The Effects of Pandemics on Trade and Private Property
Trust is a crucial ingredient for economic growth and innovation. Without the engine of trust fueling, the free flow of ideas innovation would come to a scurrying halt. Before people can cooperate in business and research, they must harvest an environment that cultivates trust. Through the cross fertilization of different viewpoints, we reap the fruits of innovation. Silicon Valley, Hollywood, and Wall Street would not exist if creative minds were unwilling to share ideas. Due to the seminal role of trust in stimulating innovation, we ought to be contemplating the propensity of covid-19 to slow the progress of innovation by impeding trust.
A stronger radius of trust enables a wider diffusion of ideas, but as research reveals the intensity of diseases adversely affects the capacity for large-scale trust by limiting social networks. Deciding to only trust family and close friends narrows the scope for innovation. As Mark Granovetter argues in a landmark paper most opportunities are available to us because of the strength of weak ties. Family and friends have access to similar information, whereas strangers offer new insights. However, the broad networks required to sustain innovation diminish in infectious environments.
Usually, the journey to unleashing innovation necessitates traveling, but in the context of a pandemic like covid-19, people are hesitant to travel, even when failure to do so can deprive them of possible opportunities. Of course, meetings are facilitated by technology, but physical interactions create a more fertile ground for intimate connections that could lead to breakthroughs. A compelling piece by Carl Benedikt Frey published in the Sloan Management Review suggests that online meetings cannot replace the dynamism of physical engagement as a catalyst for innovation. Frey writes, “And while it is true that the web, together with technologies like Zoom and Slack, helps to explain the growing geographical distance between coapplicants on patents even before the pandemic, collaborators have to meet somewhere to build a relationship and generate new ideas in the first place…. Studies show that many new ideas and projects are launched by people meeting at conferences.”
Innovation thrives in social environments, however, since the advent of covid-19 the message of social distancing has been penetrating the atmosphere. Although, promoted as a mechanism to avert fatalities, by minimizing social interactions social distancing hampers innovation. Prior to covid-19 engaging strangers in small talk that led to business collaborations was the norm, yet today we are discouraged from socializing. Under the present regime citizens are earnestly encouraged to express greater clannishness by avoiding strangers to forestall the spread of covid-19.
Employing social distancing to reduce transmissions seems like a laudable goal, but it undermines generalized trust. Generalized trust suggests that we approach people impartially as individuals. Though, today unfortunately, the assumption is to treat the people we meet as potential transmitters of covid-19. Covid-19 is depicted as the world’s most serious issue, so in the short-term containing the disease appears to be a suitable strategy, yet in the long-term we will struggle to rebuild generalized trust.
It will be challenging to alter the legacy of asociality embedded by covid-19. History demonstrates that pandemics impose a long-term imprint on culture and institutions. According to the account of researchers in the paper, “COVID-19 and Development: Lesson from Historical Pandemics,” punitive approaches instituted to confront the perils of covid-19 will be achieved at the expense of social capital and by extension impede long-run development. Using the example of the Black Death they submit that pandemics foment mistrust and intensify social conflicts. Quite appropriately they outline actions pursued by governments that foment mistrust. These factors include:
Propaganda: "Propaganda that exaggerates the severity of the pandemic and media censorship that forbids free discussion of the pandemic." According to Democracy under Lockdown by Freedom House, ninety-one countries experienced new or increased media restrictions on their news media as a result of the outbreak.
Seclusion policies: This has enabled domestic agents to suppress free competition by exerting political influence in opposing the building of strong institutions and developed financial markets.
Deterioration of institutions: In relation to institutions, objections have been raised concerning the flagrant abuse of electoral rules and an upsurge in police violence.
Imposition of travel restrictions: In the report of "COVID-19 and Human Rights: We are all in this together," the United Nations acknowledges that restricting freedom of movement is a practical and necessary measure to stop virus transmission, but also cautions that such restriction should be proportionate and nondiscriminatory given that effective testing, tracing, and targeted quarantine measures are available.
Violations of privacy: In some countries, the personal information of individuals who are tested positive for coronavirus is disclosed in public media including surname, nationality, place of work, home address, hospital, location history, close contacts, and the relationships between them. Sometimes, similar information on their immediate family members is also released. This leaves people who fall sick with covid-19 vulnerable to discrimination.
These findings are consistent with the results of a 2020 paper published in Health Economics articulating how the long-term effects of the Spanish flu negatively affected economic growth and its implications for development. Also insufficiently explored is the impact of the pandemic on civic life. Social groups engage in a wide array of philanthropic and professional pursuits. Many of their engagements entail direct interactions and cannot be conducted online. For instance, it is more effective to mentor students in person, especially when beneficiaries reside in areas with low levels of internet penetration. Invariably, then covid-19 strips the disenfranchised of necessary social capital to achieve upward mobility.
In sum, measures to halt the proliferation of covid-19 may seem plausible in policy circles, however they portend adverse long-term consequences for the development of trust and innovation. But if logic prevails, maybe politicians will appreciate that the costs of anticovid policies outweigh the benefits.