If you think this pandemic shows the limits of globalisation, think again

The flipside of becoming less reliant on foreign inputs is, of course, becoming more reliant on domestic ones.

In this crisis, for example, we faced lockdowns, business closures, and sick workers just like everybody else.

Four food factories had big Covid-19 outbreaks, requiring closures and reduced capacity. You probably didn’t notice, because our food supply is so incredibly diverse. But that strength in diversity holds for other industries too.

Economists have found, broadly, that trade diversification reduces GDP volatility, because “it reduces exposure to domestic shocks and allows countries to diversify the sources of demand and supply across countries”.

Government-mandated self-sufficiency would harm resilience by making us poorer too. Even if the Government just mandated that certain inputs for the NHS had to be made domestically, actively encouraging industries which we are relatively inefficient in would make the economy less productive overall. Insulating that capacity from foreign competition would create high-cost, lazy, bloated sectors.

A weaker economy means fewer public funds to deal with future shocks. The pandemic, as a global crisis, did throw up an unprecedented demand surge for medical resources. But it’s fashionable to claim that markets made this worse by embracing “just in time” efficiency, rather than “just in case” capacity.

Yet businesses have powerful profit incentives to ensure the integrity of their supply in new realities. It’s difficult to see why government officials are better placed to ensure “resilience” than markets adapting to new wants and needs.

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