By Francis Aubee
You don’t need to understand economics to know where this is headed. As we all know, the coronavirus is spreading across the world and it is now a global health concern. With that in mind, there are a few things to note. First and foremost, it is very important to adhere to all precautionary recommendations from the health sector — personal hygiene and general conduct in public and private spaces.
Anyone who analyses trends will notice a similar pattern whenever there is a pandemic — SARS, Ebola, etc. — a growing fear followed by the rush for food and hygiene products. The resulting economic fear puts many at the mercy of the capitalist who envisions a market with high profits to be made albeit for a short period of time. When exogenous shocks happen in the economy, price gouging knocks on the door.
What is greed “economics?” One might roll their eyes and say “isn’t all of economics about greed?” I disagree. By conflating economics and unfettered capitalism one runs the risk of committing a logical fallacy. Greed “economics” in times of need is what I consider to be the practice of raising prices to extremely high levels so as to make enormous profits during times of need — conflicts, drought, pandemics, etc. — at the expense of anyone who cannot afford such products. The coronavirus has once again exposed our fallibility as humans, the tendency to be driven by collective fear and to respond collectively in a somewhat irrational manner.
About a week ago, I said to myself, “If my economics intuition serves me right, the growing fear around the virus will likely create artificial scarcity and/or demand-pull inflation for certain goods…either one does not look good.” This was me thinking out loud. I went to my local grocery store a few days ago and decided to peep through the hand wash and sanitary aisle, unsurprisingly, my first point was proven right. All the hand wash and sanitizers were gone except for one which seemed like it would be sniffed away from me if I waited for a second longer. However, I left it there for the next lucky customer. Check your local store it might be the same.
My second point — inflation. In some parts of the world, the price of hand sanitizers is quadrupling. A price increase of 400% or 500% within a couple of days is a dangerous path, but this is not a new phenomenon and one unlikely to stop. Thus, I view this behaviour as greed “economics” — I doubt there is any economic sense behind this greed, but some will say “its demand and supply.” If you think it is demand and supply, why complain when big corporations do the same for necessities you need? Economics builds on rationality, greed does not follow logic. Using the invisible hand to justify this type of greed is comical at best.
Some merchants see the coronavirus as an avenue to charge exorbitant prices for basic products. In times like these when products like hand wash and sanitizers are treated like gold, the elasticity of demand — degree of responsiveness to changes in price — or lack of it lays bare for all to see. Hitherto, I consider both products as inelastic — ceteris paribus; however, they are now almost at the mercy of the highest bidder — in some places, not all.
Thinking back to 2014, the Ebola epidemic created similar reactions in many places. Economics theory or not, exploitation in times of need takes away from our shared humanity. Some of our collective problems do not always stem from the top — but rather from the daily interactions of the masses — all of us.
On a bigger scale, the virus will have broader macroeconomic implications some of which we won’t know till the lag period kicks in. Just last week, Flybe entered administration. Additionally, unemployment statistics in the next few months should be closely monitored. During pandemics, the strength and/or weakness of global governance is often exposed to the watching public. Epidemics do not respect borders and they are not passport holders.
In the words of Erich Fromm — “Greed is a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.” I hope that in times of need, we choose humanity rather than covering up the cracks of greed with logical fallacies.