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What If the Coronavirus Had Hit Us 25 Years Ago?

Blog Post | Health & Medical Care

What If the Coronavirus Had Hit Us 25 Years Ago?

A largely tech-free pandemic would have been far tougher than what we are going through.

I promise that this isn’t one of those schmaltzy “Look on the bright side”/”There is a silver lining to all this” articles. Coronavirus has no bright side, and there is no silver lining.

But over the past couple of days, I have become a bit more grateful for the technologies and technology-based services that are making the current situation a lot more bearable. These are, in the main, technologies that we have become so used to, it now feels as if they had been around since forever. It is easy to forget just how recent a lot of them are.

Imagine, for a moment, that the Coronavirus had hit us, say, 25 years earlier. I’m not talking about the Middle Ages, or the Victorian era. Just 25 years – a time that is well within living memory (or at least, I remember it quite well).

What would “Corona ‘95” look like?

For a start, if you are staying indoors, your only connections to the outside world are a landline telephone, TV, radio, and if you have a subscription, a newspaper. There is this new thing called “the internet”, but unless you are a tech whizz, you will probably not have heard of it yet (I certainly hadn’t). There are so few internet users that nobody even bothers to count them. Records on internet usage begin in 1998, when just 9% of UK households had internet access (today: 93%.)

Even if you are one those few early internet users, there is not much that you can do online. Internet search engines, for example, are still in their early stages. Google does not exist yet. Lots of websites just consist of blinking stars, and a sign that says “Under construction”. It still takes ten minutes to load them.

Social media exists in rudimentary form, but it is the preserve of a few computer geeks, and will remain so for more than another decade. Today, social media is an easy, low-cost, low-effort way of keeping abreast of the situation, of staying in contact with people, or just to distract yourself, and give yourself a break. And, no, it is not true that only young people use social media. There are more than 40 million people in the UK who use at least one social media platform. “Corona ‘95” would have been an extremely isolating experience, in comparison.

If you need to get hold of someone who is not at home, tough luck. The mobile phone usage is about to take off over the coming years, but thus far, only one in six households have one (compared to 95% today).

Delivery services are nothing like what they are today. The launch of Amazon is around the corner, but you will probably not hear that name for another couple of years (if memory serves me right, I placed my first order in 2000), and even then, it will be just books. The closest thing you have is a mail order catalogue, which is not much help for grocery shopping. Some restaurants offer home delivery, but that is by no means the norm. If you live in a small town or a suburb, you are lucky if you have more than two options to choose from.

The economic impact would have been infinitely worse. With 1995-technology, few people are able to work from home, and certainly not at a short notice, or without a sharp drop in productivity.

Computers are already common in the workplace, but far less so at home: only about one in four UK households have a home computer (today: 88%). Even if you have one, transferring your work files to your home computer is a major operation. You need dozens of floppy disks or CDs, as well as photocopies of material that is not digitalised. Even then, the moment you get home and start working, you will probably notice that you have forgotten an important file, or that a floppy disk has been corrupted.

If you need to regularly exchange information with colleagues, your phone bill will go through the roof. Even then, you cannot easily transfer files between you, so you will waste hours explaining things that you would nowadays solve with a simple e-mail attachment.

In terms of home entertainment, you better not be particularly picky in terms of TV content, because streaming services such a Netflix, HBO or Amazon Prime are still more than a decade into the future. For millions of people, “Corona ’95” would, above all, have meant crushing boredom.

Some readers will argue that this is all missing the point. In 1995, we had far less exposure to China, which means that Corona would simply not have happened. There is a bit of truth in that. For example, in the 1990s, goods from China accounted for less than 2% of total UK imports, compared to more than 6% today. However, given how easily the virus spreads, a little exposure is all it takes, and in 1995, China was already a far cry from the hermit kingdom of Chairman Mao’s days. The risk would have been lower then, but it could still have happened.

Thanks to modern technology, we are now far better prepared to deal with the consequences of the pandemic than we ever were. Better never than now – but better now than at any point in the past. It could have been so much worse.

This originally appeared in CapX.

Buenos Aires Times | Macroeconomic Environment

Milei Cools Argentina Wholesale Inflation to Lowest Since 2020

“Argentine President Javier Milei notched another economic victory Tuesday after data showed wholesale prices declined in May for the first time since the height of the pandemic, adding to his momentum before October midterm elections. 

The producer price index fell 0.3 percent from April and rose 22.4 percent on the year, according data from the INDEC national statistics bureau. It’s a sharp turnaround from December 2023, Milei’s first month in office, when wholesale monthly prices soared 54 percent. The libertarian often uses the indicator to warn that Argentina was nearing hyperinflation due to his predecessor’s policies. 

Local prices stayed constant while prices for imported products fell 4.1 percent, according to the monthly report. Economy Minister Luis Caputo celebrated the good news on X.

