Governments Should Encourage, Not Stifle, Innovations To Tackle The Pandemic

It is only natural that we turn to the government for protection and guidance in these dark days of Covid-19. Now is the time when government must be indispensable, whether in public health, income support for the unemployed, or in assisting businesses struggling with lockdowns. By necessity, governments everywhere have become more interventionist in fighting the pandemic. And they naturally see the protection of their territories and constituents as the top priority. So far, so good.

The danger is that they become overzealous and poke their noses where they don’t belong. Faced with shortages of medical supplies—from face masks to ventilators—governments have started to interfere in markets for these critical items.

On March 14, the European Commission imposed an EU-wide export ban on medical equipment needed for containing Covid-19 and treating the infected (although member states have discretion in enforcing the ban). Going a step further, the U.S. government invoked a Korean War-era law, the Defense Production Act, to stop U.S. companies from exporting medical equipment considered essential for domestic needs.

And in early April, India prohibited all exports of hydroxychloroquine, an antimalarial drug being tested as a treatment for Covid-19, as well as formulations made from it. (After a protest by President Trump, who has had good relations with Prime Minister Modi since visiting India in February, India made a U-turn and allowed exports to the U.S.)

Such grandstanding overlooks the fact that businesses can and do respond quickly to crises through innovations, often in unexpected ways. The ventilator shortage in the UK prompted engineers of the different Formula 1 teams to collaborate with researchers at University College London to adapt breathing devices used in auto racing for ventilators. On April 4, a ventilator created by the Mercedes-AMG race team obtained approval and can now be quickly manufactured by the thousands.

Similarly, UK-based defense contractor Babcock International and Dyson Technology, known for vacuum cleaners, are using their engineering process to make innovative ventilators. Apple, too, has repurposed some proprietary designs to start making face shields for medical workers, and claims it can make up to one million such shields a week. The list goes on.

Instead of placing restrictions, governments should utilize companies’ ability to innovate and, more importantly, make it easier for them to collaborate, regardless of their domicile. The 2003 outbreak of SARS offers some lessons. Pressed by governments to develop a vaccine, companies responded by investing millions to develop one. Once the epidemic died down in mid-2003, however, governments lost interest in supporting that research, let alone placing orders. Some pharmaceutical companies lost money and no vaccine was developed. We can only wonder how different our situation might be today had we had that vaccine capability in place.

Yuwa Hedrick-Wong is Chief Economics Commentator for Forbes Asia. He is also a visiting scholar at the Lee Kuan Yew School of Public Policy, National University of Singapore. Having worked as an economist across the Asia-Pacific, Europe, Middle East and Africa in the past 25 years, he regularly writes columns about the global economy for Forbes Asia. Views expressed are his own. He can be reached at: yuwa@forbesasia.com.