Temas de relações internacionais, de política externa e de diplomacia brasileira, com ênfase em políticas econômicas, em viagens, livros e cultura em geral. Um quilombo de resistência intelectual em defesa da racionalidade, da inteligência e das liberdades democráticas.
O que é este blog?
Este blog trata basicamente de ideias, se possível inteligentes, para pessoas inteligentes. Ele também se ocupa de ideias aplicadas à política, em especial à política econômica. Ele constitui uma tentativa de manter um pensamento crítico e independente sobre livros, sobre questões culturais em geral, focando numa discussão bem informada sobre temas de relações internacionais e de política externa do Brasil. Para meus livros e ensaios ver o website: www.pralmeida.org. Para a maior parte de meus textos, ver minha página na plataforma Academia.edu, link: https://itamaraty.academia.edu/PauloRobertodeAlmeida;
Vivemos agora um dos maiores e mais terríveis desafios da Humanidade – houve outros, claro, mas não estávamos por aqui. E se agora quisermos continuar por aqui, precisamos manter de qualquer forma ao máximo as medidas de isolamento social, quarentena, e de acordo com as organizações médicas mundiais. Os cintos se apertaram, mas o piloto não sumiu; apenas não sabe dirigir, e não pode sequestrar um país
Ninguém está querendo ficar em casa trancado, com crianças fora da escola, sem saber o que vai acontecer, trabalhando como pode, ou não trabalhando, sendo obrigado a não trabalhar por não ter como nem onde. O importante é entender o que precisamos fazer nesse momento, e que não é coisa local, é pandemia, mundial. Grave, grave, muito grave. Com reflexos econômicos imensuráveis, um futuro nebuloso.
Mas estamos vendo tudo só piorar por aqui, inclusive por altas incontroladas de preços, abusos de toda sorte, picaretagens e falsificações em produtos médicos, falta de insumos, o Brasil mostrando sua cara e suas deficiências sociais, econômicas, trabalhistas, de saneamento. Milhares de pessoas que nem casa têm para se isolar, nas ruas, com fome, sem poder contar com os solidários voluntários para lhes dar uma prato de comida, ao menos uma vez ao dia, sem água pra beber, porque os bares estão fechados. E os mandamos lavar as mãos com frequência e usar álcool em gel, como se vivêssemos uma linda fantasia conjunta.
Ninguém quer isso tudo o que está ocorrendo, mas o tal piloto, de cuja mente, dele e seus apaniguados, jorra diariamente uma quantidade de ignorâncias tal que torna mais insuportável esse momento, quer fazer parecer que é indolência nossa. Repare. As medidas que precisa tomar, não toma; as promessas que fez, inclusive econômicas, não cumpre. Nos leva a uma situação verdadeiramente insustentável, inclusive diante do resto do planeta. Esse é o fato.
Governados por um Bolsonaro inepto que conseguiu mostrar de vez a única e principal certeza desse momento, a sua total ignorância, incapacidade de liderar, dirigir, pensar. Suas ações e aparições a cada dia apenas têm servido para aumentar a angústia de todos nós, nos deixando marcas, e nos deixando doentes de muitas outras formas além do coronavírus. Depressivos, violentados, atônitos, escandalizados, revoltados.
Parem, por favor, apenas parem esse homem antes que seja tarde demais. Ele ri de nossa agonia. Nos desrespeita, juntando esses grupos de ódio de ignorantes que mancham, eles sim, o nosso verde e amarelo. Com o vermelho de nosso sangue e o verde de sua bílis nojenta. Covardes que se escondem atrás de robôs, que agora batem bumbos de dentro de seus carros potentes em inacreditáveis carreatas. Que dizem que não querem o Brasil parado e que vão nos matar se obtiverem sucesso nessa empreitada suicida, já demonstrada como muito suicida, e em várias partes do mundo.
