Does government understand business and realise the huge costs of lockdowns?

The reports from the Sydney lockdown are grim. The lockdown is imposing a huge cost on affected businesses. The financial assistance offered today by the federal and NSW governments may be insufficient for many businesses (e.g. see Sydney CBD restaurants still in strife despite government support packages).

Governments may not understand just how bad things are out there. I’m concerned government officials don’t truly understand the challenges that businesses face. I’m worried many in government think businesspeople are generally wealthy and can cope with the lockdowns and all the other costly restrictions. But does government understand business? I’m not sure it does. I don’t think it realises how brutally competitive business can be, and how profit margins can be competed away. There is not as much of a buffer as government thinks.

That most astute observer of capitalism, Harvard Economics Professor Joseph Schumpeter, brilliantly wrote in his 1942 book Capitalism, Socialism and Democracy that:

Bourgeois society has been cast in a purely economic mold: its foundations, beams and beacons are all made of economic material…Prizes and penalties are measured in pecuniary terms. Going up and down means making and losing money…if there was a way of measuring either that ability in general or the personal achievement that goes into any particular success, the premiums actually paid out would probably not be found proportional to either. Spectacular prizes much greater than would have been necessary to call forth the particular effort are thrown to a small minority of winners, thus propelling much more efficaciously than a more equal and more “just” distribution would, the activity of that large majority of businessman who receive in return very modest compensation or nothing or less than nothing and yet do their utmost because they have the big prizes before their eyes and overrate their chances of doing equally well.

Excerpt from Chapter VI of Capitalism, Socialism and Democracy

It is members of that “large majority” of businesspeople who receive “very modest compensation” as Schumpeter puts it who are being smashed right now in Sydney.

Thankfully, it appears COVID has been quashed in Queensland for now. But I expect it will be back before Winter ends. It seems like folly to attempt to totally eliminate such a highly transmissible virus. No doubt the state government will shut the border with NSW soon, making it difficult for anyone doing business interstate. We were in such a great position earlier this year as a country, but alas the vaccine rollout was botched and we’re now facing some bitter months.

Joseph Schumpeter (1883-1950). Source: Volkswirtschaftliches Institut, Universität Freiburg.

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2 Responses to Does government understand business and realise the huge costs of lockdowns?

  1. Sue Holz says:

    Yes, all Australians (at home and abroad) are paying a heavy price for SloMo’s profound incompetence. He has touched every one of us with his appalling governance and that we are still lucky last on the OECD list of vaccinations is a reflection of the sub-par team that continues to cause us grief. Under SloMo’s stewardship we have lurched from one crisis (bushfires) to another (pandemic). What does it take to do your job well SloMo? Clearly more skills than you possess!

  2. Paul says:

    1. The virus spreads because of interaction between people.
    2. Lock-downs reduce interaction between people.
    3. This reduces the number infected.
    4. Reducing the number infected reduces the death and morbidity rates.
    5. Lock-downs cost some people money.
    6. No lock-downs costs other people their lives.
    Lock-downs are currently the only way the States have to stop people dying from Covid 19.

    So what to do?
    (A) Vaccinate the entire population and all incoming travelers (vacc. certificate requirement). Vaccines are around 90% effective so there will be ‘breakthrough cases’ for those they fail to protect. Nevertheless mass vaccinations are part of the right approach.
    (B) Federally funded and run, fit-for-purpose quarantine facilities adjacent to international airports for all international travelers. Such facilities may include a hospital set up for Covid (preferable) or as they are adjacent to an airport may have either the flying doctor or care-flight helicopter to transport sick individuals to hospital. It’s not hard to do.

    Recurrent outbreaks are solely due to incoming international travelers and the failure of hotel quarantine. It can be kept out indefinitely by suitable quarantine procedures. We do that, and have done that for decades, with animal and plant diseases eg no foot and mouth virus disease in cattle in Australia. Quarantine works. Effective quarantine = no deaths and no lock-downs.

    Quarantine constitutionally is a federal responsibility. The Feds have failed and the States are left with responsibility for protecting lives due to Canberra’s quarantine failure. The States are bearing the financial cost and the political cost (i.e. lock-downs) for Federal failure. Thank God for the States or we would be like the rest of the world.

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