Getting through the Covid-19 pandemic will require markets as well as strong government
Covid-19 is a major shock to our system. With the UK speeding towards lockdown and much of Europe in similar or worse straits, this crisis — as with most crises — is causing people to look to their governments.
This is both understandable and necessary. Rishi Sunak’s excellent pledges (and performances) last week reassured tens of millions of households, at a time when many are worried about what the next few months will bring. With more essential support in the pipeline, including for the self-employed, it is clear the government is not shying away from intervening — nor should it.
But while government action is required, markets also have a crucial part to play.
Consider the food distribution system we all rely on. The decentralised market mechanism, which gives us access to all the food we need and with more choice and at a lower cost than ever, is coping fairly well, despite huge surges in demand.
Beyond occasional Twitter pictures of missing toilet rolls on shelves, most people are getting what they need despite a major increase in food purchases.
The UK has spent an extra £1bn on groceries in the last month of covid-19 stockpiling, and we are yet to hit major shortages, even if sometimes the shelves are emptied quicker than they can be refilled.
Retailers are also acting to stop damaging stockpiling by themselves, limiting key purchases to a reasonable number of items each.
Tesco is managing this by hiring 20,000 workers to distribute food both in stores and online, as are almost all the other major retailers. Some people are being processed so fast they apply for a job and start working on the same day. Apps and online systems are being redesigned at breakneck speed to support this.
The flexibility of the market and the private sector, driven by incentives and adjusting constantly to new information, provides this. The fact that those working in food retail have been designated “key workers” is a reminder that the private sector is crucial in getting through this time.
Even social distancing is made easier by capitalism. Technology companies are improving their apps and coping with unprecedented usage, and the reduction in face to face interaction will be infinitely more bearable due to the apps, streaming and broadband services most households enjoy. Not to mention the plethora of TV, films, online learning, video-games, and more that we now have at our fingertips.
It is more than just Sunak’s big financial bazooka which is getting us through this. Markets are by their nature more hidden than government, but they are fantastic providers and flexible operators. They will be incredibly necessary to adjust to the post Covid-19 world.
No central planner will know which sectors will flourish and which will not. This uncertainty is the reason that we have a welfare system, people have savings, and why we need to build up ownership and other sources of wealth and support.
Successful government and markets work with, not against, one another. The post-coronavirus world may change in many ways, but if there is one thing we must not lose, it is this partnership between markets and government.
In the chancellor’s words, Covid-19 is first and foremost a public health emergency. This is not a crisis of capitalism — or of governments.
Those who seek to claim that the only way forward is more government — both now and in the future — are ignoring the reality on the ground, and risk damaging our society’s ability to get back on track after the worst of this passes.
Callum Price is head of external affairs at the Centre for Policy Studies.