Trade and travel in the time of epidemics
Mar 2020
Trade and travel in the time of epidemics
Politicians have to weigh up the costs and benefits of uninhibited exchanges of people and goods. Many advantages of globalization can also be achieved without enormous health risks. This commentary by Joachim Voth was originally published in the VoxEU.org e-book Economics in the Time of COVID-19. The chapter first appeared in German in the Swiss newspaper Finanz und Wirtschaft as Reisen und Handeln in Zeiten der Epidemie.
edited for layout purposes by the UBS Center
The ship, Grand Saint Antoine, had already come to the attention of the port authority of Livorno. A cargo ship from Lebanon loaded with expensive textiles, it reached the port of Marseille in 1720. The Health Commission had its doubts – the plague was widespread in the eastern Mediterranean. Like all ships from affected regions, the Grand Saint Antoine was placed in quarantine. Normally, the crew and the property would have had to stay on board for 40 days to rule out the possibility of an infectious disease. But a textile fair near Marseille, where the importing merchants hoped for rich business, would soon begin. Under pressure from the rich traders, the health agency changed its mind. The ship could be unloaded, the crew went to town.
After only a few days it was clear that changing the initial decision had been a mistake. The ship had carried the plague. Now the disease spread like a forest fire in the dry bush. The city authorities in Marseille could not cope with the number of deaths, with corpses piling up in the streets.
The great plague of the late Middle Ages, in the years 1346-51, had also come to Europe via ports in the Mediterranean. As then, people tried to feel the danger of disease in Marseille. In contrast to the situation in the Middle Ages, they did not get very far. At the behest of the French king and the pope, a plague wall (Mur de Peste) was built in Provence. Tourists can still see parts of it today. The wall was over two meters high and the watchtowers were manned by soldiers. Those who wanted to climb over it were prevented from doing so by force. Although some individuals managed to escape, the last major outbreak of black death in Europe was largely confined to Marseille. While probably 100,000 people – about a third of the population – died in Marseille, the rest of Europe was spared the repeated catastrophe of 1350 when millions of people lost their lives. No medical miracle cure had saved Europe, but the effective intervention of a functioning state.
Politicians have to weigh up the costs and benefits of uninhibited exchanges of people and goods. Many advantages of globalization can also be achieved without enormous health risks. This commentary by Joachim Voth was originally published in the VoxEU.org e-book Economics in the Time of COVID-19. The chapter first appeared in German in the Swiss newspaper Finanz und Wirtschaft as Reisen und Handeln in Zeiten der Epidemie.
edited for layout purposes by the UBS Center
The ship, Grand Saint Antoine, had already come to the attention of the port authority of Livorno. A cargo ship from Lebanon loaded with expensive textiles, it reached the port of Marseille in 1720. The Health Commission had its doubts – the plague was widespread in the eastern Mediterranean. Like all ships from affected regions, the Grand Saint Antoine was placed in quarantine. Normally, the crew and the property would have had to stay on board for 40 days to rule out the possibility of an infectious disease. But a textile fair near Marseille, where the importing merchants hoped for rich business, would soon begin. Under pressure from the rich traders, the health agency changed its mind. The ship could be unloaded, the crew went to town.
Joachim Voth, UBS Foundation Professor of Macroeconomics and Financial Markets
Wuhan like Marseille once
The outbreak of the novel coronavirus (COVID-19) in Wuhan shows some interesting parallels to the situation in Marseille in 1720. There, too, the local authorities initially reacted incorrectly, which made the spread of the disease possible. In Wuhan and Marseille, there was a drastic restriction of mobility for people in the affected region to prevent the spread of the disease. In both cases, the mass quarantine was only partially crowned with success. It is still unclear whether the world will get away with a black eye like in 1720, despite the spread of COVID-19 outside of China, or whether there will be a worldwide pandemic with millions of deaths.
