Trade and travel in the time of epidemics
Joachim Vothdestroyed would be approximately $100 billion. For comparison, Switzerland spends
CHF24 billion annually on social welfare.^2 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.
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
2 See https://www.efv.admin.ch/efv/en/home/finanzberichterstattung/bundeshaushalt_ueb/ausgaben.html.