Desrespeitam os profissionais da saúde que estão na linha de frente do combate; desrespeitam a Ciência; desrespeitam a lógica. Nos levarão ao abismo se permanecerem nessas cadeiras, nos levarão a claras revoltas locais, farão reviver todas as agruras do século passado, escutem, acreditem. Isso não vai acabar bem. Entramos em um perigosíssimo vácuo de poder.
Não podemos ficar em suas mãos como estamos agora, sabendo claramente que os números de infectados e mortos estão totalmente subestimados, porque não temos a base, nem os testes que possam aferir a realidade, e ela é dura.
Nunca tive problemas com idade, a não ser agora onde querem fazer parecer que quem tem mais de 60 anos pode – e quase deve - morrer, que não fará falta – alguns safados chegam a declarar isso textualmente, e ainda se acham brasileiros e que o dinheiro deles os salvará. Estaríamos marcados para morrer, não poder fazer nada? Não, somos a História desse país, temos o conhecimento capaz de combater o mal que tenta se instalar.
Sinto uma revolta como há muito não sentia. Sei que não estou sozinha. Todas as noites ouço o som dessa revolta nas panelas que batem e nos gritos das janelas de meu país, nas discussões que tomam as redes sociais. Mas é cada vez mais clara a situação: quando pudermos abrir as portas, e se possível até bem antes disso, agora, e antes que seja tarde demais, essa revolta precisa criar corpo, ser real, e arrancar dali o maluco que tomou a direção e está desgovernado, pretendendo nos matar.
MARLI GONÇALVES– Jornalista, consultora de comunicação, editora doChumbo Gordo, autora deFeminismo no Cotidiano - Bom para mulheres. E para homens também,pela Editora Contexto. À venda nas livrarias e online, pelaEditorae pelaAmazon.
Pandemia do corona vírus - a responsabilidade é de todos e não só dos governos (federal, estaduais e municipais). As opções são difíceis e complexas. Elas exigem participação individual e coletiva. A crise é mundial. Recai sobre todos uma grande responsabilidade, principalmente sobre os governos, que precisam coordenar, orientar e regular todas as áreas. O ministério da saúde, desde o início, vem mantendo uma linha confiável, transmitindo tranquilidade, realismo e conhecimento. O pessoal dos setores público e privado da área de saúde têm sido exemplares.
Existe uma infinidade de opiniões pessoais, já que o problema é novo há muitas informações divergentes e até algumas falsas na mídia. Isso exige clareza, preparo e segurança nas informações oficiais. A vida das pessoas e a normalidade da vida do país estão afetadas e em risco. Nesse contexto é preciso liderança, coordenação, equilíbrio, flexibilidade e método decisório.
O apoio político à área técnica é fundamental. É hora de estar acima das disputas partidárias, ideológicas, eleitoreiras e de unir os governadores, prefeitos, poderes Executivo, Legislativo, Judiciário, empresariado, população. É importante confiar na área técnica, discutir as opções internamente na área governamental e, após decidir, preservando a flexibilidade, prestigiar as recomendações, ter uma coordenação de governo, transmitir tranquilidade, equilíbrio, coerência e exemplo.
Discussões públicas e contradições mostram falta de coordenação e não trazem a tranquilidade e a paz necessárias para a população enfrentar este período difícil. É na dificuldade que a liderança emerge. O líder tem que transmitir uma orientação segura, serena, exemplar e tem de prestigiar seus assessores, tem que assumir a responsabilidade de todo o processo. As mudanças e adaptações que a dinâmica impõe precisam ser dirigidas com mão segura pelo líder. A hora é crítica, pois afeta a vida das pessoas e todos os campos da vida nacional. A liderança, nesse momento crítico, exige percepção, calma e sensibilidade. Tem que ter bom senso, autoconfiança e humildade para tentar recuperar o tempo perdido.
Jornal “O Estado de S. Paulo”, Opinião, 27/03/2020.
Marcos S. Jank*
A globalização será fortemente impactada pelos dois tsunamis da pandemia.
