McLeod Group blog by Lauchlan T. Munro, April 9, 2020
The COVID-19 pandemic has forced governments around the world to take drastic policy measures, whose scale and scope are truly astonishing. Many of these measures were unthinkable only two months ago. As the nature of the policy responses to the pandemic becomes clear, it is time to take stock of the early implementation. Here are five early lessons.
1. The unthinkable is doable
Nobody would have thought, two months ago, that almost every fiscal conservative would suddenly convert to the Keynesian creed of massive fiscal stimulus. But, as in 2008, even ardent deficit hawks lose their faith when the alternative is total collapse. Even more important than the fiscal stimulus, however, are the qualitative changes that governments have now launched. In recent weeks, even the most conservative legislators have voted for fundamental additions to the welfare state, including wage subsidies, universal basic income, and increased attention to public health, mental health, homelessness and domestic violence. On the economic side, government loan guarantees to businesses, increased enforcement of workplace health and safety rules, enhanced employment protection, a shortened work-week, changes to bankruptcy laws and even government ownership of the commanding heights of the economy are now being implemented by fiscally conservative governments that opposed such measures only months ago.
Not all these measures will survive the current crisis, but some will. Many things that Canadians take for granted, from taxes on income, tobacco and alcohol, to women’s voting rights, came about as a result of an earlier crisis. Progressive political forces have been advocating for such reforms for years, without success. How the left mobilizes to preserve these measures after the crisis passes, and how fiscal conservatives react, will be something to watch.
2. Now is a golden opportunity for learning
How does online learning compare to in-class learning? What effects does online learning have across different subjects (say, biology vs. English) and at different educational levels (primary, secondary, post-secondary)? We are about to find out. Education systems have largely shifted online in recent weeks, with unknown long-term results. The same is true for family medicine and large parts of the public administration. No university research ethics board would have approved such large-scale social experiments, but such COVID-related “natural experiments” are now under way around the world, created by public policy forcing people to self-isolate and work remotely. By comparing results before, during and after the pandemic shock, we will learn much about the benefits, downsides and unintended consequences of moving so much social interaction online.
3. Unintended consequences are consequential
“Movement on any indicator can be maximized provided society is willing to ignore all other indicators”. Aaron Wildavsky told us 40 years ago. In the current pandemic, we can flatten the epidemiological curve by forcing most people to stay at home, but that lockdown will have important, often unintended, economic, social and political consequences. Mass self-isolation has brought with it lost income, increased risks to mental health, and greater marginalization of people with mental illness, refugees and migrant workers. Patterns of criminal activity have changed as criminals have adapted. Drunk driving is down, but commercial break-ins, gender-based violence, and speeding are up. In parts of Mexico, the lockdown has created a free-fire zone, and the murder rate is soaring.
The ways governments have reacted to these side effects of mass self-isolation reflect deep-seated biases and blind spots. Many governments, especially those with some semblance of a welfare state, clearly foresaw the impending income losses and quickly put in place new, expanded or expedited income supports. Governments reacted more slowly to the effects on mental health and domestic violence, even though these effects were just as foreseeable as the income losses.
4. Social policy matters for the economy
In countries with advanced welfare states, the social cost of mass self-isolation is, for most people, stressful but manageable. In countries with more rudimentary welfare states, however, the shutdown can have life-and-death consequences as people weigh the risks of going out to work and buying food or staying at home and starving. In India, lockdowns may be less effective in flattening the curve because the urban poor must self-isolate in overcrowded and often unsanitary buildings and neighbourhoods. Shutdowns of public transport have forced migrant workers to walk hundreds of kilometres home and thus spread the virus further.
The Indian case illustrates the need for better housing, an improved public health system and universalist social protection systems, including universal medical care and income support. Such measures reduce the incentive for people to go out to work during lockdowns. They also help those affected get through the crisis with less mental and financial damage and thus enable an easier return to work after the crisis.
5. Now is the time to think about later
Eventually, the crisis will pass. Faith in governments will be either reinforced or undermined, depending of the quality of their response. Governments and their electorates will have to decide which emergency measures to keep and which to jettison. Social and political contestation around these issues is likely to be intense. Faith in global supplies chains that can be manipulated by the powerful will have eroded, and some resurgence of economic nationalism, at least with respect to key commodities, can be expected. Governments, firms and households will carry higher levels of debt, while the poorer classes especially will have lost income, savings and livelihoods.
If debt forgiveness for poor countries and households, increased income and inheritance taxes for the wealthy, new taxes on financial and property speculation and greater international coordination of economic regulation, taxation and expenditure have been taboo in recent decades, now is time to reassess that orthodoxy. After the crisis passes, politics, society and the economy are unlikely to return to their pre-pandemic normal, nor should they. Now is the time to think about the post-crisis world we want to build. A crisis is a terrible thing to waste.
A former international civil servant, Lauchlan T. Munro now teaches at the University of Ottawa’s School of International Development and Global Studies.