The post-Covid economic order – editorials
It is now clear that the coronavirus pandemic (Covid-19) will not only have enormous costs in terms of loss of life and public health, but it will also cause enormous economic suffering. The nature of the disease is such that there is an inherent tension between preserving lives, implying large-scale blockades, travel restrictions and social distancing, and economic activity, which is based on mobility, migration, supply chains, trade, demand, and consumption. Governments around the world have intervened, to varying degrees, to minimize distress. But what does the crisis say, as well as the nature of the response, about the new global economic paradigm?
The welfare state is back. This is the most significant transformation in decades in the formulation of world economic policies. To be sure, the welfare element of state policy, even in the most developed capitalist democracies, never completely vanished. But the prevailing wisdom was that the state should fulfill its central role of providing basic public services and act as a regulator, and let the rest be determined by the market. But it is clear that governments will now have to intervene in all elements of economic life. For the poor, food and cash transfers will come true; for citizens in general, free or subsidized medical care should be considered; for the unemployed, subsidies may have to be instituted; for companies and companies, fiscal support must be provided, tax concessions must be granted and demand must be created through public interventions; For the working class, public spending should increase. The irony is that at a time when the world is dominated by right-wing leaders, the economic argument of the global left has prevailed.
But this does not mean a return to the old ways of conducting economic transactions, since the other most significant change will be the improved role of technology. Undoubtedly, technological advances were already driving economic integration in unprecedented ways. This is what made working from home possible. But expect increased reliance on technology now and a reduction in the human interface, in the way people live their lives, spend their money, work, operate businesses, interact with friends and family, and create communities. All this accelerates the digital transformation, which, in turn, will be detrimental. Both the government and the private sector will be affected by this. It is this twin process, of welfare and a greater role for the State, on the one hand, and technological disruption, on the other, that will dictate the post-pandemic order.