voxeu.org
Originally posted 10 April 20
The COVID-19 pandemic is a blow to self-interest as a value orientation and laissez-faire as a policy paradigm, both already reeling amid mounting public concerns about climate change. Will the pandemic change our economic narrative, expressing new everyday understandings of how the economy works and how it should work?
We think so. But it will not be simply a shift to the left on the now anachronistic one-dimensional markets-versus-government continuum shown in Figure 1. A position along the blue line represents a mix of public policies – nationalisation of the railways, for example, towards the left; deregulation of labour markets, for example, towards the right.
COVID-19, for better or worse, brings into focus a third pole in the debate: call it community or civil society. In the absence of this third pole, the conventional language of economics and public policy misses the contribution of social norms and of institutions that are neither governments nor markets – like families, relationships within firms, and community organisations.
There are precedents for the scale of changes that we anticipate. The Great Depression and WWII changed the way we talked about the economy: left to its own devices it would wreak havoc on people’s lives (massive unemployment), “heedless self-interest [is] bad economics” (FDR),1 and governments can effectively pursue the public good (defeat fascism, provide economic security). As the memories of that era faded along with the social solidarity and confidence in collective action that it had fostered, another vernacular took over: “there is no such thing as society” (Thatcher) – you get what you pay for, government is just another special interest group.
Another opportunity for a long-needed fundamental shift in the economic vernacular is now unfolding. COVID-19, along with climate change, could be the equivalent of the Great Depression and WWII in forcing a sea change in economic thinking and policy.
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