The fundamental question that arises, however, is: how much mobility can and should a globalised world have? In other words, are we, the globalised world, to blame for the outbreak, like the greedy textile traders in Marseille in 1720? When SARS broke out, China was responsible for about 4% of global economic output; today, China’s share of the world economy is 16%, and growing. With the increase in economic strength, the interdependence with the rest of the world has exploded. Millions of people travel to and from China every year. Over 70 international flight connections from the Middle Kingdom enable fast travel to the far corners of the earth. The same applies – if not to the same extent – to the movement of goods and people with other regions of the world, which are constantly producing new pathogens such as Ebola and HIV.
Interestingly enough, modern medicine is almost as helpless in containing the outbreak and treating the sick as it was in 1720. Vaccination is not available, and no effective cure exists. In China itself, numerous doctors have already died as a result of COVID-19. Only the same primitive measure as in Marseille and Wuhan – quarantine – offers some protection. Just as Louis XV’s France protected itself with soldiers, orders to fire and the Mur de Peste, today entire cities in China, Italy and Korea are cordoned off and cruise ships are isolated in port. The basic question, however, is: should normal traffic be massively restricted to known starting points for new infectious diseases, just as early modern societies in Europe protected themselves from the plague? Are we taking the first step towards the downfall of an exaggerated, unsustainable form of globalisation?
The outbreak of the novel coronavirus (COVID-19) in Wuhan shows some interesting parallels to the situation in Marseille in 1720. There, too, the local authorities initially reacted incorrectly, which made the spread of the disease possible. In Wuhan and Marseille, there was a drastic restriction of mobility for people in the affected region to prevent the spread of the disease. In both cases, the mass quarantine was only partially crowned with success. It is still unclear whether the world will get away with a black eye like in 1720, despite the spread of COVID-19 outside of China, or whether there will be a worldwide pandemic with millions of deaths.
The fundamental question that arises, however, is: how much mobility can and should a globalised world have? In other words, are we, the globalised world, to blame for the outbreak, like the greedy textile traders in Marseille in 1720? When SARS broke out, China was responsible for about 4% of global economic output; today, China’s share of the world economy is 16%, and growing. With the increase in economic strength, the interdependence with the rest of the world has exploded. Millions of people travel to and from China every year. Over 70 international flight connections from the Middle Kingdom enable fast travel to the far corners of the earth. The same applies – if not to the same extent – to the movement of goods and people with other regions of the world, which are constantly producing new pathogens such as Ebola and HIV.
Cost versus profit
This question can be divided into two elements. First, is a massive restriction of mobility desirable? And second, is it feasible at all? An economically rational answer to the first question should begin with the value of a human life. With all the reservations that one can have against such calculations from a philosophical point of view, cost-benefit considerations without numbers for the value of a human life are not feasible. However, estimates regularly show an enormous range; the average is around US$10 million per person (Viscusi and Masterman 2017). This means that even before the epidemic has peaked, COVID-19 caused an immediate cost of $26 billion in deaths. If the epidemic ends with a maximum of 10,000 deaths (four times the current value), the value of life destroyed would be approximately $100 billion. For comparison, Switzerland spends CHF24 billion annually on social welfare. In addition, there are disruptions in the supply chains that were never designed for such faults; massive declines in financial markets; empty beds in hotels built for mass tourism.
The costs must be compared with the enormous gains in economic performance that the free exchange of goods and people has made possible. In China alone, hundreds of millions of people have escaped deepest poverty during the past 20 years. In 1980, more than half of the Chinese population lived on less than $2 a day; in 1998, it was less than a quarter (Sala-i-Martin 2006). Around the world, people have escaped the poverty trap wherever the free movement of goods and people has become possible. And richer regions also benefit massively, often in surprising ways. For example, Campante and Yanagizawa-Drott (2018) shown that better flight connections ensure new business contacts and better capital supply – cities that are well connected to the international flight network benefit enormously. So, the epidemic dangers of globalisation are offset by massive economic gains.
