the second and third waves—unless you can completely shut your borders, which is really impossible in this world.
I think the question that we will have to address is, in this integrated world, are we going to go at it alone?
There is going to be a lot more pressure within countries to bring more resources into the country. When countries put bans on medicines going out, obviously every country then wants to make sure that the basic medicines it needs are produced internally. When countries put bans on ventilators being exported or even food being exported at times like this, it’s every country for itself. So there is going to be pressure for more isolationism, and more pressure on trade for that reason.
At the same time, one can’t help but think that this is a global crisis, and we must be aware that we live on this one planet, where this crisis can come back to hit us from anywhere, and it isn’t resolved until it’s resolved everywhere, which then means that we have to work together.
There is an impetus for global cooperation to make sure that the poor countries in Africa have a way of dealing with the problem even as the rich countries deal with it themselves.
So I do believe that we will see some impetus for stronger global institutions, especially to deal with this kind of problem—and also, incidentally, to start the process of dealing with climate change, because I think this will increase the awareness of globally sized problems that we may have to deal with, certainly in the next few decades.