There is nothing irrational about the coronavirus panic. It will change the world as we know it.

Unfortunately, these are having an equally draconian effect on economic activity. The Chinese economy is fast grinding to a halt, which given its vital importance in global supply chains is having severe knock-on consequences elsewhere, regardless of whether directly impacted by the virus. Multiple factory and office closures in Europe and beyond will soon be a reality. If we in the UK haven’t yet felt it, it is only because container shipping from the Far East is on a four- to five-week lead time. The big freeze from China will be blowing in any day now.

The good news is that, unlike the financial crisis, where lost output was never fully recovered, the economy ought to bounce back sharply once the epidemic is over. Nonetheless, there will be some long lasting effects.

Whether or not Covid-19 turns out to be the “big one”, what it has done is highlight the risks both of unfettered international travel and over-reliance on global supply chains. There is probably no turning back the clock on the first of these phenomena, but on the second there very much is. Already acute concern over security of supply coincides with technological advances in automation, which in turn reduce the incentives to offshore production to low labour-cost economies, and make possible a radical reimagining of the way the global economy works.

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