August 31, 2020 Reading Time: 4 minutes
running businessman

I warned recently that the events of 2020 were killing political moderation in America by bankrupting millions of small business owners, the hardy yeomen entrepreneurs who have so long formed the solid center of American politics.

A new study from Baylor’s b-school — tellingly one begun well before the current pandemic — suggests that the policy response to COVID-19 may kill America’s long tradition of entrepreneurship too. That is not as far-fetched as it sounds. It has happened before, in many countries.

What authors Daniel Bennett and Boris Nikolaev show in “Historical Disease Prevalence, Cultural Value, and Global Innovation” (Entrepreneurship Theory and Practice, 2020) is that peoples who suffered from higher levels of disease pathogens, especially the nine nasties (dengue, filariae, leishmania, leprosy, malaria, schistosomes, trypanosomes, tuberculosis, typhus — and, yes, they are all real, and real bad), became more collectivist and xenophobic and less likely to interact with members of other groups.

Less interaction meant less trade, which meant a smaller Smithian extent of the market, which meant a less well-developed division of labor, which meant lower per capita output, which meant more susceptibility to pathogens. Living in a germy place did not necessarily spring a steel trap of impoverished economic inertia, but it certainly did not help to create a vibrant entrepreneurial environment.

Jared Diamond also highlighted the power of pathogens in his epic Guns, Germs, Steel and various development economists have been pointing to the negative effects of malaria for decades. They clearly have a point: if a disease changes the genome, as malaria does by creating selective pressures in favor of debilitating sickle-cell anemia, or wipes out a culture, society, and economy, as occurred in the New World after the arrival of European diseases, it clearly delivers a negative economic shock. What the Baylor boys show is that those shocks can reverberate for centuries.

Granted, their study looks at seriously deadly pathogens. But the mere fear of disease can be just as powerful by increasing neophobia, or fear of novelty, and nepotism, or bias in favor of family and friends. Instead of individual freedom, people in high fear environments favor conformity and authority, traits not conducive to innovation or entrepreneurship. Or, I would add, to modern democracy.

As a global pandemic, COVID-19 by definition raised everyone’s PSTV (Parasite Stress Theory of Values) by a little bit. But the overreaction to the pandemic by much of the media and most governments is a far bigger threat to entrepreneurship than the virus itself. For months, people have been bombarded with bad news, seemingly always on the heels of every little hopeful sign. Much of the world’s population is literally cowering at home afraid to go to church, school, or work, the very places that provide humans the most distractions, if not outright joy. 

Innovation, except for COVID-related stuff, is now at a low ebb and may never rebound if the crisis lasts long enough to change cultural values. Or, in a generation we may see less innovation because the crisis has turned our young people into collectivists, more concerned about “staying safe” than “taking risks.”

The irony is that innovation could have saved us all from the bulk of the economic costs and deaths from, and with, COVID-19. With rational discussion instead of top-down direction from the CDC, NIH, WHO, etc., we could have ascertained even before the virus hit our shores that a voluntary live vaccine would provide sufficient herd immunity. Live vaccines are easy to make as they are just a small dose of the real thing. It would have been far safer than the DIY alternatives, like partying hardy, that many young people eventually opted for anyway.

Unfortunately, though, the strength of property rights has been eroding for generations in the face of government mandates and have sunk even lower of late, especially in large cities that privilege the right of assembly over property protections. That dip also does not bode well for the future of innovation in America because the Baylor authors also show that “property rights institutions are a strong positive predictor of national innovation” levels, a finding well known to those who study the strong connection between economic freedom scores and innovation. 

It is possible that we will get through this, as politicians assert ad nauseum, as if it wasn’t a cliched non sequitur. Yes, America has seen worse times than this and what not. But most of the current batch of Americans hasn’t seen worse than this and no group of Americans since the New Deal has had to look into the faces of politicians who implemented colossally bad policies and then doubled down on them, extolling their obvious failures as successes. 

This is not the America of Valley Forge or D-Day, it is the America of Pickett’s Charge, where people die needlessly without any hope of “victory” because their reputed superiors told them it was the only way. It is the America where farmers destroyed food while other Americans went hungry. It is the America that purports to help the downtrodden and poor while grinding their faces, this time behind essential job classifications and mandatory masks. 

America’s saving grace may be that most of the rest of the world, even Anglosphere countries like Australia and New Zealand, screwed up even worse. But the biggest threat was never a mass exodus of entrepreneurs, it was the loss of entrepreneurship itself.

Robert E. Wright

Robert E. Wright

Robert E. Wright is the (co)author or (co)editor of over two dozen major books, book series, and edited collections, including AIER’s The Best of Thomas Paine (2021) and Financial Exclusion (2019). He has also (co)authored numerous articles for important journals, including the American Economic ReviewBusiness History ReviewIndependent ReviewJournal of Private EnterpriseReview of Finance, and Southern Economic Review. Robert has taught business, economics, and policy courses at Augustana University, NYU’s Stern School of Business, Temple University, the University of Virginia, and elsewhere since taking his Ph.D. in History from SUNY Buffalo in 1997. Robert E. Wright was formerly a Senior Research Faculty at the American Institute for Economic Research.

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