COVID-19 and Adam Smith's invisible

Looking back, the present day pandemic in particular and the world economy in general have been changed from a simple economic construction to an intricate series of entangled systems. We witnessed the fall of the microeconomic and macroeconomic activities and the beginning of new social and economic activities such as wearing masks, use of sanitizers, maintaining social distancing, reduction in social customs and traditions coupled with their expenditure too. In general, market and COVID-19 volatilitydiscourse is still wide open. The existing literature on the subject of such a liaison has borne diverse domino effects. Many empirical research studies have confirmed that market growth and COVID-19 volatility are inversely related and have a downward slope. It means COVID-19 negatively affects the growth prospects of the market economy. The downward trend of macroeconomic variables retards market growth, economic growth, economic development, and what not. All global economic and social processes have been greatly affected by the COVID-19 wave. The economic reforms of the world in the early 1980s popularized the processes of liberalization, privatization, and globalization which brought notions of emerging economies and also popularized the notions of market. The growth of emerging markets is directly proportional to the growth of integration of them with the global markets as depicted by the growth of liquidity in equity and debt markets, growth of Foreign Direct Investment, and development of financial markets.

These reforms improved the health of emerging economies and made them good enough to face different challenges as they opened the gates for the take-off economic development phase quite early as compared to the rest of the world in generic form and emerging economies in precise form. In view of this, the question or problem of making a line of demarcation between economic and health reforms is very important. There should be a good tuning between economic reforms and health reforms. Most of the countries failed in their mission to reduce coronavirus cases because of bad tuning between economic reforms and health reforms since the introduction of the reforms in their respective economies. This has affected the political economy too thereby creating bad effects on almost all sectors of the economy. But, there are some countries that have performed very well on different economic and health parameters which is why novel coronavirus did not affect them much. As far as their political economy is concerned we find better results. It has played an important role in addressing and reducing both short-run and long-run effects of COVID-19 crunch on their economy, and society at large. Most of the COVID-19 affected countries follow Adam Smith’s invisible hand, a metaphor showing the unintentional greater social advantage driven by individuals who act in their own self-regard. They follow the notion of trade and commerce on their own, directing self-interest towards socially desired ends justifying the economic canon of Laissez-faire.

In present day pandemic times we find this invisible hand in the health sector too. COVID-19 has increased the demand for health budgets and health organizations are knocking the doors of laissez-faire market based tools to address COVID-19 challenges, in particular and global health challenges, in general. Adam Smith, father of economics, is of the opinion that the market’s invisible hand has the capacity to divide the resources of the world among its needs in a decent manner. In the health market, prices act as a link or mediator between demand and supply of health resources. Nowadays, we don’t find any reduction in coronavirus cases and treatment of COVID-19 patients with vaccines seems a big challenge especially for the age group above 50 years. There are huge price fluctuations associated with the widespread uncertainties associated with this pandemic. Vaccine suppliers are not in a position to predict how rapidly the countries will adopt the vaccine and for that reason they might keep the prices high. Health departments facing high prices may reduce the supply of vaccines and delay the orders which further increase the prices. Invisible hand is beyond what is seen and observed and it increases the process (here cases) and reduces the supply. A rapid yet decent government involvement worked very well in many market economies apart from mixed economies. On the other hand, the invisible hand of the market failed in many developed economies of the world particularly Uncle Sam (United States of America) to reduce the coronavirus cases.

Healthy markets for vaccinations and other immunity booster products do wonders as they permit producers to decide their production dependent upon the demand that is known and contributors to take full advantage of their investments. Invisible hand does not always fit in the model of developing and emerging economies well. In fact, indeterminate capital and finance alongside uncertain vaccine demand paved the way for the lack of the encouragement for the producers to invest in new products at reasonable prices. Accordingly, we find a huge development gap between developed economies and developing economies in terms of the availability of COVID-19 vaccine. It is high time to correct all market failures and make every effort to make markets healthy especially markets of COVID-19 vaccines. During shocks and pandemic, it is not advisable to depend upon the government body only for the growth, development, and distribution of diagnostics because the world needs a global consortium. There is a need for the healthy market-based approach with a decent government involvement too and to call for more practical and planned private sector participation to boost the growth of the health sector and the access to health products.  

Binish Qadri is ICSSR Doctoral Fellow in the department of economics, Central University of Kashmir