Discounting pandemic data that saw demand plummet, the May print is the lowest in the series, which begins in 2016, Caputo wrote.

In May, monthly consumer price increases also cooled to their slowest pace in five years to 1.5 percent.”

From Buenos Aires Times.

Buenos Aires Times | Macroeconomic Environment

Inflation in Buenos Aires City Slows to Monthly 1.6 Percent

“Consumer prices in Buenos Aires City rose 1.6 percent in May, lower than the expectations of most analysts and a slowdown from the previous month.

The news will be welcomed by President Javier Milei’s national government, which is awaiting the publishing of the INDEC national statistics bureau’s national figure later this week.

According to data from the Buenos Aires City Statistics Office, prices in the capital were up 1.6 percent, down from the 2.3 percent recorded in April. Most private consultancy firms expected a rate of around two percent.

Inflation so far this year in the capital totals 12.9 percent – a massive drop on the 48.3 percent recorded over the same period in 2024.”

From Buenos Aires Times.

The Economist | Macroeconomic Environment

America Is in the Midst of an Extraordinary Startup Boom

“Last year applications to form businesses reached 5.5m, a record. Although they have slowed a touch this year, the monthly average is still about 80% higher than during the decade prior to covid, compared with just a 20% rise in Europe. Startups normally play an outsized role in creating employment in America, as elsewhere. By definition, every startup job counts as new, whereas mature companies have more churn. That difference has become even starker. In the four years before the pandemic, established firms added one net job for every four created by startups; in the four years since the pandemic, established firms have actually lost one job for every four created by startups.

Perhaps even more important than the numbers is the kind of ventures that are being created. In 2020 and 2021 many startups catered to the working-from-home revolution. These included online retailers, small trucking firms and landscapers. Since mid-2022, however, the baton has been passed to technology firms, according to Ryan Decker of the Fed and John Haltiwanger of the University of Maryland. A paper published in March by the Census Bureau found a particularly sharp increase last year in business applications based around artificial intelligence. For researchers, this carries echoes of the 1990s, when computers and the internet took off.”

From The Economist.

Blog Post | Economics

Javier Milei and the Future of Latin America | Podcast Highlights

Chelsea Follett interviews Daniel Raisbeck about the recent election of Javier Milei and what it means for the future of Argentina and the rest of Latin America.

Listen to the full podcast episode or read the full transcript here.

What are some of the most promising events in Latin America today?

Of course, the election of Javier Milei. He took office on December 10th, and it’s all quite encouraging. He had a large decree that repealed many laws and modified others to liberate the Argentine economy, which is currently one of the most regulated economies in the world.

It will depend, of course, on congress and the courts which can potentially block many of his initiatives. Here at Cato, my colleague Gabriel Calderon and I have focused on his main proposal: the dollarization of Argentina’s economy. In general, we think it’s a very good policy, but in that respect, I’ve been disappointed with the beginning of Milei’s government. We can discuss that further if you like.

First, let’s set the stage. Could you describe the situation in Argentina before Milei?

Well, the main problem was inflation, which was around 140 percent at the time of his election in November. And, of course, this is caused by the central bank. Argentina’s central bank is particularly irresponsible even within a Latin American context. Argentina also has one of the most regulated economies in the world. Forty percent of the population is living in poverty, and its economy hasn’t grown in over a decade.

This is especially sad because Argentina was incredibly successful in the 19th century. Its 1853 constitution was drafted based on the ideas of a classical liberal author called Juan Bautista Alberdi, who basically called for free trade, unrestricted industry, free immigration, and infrastructure to connect the country. And that’s what they did. It wasn’t immediate; it took a few decades, but from 1880 to 1916, you had this very successful export model that made Argentina into one of the richest countries in the world. Then, in 1916 and 1920, with everything that was happening in the world, nationalism took hold in Argentina and eventually morphed into Peronism, which is the standard, prototypical Latin American corporatist ideology. There has been a very clear decline ever since.

Could you talk more about Milei’s political beliefs?

Milei describes himself as a classical liberal or a libertarian and even as an anarcho-capitalist. He was actually trained as a neoclassical economist, but he relatively recently became an adherent of the Austrian School. And he’s been very open about it. He has never tried to soften his stances to appease some section of the electorate. He is also very talented at explaining economic concepts like the causes of inflation or the effects of regulation in a way that the public can understand.

Can you talk a little bit about the classical liberal tradition in Argentina?

Argentina has many classical liberal economists. At a per capita level, it’s probably the highest percentage in Latin America. They also have a long tradition of think tanks beginning in the 1950s. One particular think tank was started by a gentleman called Alberto Benegas Lynch, who corresponded with Ludwig von Mises and Friedrich Hayek. So, Argentina has a rich intellectual tradition in the Austrian School.