Smart policies have to weigh the costs and benefits of uninhibited exchanges of people and goods. Even if you decide that an outbreak every few years is a price that we should willingly pay in order to reap the benefits of globalisation, there is a very real question whether future epidemics might be worse. The next outbreak could be as infectious as coronavirus and as deadly as SARS (10% death rate), MERS (30%), or Ebola (60-90% death rate). Instead of deaths in the thousands, hundreds of millions of people could die before new treatment options or massive quarantine stop the next new virus. Even if such an outbreak is not very likely, slim probabilities of a ‘tail event’ must be taken into account in every cost-benefit calculation – and even a small reduction in the risk of such an outbreak may well be worth almost any price.
This question can be divided into two elements. First, is a massive restriction of mobility desirable? And second, is it feasible at all? An economically rational answer to the first question should begin with the value of a human life. With all the reservations that one can have against such calculations from a philosophical point of view, cost-benefit considerations without numbers for the value of a human life are not feasible. However, estimates regularly show an enormous range; the average is around US$10 million per person (Viscusi and Masterman 2017). This means that even before the epidemic has peaked, COVID-19 caused an immediate cost of $26 billion in deaths. If the epidemic ends with a maximum of 10,000 deaths (four times the current value), the value of life destroyed would be approximately $100 billion. For comparison, Switzerland spends CHF24 billion annually on social welfare. In addition, there are disruptions in the supply chains that were never designed for such faults; massive declines in financial markets; empty beds in hotels built for mass tourism.
The costs must be compared with the enormous gains in economic performance that the free exchange of goods and people has made possible. In China alone, hundreds of millions of people have escaped deepest poverty during the past 20 years. In 1980, more than half of the Chinese population lived on less than $2 a day; in 1998, it was less than a quarter (Sala-i-Martin 2006). Around the world, people have escaped the poverty trap wherever the free movement of goods and people has become possible. And richer regions also benefit massively, often in surprising ways. For example, Campante and Yanagizawa-Drott (2018) shown that better flight connections ensure new business contacts and better capital supply – cities that are well connected to the international flight network benefit enormously. So, the epidemic dangers of globalisation are offset by massive economic gains.
Virtual plague wall
Fortunately, many – but not all – of the benefits of globalisation can be achieved without enormous health risks. The free exchange of goods and capital does not have to be restricted; only very few diseases are transmitted by contaminated goods. The free movement of people itself also contributes to the advantages of globalisation, but it is far less important for production. It is not obvious that running the risk of coronavirus outbreaks every few years – or worse – is a price worth paying for multiple annual vacation trips to Paris and Bangkok, say. Severe restrictions may well be desirable and justifiable, bringing to an end a half-century of ever-increasing individual mobility. In addition, specific restrictions could be brought in. For countries where, for example, wild animals are regularly sold and eaten (such as China, until recently), the certification for travel could be withheld without restrictions; anyone who comes or returns from there must undergo a medical examination and possibly spend a few weeks in quarantine. This would not only build a virtual plague wall against the next major outbreak, it would also put pressure on health authorities around the world to restrict dangerous practices that allow pathogens to jump from one species to the next. Even if airlines, hoteliers and tour operators would suffer from such rules in the short term and would complain, the lesson from Wuhan should be that we need a broad discussion within and outside of academia about how much mobility is actually desirable.
