What Can We Learn from the Mask Shortage?

The leisurely weekend mornings I had enjoyed for weeks are gone. Now I have to visit a nearby pharmacy to buy the public masks I could not purchase during the workweek. Since I may come away empty-handed even after standing in line for a long time, my mind is even busier than it is when getting ready for work on a weekday. As the COVID-19 crisis drags on, it has become routine for the entire nation to buy the two public masks allotted each week.

A joke comparing this situation to the Soviet Union, where rationing was in place yet daily necessities were always in short supply, suddenly comes to mind. A phone call came to the home of Yuri Gagarin, the Soviet-born first human to travel into space. His daughter answered and said, “My father took a rocket into space and will be back in a week. My mother went out to collect rationed goods, so it will take more than two weeks.”

The supply of public masks is also at the level of a rationing system. You can buy only a fixed quantity at locations designated by the government. Even then, not everyone can buy them. Some people cannot get any masks even after waiting in a long line. Because the supply is far too short, people are also wasting large amounts of time and money trying to buy masks through home shopping channels and the internet. More and more people are complaining of stress as they hit the computer refresh button countless times.

The situation has gone beyond rationing to the point of barter. Only one kind of public mask is supplied. If medium-sized black KF94 masks are in stock, you cannot buy a different quality, size, or color. To get the masks they actually want, people must make extra efforts to trade privately with one another. Some restaurants have even appeared offering one bowl of gukbap in exchange for three KF94 masks. It is a bitter scene brought about by the mask shortage.

What caused the mask crisis? Demand surged because of the COVID-19 outbreak, while supply failed to keep up. In fact, the solution is simple. The government should ease the regulations blocking mask supply and provide sufficient incentives for the supply market to function more actively. Of course, there may be a temporary shortage of masks in the market, but as deregulation takes effect, the market will stabilize on its own.

The government says the mask crisis was caused by manufacturers and distributors hoarding masks and taking excessive profits. But using a few cases of collusion or hoarding to cast all producers and distributors as the main culprits is to confuse cause and effect. Once the cause is wrongly identified, the prescription is bound to be wrong as well. The government chose to intervene aggressively in the mask supply market by regulating and pressuring firms. It went further and began forcibly requisitioning 80% of all masks produced and supplying them directly at a uniform price under the name “public masks.”

The government’s policies of controlling production, distribution, sales, and prices are bound to fail. It is unreasonably forcing unit prices down, pressuring factories to increase output without regard for their circumstances, and compelling them to supply public masks while disregarding all existing contracts and business relationships. It is excessive for even the National Tax Service and the Fair Trade Commission to conduct crackdowns and interfere in private companies’ production volumes, sale prices, raw material inventories, and business partners. Price-control policies in particular paralyze the market’s function and fundamentally block the very effects the government hopes to achieve.

Confusion in the market creates new opportunities for someone, and through that process our lives advance. This also produces results consistent with the public interest. The mask crisis is no different. In a free market without government intervention and regulation, a mask shortage can soon subside through the economic incentive of individuals maximizing their own interests. The washable nano-mask recently developed by a domestic research team could be one example.

What the government needs to do is step away from the mask market. If it leaves it to individual companies to decide what to produce, how much to produce, and at what price to sell, businesses will on their own produce and supply a sufficient quantity of masks. That is why firms exist, and it is what they do best.

Eun-kyung Kwak

Head of the Corporate Culture Division

Center for Free Enterprise (CFE)

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Original title: 마스크 대란, 우리는 무엇을 배울 것인가?

Author: Eun-kyung Kwak

Date: 2020-04-02

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&pn=22&idx=22534