The Post- Pandemic Brave New World

The pandemic stuck a global economy that already was profoundly unsustainable - Socially, Environmentally and even intellectually. Policymakers' choices during this disruption could shape their economies for decades to come. Over the past four decades, almost all advanced economies have become more polarized, with increasingly unequal income distributions. Developing economies lifted billions of people out of poverty, but in the process they, too, created their own rising inequalities and social tensions. The global economy's lopsided growth has brought us to the edge of catastrophic climate change. 

The political upheavals in one country after the another meant the world could not expect to go on as before. Then the coronavirus brought the most dramatic societal disruption and economic collapse in peacetime memory. The enormity of the crisis made unintended radicals out of many political leaders as they intervened drastically in economic activity and took the risks of both workers and businesses on the state's shoulders on a massive scale. 

The structure of public spending has also undergone a big shift, especially in countries with spartan welfare states (form of Govt. in which state protects and promotes economic and social well-being of citizens) to start with. U.K. in a matter of months designed a European style wage subsidy from scratch. USA allowed people to lose their jobs, but sharply boosted unemployment benefits. Every advanced economy has put in place extraordinarily generous loan programs for businesses, in some cases taking all credit risks off banks' hands. In many countries, the state is back in a big way, and this shift is qualitative as well as quantitative - Governments are taking on risks previously borne by the private sector.          

It is time to consider how current policy choices will - and how they should - shape the long-term path of world's economies. Concerns about  rising inequality have been given new fuel because lock downs entailed greater hardship for people in jobs hat could not be done from home. Workers in sectors relying on low-paid and precarious work, hit disproportionately hard by the pandemic, were less equipped to absorb such a shock to begin with. Even unprecedented Govt. steps to protect incomes have been insufficient to offset the damage to those already worse off.   

Climate change, geopolitical upheavals, rapid technological transformations and now the pandemic have increased pressure on politicians to lead their economies to a better place, rather than freeing the animal spirits of the private sector. Even before Covid 19, economics and economic policy advice were becoming increasingly sympathetic to more active intervention to make economies work better.            

Policymakers can at most hope to tweak their governing systems. Mostly their job is to keep things running. They now face three big questions as to how they envisage their country's economic future. These are - 

First, reallocation or restoration. Second, building back better or back to business. Final question is -  whether states are ready to once again embrace planning. Most leaders vow to - Build back better and oversee reallocation of resources to more Covid safe, greener, and more productive activities. At least implicitly this entails a commitment to a more active and strategic state role in the economy than most have engaged in recently. It is yet to find out whether many states have the capability, or their leaders the temperament, to govern the economy more actively and more strategically than before.  

                                                 ****************