Fortunately, many – but not all – of the benefits of globalisation can be achieved without enormous health risks. The free exchange of goods and capital does not have to be restricted; only very few diseases are transmitted by contaminated goods. The free movement of people itself also contributes to the advantages of globalisation, but it is far less important for production. It is not obvious that running the risk of coronavirus outbreaks every few years – or worse – is a price worth paying for multiple annual vacation trips to Paris and Bangkok, say. Severe restrictions may well be desirable and justifiable, bringing to an end a half-century of ever-increasing individual mobility. In addition, specific restrictions could be brought in. For countries where, for example, wild animals are regularly sold and eaten (such as China, until recently), the certification for travel could be withheld without restrictions; anyone who comes or returns from there must undergo a medical examination and possibly spend a few weeks in quarantine. This would not only build a virtual plague wall against the next major outbreak, it would also put pressure on health authorities around the world to restrict dangerous practices that allow pathogens to jump from one species to the next. Even if airlines, hoteliers and tour operators would suffer from such rules in the short term and would complain, the lesson from Wuhan should be that we need a broad discussion within and outside of academia about how much mobility is actually desirable.
Economics in the Time of COVID-19
COVID-19 may be as contagious economically as it is medically. The VoxEU.org eBook Economics in the Time of COVID-19 addresses some key questions: How, and how far and fast, will the economic damage spread? How bad will it get? How long will the damage last? What are the mechanisms of economic contagion? And, above all, what can governments do about it? The book has been edited by Richard Baldwin and Beatrice Weder di Mauro.
COVID-19 may be as contagious economically as it is medically. The VoxEU.org eBook Economics in the Time of COVID-19 addresses some key questions: How, and how far and fast, will the economic damage spread? How bad will it get? How long will the damage last? What are the mechanisms of economic contagion? And, above all, what can governments do about it? The book has been edited by Richard Baldwin and Beatrice Weder di Mauro.
Quotes
How much mobility can and does a globalized world afford?
Joachim Voth
VoxEU video
Contact
UBS Foundation Professor of Macroeconomics and Financial Markets
Joachim Voth received his PhD from Oxford in 1996. He works on financial crises, long-run growth, as well as on the origins of political extremism. He has examined public debt dynamics and bank lending to the first serial defaulter in history, analysed risk-taking behaviour by lenders as a result of personal shocks, and the investor performance during speculative bubbles. Joachim has also examined the deep historical roots of anti-Semitism, showing that the same cities where pogroms occurred in the Middle Age also persecuted Jews more in the 1930s; he has analyzed the extent to which schooling can create radical racial stereotypes over the long run, and how dense social networks (“social capital”) facilitated the spread of the Nazi party. In his work on long-run growth, he has investigated the effects of fertility restriction, the role of warfare, and the importance of state capacity. Joachim has published more than 80 academic articles and 3 academic books, 5 trade books and more than 50 newspaper columns, op-eds and book reviews. His research has been highlighted in The Economist, the Financial Times, the Wall Street Journal, the Guardian, El Pais, Vanguardia, La Repubblica, the Frankfurter Allgemeine, NZZ, der Standard, der Spiegel, CNN, RTN, Swiss and German TV and radio.
UBS Foundation Professor of Macroeconomics and Financial Markets
Joachim Voth received his PhD from Oxford in 1996. He works on financial crises, long-run growth, as well as on the origins of political extremism. He has examined public debt dynamics and bank lending to the first serial defaulter in history, analysed risk-taking behaviour by lenders as a result of personal shocks, and the investor performance during speculative bubbles. Joachim has also examined the deep historical roots of anti-Semitism, showing that the same cities where pogroms occurred in the Middle Age also persecuted Jews more in the 1930s; he has analyzed the extent to which schooling can create radical racial stereotypes over the long run, and how dense social networks (“social capital”) facilitated the spread of the Nazi party. In his work on long-run growth, he has investigated the effects of fertility restriction, the role of warfare, and the importance of state capacity. Joachim has published more than 80 academic articles and 3 academic books, 5 trade books and more than 50 newspaper columns, op-eds and book reviews. His research has been highlighted in The Economist, the Financial Times, the Wall Street Journal, the Guardian, El Pais, Vanguardia, La Repubblica, the Frankfurter Allgemeine, NZZ, der Standard, der Spiegel, CNN, RTN, Swiss and German TV and radio.