You mentioned dollarization. Could you talk more about this policy?

Dollarization means granting the US dollar legal tender or at least getting rid of exclusive legal tender for a national currency. Panama was born dollarized in 1904, and more recently, Ecuador dollarized in 2000 amid a crisis similar to what Argentina is facing now. El Salvador dollarized in 2001 after facing a similar crisis the previous decade.

When you dollarize, you end up with inflation levels akin to those of the United States. That might seem high from a US perspective after the last few years, but when you have 140 percent inflation in Argentina, 7 or 8 percent isn’t so bad. And even with all the problems with the US Federal Reserve, when you compare that to other countries, the dollar is a good option. By taking away the power of local politicians to interfere in the monetary sphere, you get rid of a huge problem. Now, that doesn’t solve all other problems. The governments can still run deficits and have debt problems. But when you have dollarization, those debt problems don’t really affect the private sector and regular citizens. Whereas with a national currency, a debt crisis usually leads to the deterioration of the currency and a loss in purchasing power.

Maintaining that purchasing power is why nobody is thinking about dedollarizing in these countries. Even in Ecuador, when the left-wing strongman Rafael Correa was at the peak of his power and popularity, with 60 percent or above in approval ratings, the dollar was always more popular than he was. That’s also why we think it’s important for Milei to dollarize and dollarize quickly. If the Peronists come back to power, they could overturn a lot of his deregulatory measures, but dollarization would be very difficult for any future government to reverse.

How hopeful are you that he’ll be able to implement dollarization?

Milei had to join forces with former President Mauricio Macri’s party to win the election, and many people in that party do not favor dollarization. Luis Caputo, the person that Milei put in charge of the finance ministry, who was also one of Macri’s finance ministers, has previously spoken out against dollarization. More recently, he has taken the view that the fiscal issue is more important and that dollarization will be a consequence of stabilizing the economy.

Caputo’s plan involves liquefying the debt through inflation. But the thing with liquefying the government debt is that you’re also liquefying everyone’s savings and salary. So, it’s a bold and even dangerous alternative. I also think that dollarization involves a similar process because once the market realizes you’re serious about dollarizing, the obvious thing would be for inflation to begin to fall and for interest rates to come down, but without destroying purchasing power even more. And I think that would be the better scenario.

It’s not clear if this decision was made out of political necessity or if Milei actually believes in what Caputo is doing. Dollarization is a niche policy that only three small countries have accomplished. Even though it’s been terribly successful, especially in bringing down inflation, relatively few economists understand dollarization and how to bring it about.

What other policies has Milei proposed?

His decree and omnibus law aim to deregulate broad swaths of the Argentine economy. One example is they got rid of price controls for rents that dated back to the 1970s. Another one is the Open Skies policy, which allows airlines from abroad to enter the market and even control flights within the country. Previously, they had a scheme to undercut the low-cost airlines in favor of the national airline, which is heavily subsidized. Milei even said he is privatizing the national airline by handing it over to the workers and cutting subsidies. But there’s a wide scope of reforms. These are just some highlights.

Let’s talk about Latin America as a whole. What are some of the biggest obstacles to the region becoming more prosperous?

One that is not well known is the lack of trade within the region. There is a mostly common language and very similar institutions and historical backgrounds, so you would think Latin America is an ideal region for trade. But trading between countries is very difficult. It’s also very difficult to migrate from one Latin American country to another. For instance, Colombia, where I’m from, restricts how many foreigners companies can hire. And this is standard across the region.

Another major problem is that there hasn’t been a very strong classical liberal element in Latin American politics. In the Anglosphere, you had Thatcherism and Reaganism and these types of movements, but the Latin American right has traditionally been very protectionist and corporatist. A right-wing government in Latin America, especially after the era of military dictatorships, might not bring about a humanitarian collapse like in Venezuela, but at the same time, these governments don’t allow their economies to grow. And, of course, if you don’t grow, you won’t be able to lift people out of poverty. That’s the big problem in Latin America: anemic economic growth. And it’s a question of how conscious people are that you need freedom to have that economic growth.

So that’s also why Milei is interesting. He is, of course, breaking from the leftist model but also from the crony capitalist, protectionist, and interventionist right.

We usually try to end on a positive note. What are you the most optimistic about concerning the region’s future?

I’m not going to be terribly original here, but five years ago, if someone had told me that, in a few years, there would be an openly libertarian or anarcho-capitalist president of Argentina, I wouldn’t have believed them. And this is where we are. And I think the lesson is that sometimes it might seem very difficult to enact freedom-oriented reforms, but it can be done. It is being done now. And it’s being done by someone who was very radical in his approach. He wasn’t moderating his principles to convince centrists. He was straightforward. And I think that’s a very positive example to follow.