Brexit, if used properly, can speed Britain’s post-Corona recovery

’Brexit, if used properly, can speed Britain’s post-Corona recovery. The way we buy and sell things will change’ wrote Wolfgang Münchau in The Spectator last weekend.

An important article with an interesting argument. Here is the introduction of the article:

Will the recovery be shaped like a V or a U, some other letter or perhaps the Nike swoosh? This is a much-discussed question among economists right now — but it is not the most important question. We’re familiar with the idea of an up-and-down financial crisis where things return to their starting point: we had roller-coasters in the mid-1980s. Even after the global financial crash of 2008-09, financiers still kept their place as masters of the universe. Global supply chains were repaired and the old power structures remained in position. This time might be very different.

Old fixes are being applied to a new crisis. Central banks, for example, have less scope to cut interest rates than they did ten years ago. And there is little point in stimulating demand when you lock down the economy. This is what makes the Covid-19 lockdown unique: the extent to which it hits both consumption and production.

After the lockdown, life will gradually return to normal. Most of us will work in offices again. Restaurants will reopen. But the transformation will come when consumers cling on to some of the habits they acquired during the lockdown, and when companies change the way they work. Reliance on global supply chains, hitherto seen as a money-saving blessing, will start to be considered a liability. Investment into 3D printing will in the long-term accelerate to reduce reliance on imports, which as we have seen can choke off at short notice. Remember, 3D printers could, in theory, produce any three-dimensional object.

The way we buy and sell things will change, too. Restaurants and greengrocers that started delivery services for the first time during the lockdown may continue afterwards. This is what makes this crisis the first in our lifetimes with the potential for ‘-creative destruction’, an expression invented by the Austrian political economist Joseph Schumpeter in the 1940s. But Schumpeterian creative destruction does not come in the shape of a V, or any other letter. He was not specifically concerned with crises, but with challenging the Marxist view of how capitalism follows a preordained pattern ending in self-destruction. He wanted to point to another pattern: reinvention. It’s something we can see at work now.

The American economist Mancur Olson expanded Schumpeter’s idea to explain the economic dynamics of large shocks. In his 1982 book The Rise and Decline of Nations, he gave what I believe is the best explanation of the post-war economic success of Germany and Japan. War, he said, destroyed established power relationships and industrial lobbies. So it was this — rather than the wartime destruction of the capital stock — that drove entrepreneurship and innovation in the 1950s and 1960s. The new entrepreneurs had at that point not yet formed effective lobbies. Germany still reaps fruits seeded in that period, the most Schumpeterian in the country’s modern history. -//-.

You can read the entire article here: Brexit, if used properly, can speed Britain’s post-Corona recovery

Source: TheSpectator