A imagem mais dura e realista da crise que vivemos são as duas ondas que nos vão atingir em cheio. A primeira é uma onda de menor tamanho, que já recebe todas as atenções neste momento: a pandemia do coronavírus. A segunda, ainda desconhecida e muito mais avassaladora, é a recessão mundial que vem logo atrás da covid-19. Dois tsunamis sucessivos, porém de diferentes natureza e impacto.
O dilema é que quanto melhor forem a contenção e o isolamento das pessoas, maior será a vitória contra a primeira onda e mais desastroso será o impacto da segunda. Como diz o ditado, “se correr o bicho pega, se ficar o bicho come”. Neste caso, se corrermos para fora de casa o bicho da covid pega todo mundo, se ficarmos confinados em casa o bicho da recessão nos come mais à frente.
A tragédia é que, enquanto a covid-19 ataca os mais velhos, a recessão atingirá principalmente os mais pobres, o mercado informal e as pequenas empresas, que têm pouco acesso a crédito e capital de giro, afetando milhões de empregos.
A crise atual origina-se na área sanitária, que determinou o isolamento social, e avança na área econômica, com a paralisação da oferta de bens e serviços. Esta crise exige, portanto, políticas públicas que consigam administrar o difíciltrade-offentre riscos sanitários e riscos socioeconômicos, com suas respectivas medidas e ajustes.
No cenário otimista teremos um impacto momentâneo, com a doença causando poucas mortes e uma recessão moderada e administrável, compensada pelo inevitável surto de crescimento quando a vida se normalizar.
No cenário pessimista, a pandemia demora muito tempo para ser solucionada e a recessão resultante deixa pesadas sequelas em termos de desemprego, quebra de empresas, desorganização de cadeias produtivas, desespero e mesmo violência.
As fronteiras do mundo haviam desaparecido com a facilidade de se conectar, viajar, conversar e trabalhar online. Pessoas se integraram por meio de aviões, internet e redes sociais. Empresas e produtos que se tornaram globais. Mas esta crise está revelando aspectos até aqui inimagináveis, como a incapacidade dos países de prever e lidar com crises sanitárias. Com tanta riqueza acumulada, a humanidade da era digital foi abalroada pela falta de testes, máscaras e respiradores.
Isso sem contar a visível fragilidade das cadeias de suprimento e a inoperância de organizações multilaterais como ONU e G-20 para atuarem de forma coordenada e contundente num momento em que elas são mais necessárias.
O fato é que a crise do coronavírus traz o Estado-nação e as fronteiras nacionais de volta à cena e vai aumentar as pressões por controles de fronteira, protecionismo e favorecimento de produtores e produtos locais.
O mundo global pode sangrar se o nacionalismo pós-coronavírus levar à deterioração das relações EUA-China, ao colapso da arquitetura integrada da União Europeia e à redução do comércio e dos investimentos globais. Isolamento e quarentenas, xenofobia, movimentos antiglobalistas e antimigração podem produzir uma aversão a produtos importados, atingindo em cheio a crescente presença e competitividade do agronegócio brasileiro.
Um dos elos mais sensíveis no ambiente altamente tumultuado desta pandemia é o abastecimento de alimentos e bebidas. Pelo menos aqui, no Brasil, não vai faltar comida, já que produzimos muito mais do que consumimos. Mas dois problemas podem impactar o esforço de produção: a distribuição de produtos e a recessão global.
No médio e no longo prazos, temos de entender melhor qual será o impacto de uma recessão global nas nossas exportações. Conceitualmente, o agronegócio deveria ser um dos setores menos afetados, pois as pessoas não vão deixar de comer e o mundo depende do Brasil para sua segurança alimentar em diversas commodities. Mas uma recessão longa e penosa pode criar alta volatilidade e derrubar preços e margens, a exemplo da Grande Depressão de 1929.
No curto prazo, as medidas de contenção têm criado travas importantes no fluxo físico das cadeias de suprimento de produtos agropecuários e alimentos, que são longas e complexas, principalmente na área de produtos perecíveis, como frutas, verduras, carnes e lácteos, e de atividades cuja produção depende de mão de obra intensiva e aglomerada.
