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Smith, Hayek and the Virus: Entrepreneurial Responses in Times of Crisis

Smith, Hayek and the Virus: Entrepreneurial Responses in Times of Crisis

The world is struggling with despair in the face of an uncaring threat at the moment of writing these ideas: that word is not even worth mentioning any longer, since it is probably on the lips (and in the ears) of the majority of people worldwide. ‘Probably’ and ‘majority’ are only used here in order to respect a certain journalistic demeanor in writing which requires some precautionary – thus, not categorical – statements. Indeed, some children might not truly understand what goes on during the present time; so might some minority of people living in any given disconnected and remote settlement (if such disconnection still exists) and, unfortunately, so does some whimsical category of people – even grown-ups – who, although they have heard about the danger, behave as if they do not understand what is happening (which, again, with precautionary measures, might just be the case: their ignorant behavior simply denotes a lack – inability? – of understanding). Or, the more despicable, they did understand, but they simply want to make a spectacle of their ability to break the law (because, hey, isn’t it so, they are ‘smarter’, ‘wiser’, ‘brighter’).

Yet, it would be fair to argue that most other sensible and rational human being fears. He fears this – now say it – pandemic, because this is all that seems to matter, at least this year (if any joking is allowed in these dark hours, then Google, Merriam-Webster, Oxford English Dictionary et al. who usually do a buzzword-of-the-year announcement: do not even bother searching any longer, here you have it and we are not even halfway through). 

Strategic planning has suddenly converted to spontaneous thinking 

This Coronavirus (by its ‘folk’ name) has not only frightened people, but it has also destabilized systems: medical, economic, social, cultural etc. It might have probably also destabilized belief and value systems, but these are too deep for us to witness and understand at such short notice (we can do so after several years). Some – and not a few of them – argue that it has also destabilized supranational structures: that this is the swan song of the European Union. Again, we will have to wait and see. For the time being, the Union is too busy to think about its future. Strategic planning has suddenly switched to spontaneous thinking (which we like to believe is strategic, but the more time goes by in this fight against the pandemic, the more we find out it is not: it was first claimed that the virus would not affect Europeans – it did; then, that it would be annihilated by heat – it seems not, since Africa is witnessing a growing number of infections, yet we can still hope, just as Oceana did in 2012, in an “endless summer”, and a hot one too; then that it would not affect young people, but only seniors – proved wrong; and that it could not be transmitted to/through animals – latest evidence shows that a dog and a cat have got it too). So, the EU – as the rest of the world – is fighting on short notice with an enemy it cannot yet predict.

Medical systems and hospitals are down. Many have surpassed their capacity. Over here, we used to argue that Romanian hospitals were not ready for a major crisis. Now it looks like neither did American/US, German, French, Spanish or Italian ones. And if these medical systems, which were considered state of the art not long ago, could not (properly) face such an epidemic, then why would Romania have managed any better? 

The private business responded more swiftly than the public sector 

Governments are struggling to supply basic care needs not only for patients, but also for doctors and medical personnel. In all of this chaos, one small, maybe less observed, but important economic lesson needs to be highlighted: that, in not a few situations, the private business responded faster than the public sector. Entrepreneurs were among the first to donate money during this epidemic. A harshly blamed entrepreneur somewhere at the outskirts of Bucharest b(r)ought trucks of sanitary products, furniture, technology and food for the National Institute of Infectious Diseases; another blamed one from the outskirts of Monte Carlo provided one of his hotels as a quarantine space; NGOs and associations raised funds and purchased washing machines, masks, gloves, equipment for hospitals; some tiny start-ups that many people did not even hear about started producing the badly needed ventilators with the help of 3D printing technology; fashion producers stopped their commercial activity and redesigned assembly lines in order to produce masks, and the list of examples can go on and on. Indeed, an entrepreneur cannot call for a military decree, because that is not his business, nor his duty to do so: it is the government’s. Nor can an entrepreneur impose regulations and restrictions on the civic society: it is still the government’s job to do it. But when it truly comes to business, what an entrepreneur can do is to supply. To supply if there is demand. And this crisis has shown that there is a lot of demand and that there is a lot of need for entrepreneurs. Just that they also have to be allowed to pursue their pure and honest profit-making interest.

Maybe – if a brighter future still lies ahead for humanity – what public sectors and markets should learn once and for all is that private initiative also plays its role, and it can very often deliver where (and when) the state is unable to. And not only can it deliver, but its responsiveness is also high: it swiftly moves to intervene in situations where markets are destabilized. The invisible hands of entrepreneurs can regulate markets, even in (if not, especially in) times of crisis. Adam Smith wrote his Wealth of Nations in 1776, a year when some of his Scottish folk were involved in the turbulent American Revolution. The Austrian School largely developed over the first half of the 20th century, a period marked by two cruel World Wars. The fact that some of the indispensable ideas of entrepreneurial initiative stem from times of humanitarian crises should not mystify us. From Smith to Hayek and von Mises – with an arch over time to 2020 –, all of them might have observed that, in times of hardship, governments struggle and some of their duties are taken over by entrepreneurs. So, hoping in a light at the end of the tunnel, if and when the Coronavirus will be beaten back, a wiser society could arise, not only in terms of wiser people with a decent civic behavior towards their fellow citizens, but also in terms of governments that will understand to focus on their administrative tasks and let the economy in the hands of those who can deal best with it: the entrepreneurs. Because the Coronavirus has indicated that, from an economic point of view, governments have got their weak spots. Let us also hope for a future in which governments will really support entrepreneurs, at least as a ‘thank you’ for the latter’s involvement in the current crisis.

 

 
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OEconomica No. 1, 2016