![]() ![]() We need a better framework for economic governance that preserves the advantages of a liberal economic order, the need to protect people where they live and who, in the words of Woodrow Wilson in his first inaugural address in 1913 5, “can not alter, control or singly cope with the consequences of great industrial and social processes”. There were both policy and market failures after 2008 there is no margin for error this time. Decisions taken now and in the coming years will have far-reaching effects, altering and then locking in factors of development and territorial structures that will be very difficult to modify once in place. What may sound technical is in fact highly political because huge sums are at stake. Short-changing the future after 2008 has been the most expensive mistake of all. Post-2008 pressures to reduce deficits by cutting expenditure and investment would turn up time and again in post-pandemic inquiries into the staffing of hospitals, the production and stockpiling of medical supplies, as well as the training and hiring of medical staff. ![]() The same can be said about deficits: it is the use of money that matters. It is much worse when the government lightly regulates the wrong things than when the level of regulation is higher but concerns all the right things. Both seem to forget what Friedrich Hayek argued in the 1960’s: it is not the quantum of regulation that matters, but what gets regulated 4. To some, mostly on the political right, the return of the State should be temporary to others, essentially on the left, a greater role for the State should be permanent. Better regulation usually comes after and not before the catastrophe, but to get out of the recession, businesses will argue to scrap regulations. ![]() In 2008, commentators proclaimed that the State was back they have done so again in 2020. This is a classic example of a conjuncture, when a crisis happens at the crossing of both short-term and long-term trends and major technological innovations. Nothing near that level was being invested before 2020. In 2006, the estimated cost of renewal and modernization over 25 years was $70 trillion, then 3.5% of global GDP 3. Many systems for telecommunication, transportation, water, power generation and transmission, as well as hospitals – some built to last 100 or 150 years, others for 25 or 50 years – are coming to the end of their useful life-cycle. ![]() This goes far beyond the production of masks, ventilators, and of pharmaceuticals, or the numbers of beds in intensive care units (ICUs). During a crisis such as this, we realize how invaluable infrastructure is, and what the risks of under-supply are. With the Covid-19 pandemic, we are confronted with this crisis at a unique moment, a historic rupture between one period and another. Will there be greater momentum for a paradigm shift now that we are counting the dead as well as the debt? Complacency, the burden of conventional wisdom, reluctance to trust new ideas, and the power of vested interests inhibited change in policy after 2008, and could do so again in the 2020s. People do not want a better past they want a better future” 2. Already in 2018, British economics journalist Martin Wolf writing about the policy failures after the financial crisis of 2008, warned that “A better version of the pre-2008 world will just not do. When there is great suffering which catches countries unprepared, people are conflicted between a desire to return to normality and a desire to redeem the loss of life and wealth by attempting to change things. Soberly, we acknowledge that things will never be the same again: we hope for the better, but fear the worst. In a study for the Fondation pour l’innovation politique 1, I highlighted the urban dimension of the Covid-19 pandemic as the most recent and spectacular example of a lethal, fast-moving cross-border risk. Crises bring to light strengths that were taken for granted, and weaknesses that were long ignored. ![]()
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