The System Held

Some believed the pandemic would expose the irrationality of the Western economic system. They were wrong.

A U.S. Treasury check
Chip Somodevilla / Getty

A year has passed since the coronavirus started to dominate every conversation, large sporting events were canceled, and offices began to close their doors. Slowly and then suddenly, normal life went on pause. After months during which many journalists and politicians dismissed the dangers of COVID-19, Americans realized that they were in the midst of the most serious pandemic in a century.

Soldiers who enter battle find themselves surrounded by the fog of war. In those first weeks, we all were deeply immersed in the fog of pandemic. Never having lived through a similar public-health emergency before, Americans did not know what to expect. But a sort of consensus about the likely future included a bold claim.

The pandemic, it was voguish to believe, would expose the irrationality of the Western economic system. A global supply chain relying on just-in-time production would break down, starting a process of de-globalization. Fearful that food might run out, the electricity grid would stop working, and the water supply would be disrupted, millions of people bought dry goods and filled up their bathtubs. Anticipating a total collapse of civil order, thousands purchased guns and ammunition. As a New York Times headline put it after the paper surveyed leading economists in April 2020, COVID-19 would spell “the end of the world economy as we know it.”

A year on, almost every part of this argument has been proved wrong.

At the beginning of the pandemic, unemployment rose sharply, and panicked shoppers emptied store shelves of durable goods. But over the following months, the economy proved remarkably resilient. Civil order held. Neither the water supply nor the electricity grid was seriously imperiled because of the pandemic. Toilet paper quickly returned to supermarkets near you. Lifesaving vaccines were invented, and are now being distributed, in record time.

Although many companies went out of business, and many continue to struggle, others succeeded at adapting their services to the terms of the pandemic—restaurants went all in on takeout; fashion designers made masks. Commercial activity and demand for labor picked up at breakneck speed. Technology companies that figured out how best to connect loved ones and co-workers virtually knew they stood to make astounding profits. That helped unleash an awe-inspiring wave of creativity that made a terrible year a little more bearable. The U.S. unemployment rate now hovers around 6.2 percent—not great by American standards, but lower than the levels many countries record in boom times.

The much-maligned welfare state played a large role in this success story. A purely free-market economy would have left millions to their own devices as a virus destroyed their livelihoods. Thankfully, the mixed economy of the United States—and, to an even greater extent, those of most other developed democracies—recognizes that many people end up in dire situations through no fault of their own. Existing entitlement programs, coupled with generous relief payments for individuals and small businesses affected by the pandemic, ensured that millions of people had access to food and were able to pay their rent. America’s poverty rate actually fell in 2020.

All of this suggests a heretical conclusion. The year that was supposed to showcase the frailty of the modern global economic system actually proved the astonishing resilience of welfare-state capitalism.

By contrast, supposedly competent governments failed to come to our rescue. When the United States first decided to lock down, the purpose was to create a system to test people who may have had COVID-19, trace their contacts, and isolate anybody who was exposed. But quickly, America gave up on any kind of systematic response. The country’s vaunted public-health systems proved incapable of implementing the pandemic playbooks they had studiously updated year after year.

Part of the blame undoubtedly lies with Donald Trump. But the problem goes much deeper and wider than him. In an international context, America’s failure was, as the writer David Wallace-Wells recently argued, more typical than exceptional.

European countries such as France and Germany also failed to put test-and-trace systems into place. They, too, made erratic decisions to lock down or open up on political or electoral, rather than scientific, grounds. They, too, suffered from very high levels of infection and fatalities per capita. And now a series of political failures has actually put them far behind America in the race to vaccinate their citizens.

To be sure, expecting perfection is unfair. Given the scale of the pandemic, some mistakes were inevitable, and forgivable. But numerous political institutions in just about every developed democracy, as well as international organizations, committed grave errors at just about every turn.

To name a few of the most egregious missteps: The World Health Organization downplayed the severity of COVID-19 for months. The CDC designed a faulty test that made the United States incapable of tracking the disease’s spread. Public-health officials on both sides of the Atlantic falsely claimed that masks did not help contain the virus. The European Union spent months negotiating with vaccine makers to save a few euros per shot, needlessly delaying the rollout of the lifesaving injections. With the exception of a few countries, including Australia and South Korea, government failure has, over the past 12 months, been the norm.

Our economic system, though, has proved remarkably resilient. The welfare state has once again showed its value. Heroic scientists have invented vaccines that will save millions of lives. Private companies are manufacturing billions of doses at record speed.

But many democratic governments and established institutions around the world fared far worse than most people could have imagined a year ago. To confront the enormous challenges that will face us in the coming decades—including climate change and a resurgence of authoritarianism—we have to get serious about understanding why they did so poorly.