Project Syndicate (USA): restart strategies to combat the pandemic in the United States

New York- a Strategy to combat сovid-19 in the United States, or rather, her sad lack, it is easy to criticize. Denial, procrastination, the political chopping, a system error — all this has led to more than 100 thousand deaths in the United States and deepened the social and economic crisis. Since March, more than 40 million workers, one in four people applied for unemployment benefits. And now the Americans say that their country, although it is not ready hastily to return to “normality”.

Error American pandemic action explained not only the current hyperpartisan policy. The American roots of this catastrophe lie very deep.

Let’s explain a significant part of the blame is deserved to party: the Democrats (despite Republican opposition) are trying to patch up a worn-out system of social protection in the United States with direct support of the unemployed, the poor, people suffering from diseases and other vulnerable groups. But the Democrats also abstained from calling for the US government managing (and paying) work in the private sector to produce socially needed goods and services that the market itself cannot and will not deliver.

The statement that the state should be require “provision of goods”, immediately bring to mind about the leaders of the Soviet planned economy, which decide what kind of shoes should make, what style, shape and even size. The government, of course, should not interfere in this way in market decisions about private goods. Such actions only lead to artificial shortages, typical of a command economy. However, in a capitalist economy the government also played a direct role in the provision of certain goods and services.

Public goods, e.g. national defence, clearly must provide the government. Moreover, the US defense goods not actually produced by the public sector; the government charges to do this to the private sector. Not to say that American law “On defense production” (DPA) of 1950, a model for which was the law “On military authority,” granted to President Franklin Roosevelt vast powers to control the American economy during world war II, is very rare. Annually in the framework of the law the DPA the army is placing about 300 of the thousands of orders and when President Donald trump, the practice continues.

But trump doesn’t want to rely on the DPA law to combat covid-19. This law applied only in a few cases, for example, to force 3M to prioritize the orders of the US government on the front of the N95 mask and ban this company to export, or to force the company General Motors (GM) to produce artificial lung ventilation (ALV).

Methods of using the DPA law the property trump was also overly interventionist, and the interventionist enough. The administration has used its provisions, which provide her, we can say, hard command and operational control, and used the law against 3M and GM. The government ordered the private sector, what he should do.

It is much better to use the huge power of the state in the form of a mild command: the government creates private sector incentives to produce goods that are useful to society. For example, Germany has implemented safeguards public procurement within the framework of a broad package to support the economy. The goal was very clear: do not command German companies to produce medical materials and equipment, and to set the right incentives for them to do that.

This approach does not lead to a decrease in the natural of innovation activity of corporations and entrepreneurial ingenuity. We should all applaud the local plant of alcoholic beverages, which switched from the production of alcohol on sanitizer for owner, or manufacturer of coffee filters, who began to issue face masks. But it is obvious that left to itself the market will not produce a sufficient number of personal protective equipment, medical ventilators or therapeutic drugs. It does not guarantee universal vaccination, if and when the time comes.

The position of the US government is no worse than the German government. In accordance with section III of the law of the DPA, he has got the same tool: the guarantee of the Federal procurement. Failure to use these powers is the result of a dangerous ideological delusions.

Masks, resuscitators and vaccination are neither private nor public good. They are not like shoes: if a person prefers purple shoes huge size, it might offend the feelings of other people connected with the idea of fashion, but creates no other external effects — neither positive nor negative. And they are not like air (neizlechimoe public good, which has no competitors). Masks, resuscitators and vaccination is a social goods: provision benefits society, and governments are obliged without hesitation to ensure their adequate delivery.

In most cases, requires strong governmental incentives for the private sector provided these social benefits. The struggle covid-19 is not the only example. The same can be said about the technologies to mitigate or adapt to climate change is another systemic problem that the private sector alone will not decide in the interests of all.

Comes it about the problem covid-19 or climate change, voluntary corporate activities and charity will not be able to solve them. To take full advantage of the power of the glorious dynamism of the private sector of America, you will need to use the power of the Federal government for directing private capital and energy to support the enormous social business.

The struggle of the U.S. Federal government with covid-19 is a series of missed opportunities, starting with the failure of adequate preparation for the detection of cases and containment of the pandemic and ending with the easing of its economic consequences. The same can be said about the first law help the economy of $2 trillion, which is not sending a dime on creating the right incentives to mobilize the private sector to eliminate the main causes of this economic collapse. The fact that the economy may not be the best stimulus than the victory over covid-19.

To achieve this goal, and to solve climate change, we need to rethink the role of government. In the best of times the command economy in the Soviet style was not working. But as it clearly shows the crisis caused by the covid-19, the capitalist economy, American style is inadequate to cope with the task of providing social goods people need. Obtaining them requires an active state which takes seriously the private sector.

Roman Friedman is Professor of Economics at new York University, co-author of the books “Economics of imperfect knowledge” and “Beyond mechanical markets”.

Gernot Wagner is the co-author of “Climate shocks” and author of “But will notice if it’s a planet?” Teaches Economics of the climate in new York University.