Isso sem contar o impacto das restrições impostas sobre importantes canais de distribuição, como bares, restaurantes, hotéis e serviços de alimentação. Tenho ouvido relatos de arbitrariedades absurdas, fechamento de cidades, falta de serviços de apoio, atrasos e quebra de contratos nas cadeias do agro. A demanda de alimentos básicos é geralmente inelástica e seus efeito sobre o consumo total são limitados, mas os padrões de consumo podem mudar em função de restrições localizadas e preços relativos.
Em toda a minha vida, nunca vi um momento tão crítico como este, que exige estratégia sólida e coordenação firme de autoridades em diferentes níveis do governo e imenso esforço coletivo e cooperativo de empresas e pessoas. Os países que melhor lidaram até aqui com a mitigação da doença e da recessão foram os que implementaram estratégias firmes e focadas para lidar com problemas concretos (isolamento de doentes, por exemplo), ao lado de campanhas de ampla informação e conscientização da sociedade.
President Trump speaks at a news conference March 18 at the White House. (Kevin Dietsch/UPI/Bloomberg News)
It’s the new normal in pandemic geopolitics. Taking their cues from tens of millions of office workers around the world, leaders of the Group of 20 major economies met over videoconference Thursday morning in a 90-minute virtual session chaired by King Salman of Saudi Arabia about the coronavirus crisis.
Nothing that significant emerged from their discussions. Inan anodyne joint statement, the bloc touted the approximately $5 trillion in stimulus it is collectively putting into the global economy — mostly in the form of relief and temporary assistance to the unemployed — andoffered unspecific commitmentsto coordinate a collective response to the virus. The new-age optics of the summit hardly dimmed the real tensions still in play: Saudi Arabia remains in a spat with Russia over each other’s oversupply in the oil market that preceded the nose-dive in global markets, while the novel coronavirus pandemic has only worsened the already strained relations between the United States and China.
In his remarks, Chinese President Xi Jinpingreportedly inveighed against U.S. tariffsand trade barriers that have snarled the global supply chain and threaten to tip many countries into a recession. The Trump administration, meanwhile, made its position clear Wednesday, when Secretary of State Mike Pompeoended the possibility of a joint statementfrom the Group of Seven foreign ministers by insisting that they label the outbreak the “Wuhan virus” — a descriptor Beijing deems offensive and part ofa “sinister” messaging campaignby Washington.
On this front, U.S. allies elsewhere are sympathetic to China. “Other nations in the group of world powers rejected the term because they viewed it as needlessly divisive at a time when international cooperation is required to slow the global pandemic and deal with the scarcity of medical supplies,”my colleagues reported.
According to NBC News, a similar confrontation is taking place at the United Nations, where efforts for a joint Security Council resolution or declaration about the pandemic have been stymied by American insistence on stressing the virus’s origin in Wuhan.
For President Trump and some of his allies, this is a key line of attack.After spending weeks playing down the virus’s threat, they areciting China’s initial opaque managementof the crisis as a central reason the United States appeared to have been blindsided by it. On Thursday, thenumber of confirmed casesof the coronavirus in the United States surpassed the number reported by any other country in the world.
“China unleashed this plague on the world, and China has to be held accountable,” Sen. Tom Cotton (R-Ark.) said last week when announcing legislation aimed at ending U.S. reliance on Chinese drug manufacturing.
That’s not quite the view of the rest of the international community. Although Chinese state outlets have churned out their own angry propaganda,accusing the United Statesof somehow engineering the pandemic, Beijing has stepped up aid shipments to Western countries and dispatched medical teams to help Italy, the worst-hit country in Europe.
Asmy colleagues reported, there may have been an earlier era when the world looked to Washington for leadership during a global crisis. Under Trump, that moment seems to be passing.
“Very few countries today see the U.S. as part of the solution, whereas in the past it was the natural point of comparison, or a country to imitate,” Luis Rubio, head of the Mexican Council on Foreign Relations,told my colleagues.
“I do wonder whether this really is an inflection point in the international system,”said Nathalie Tocci, the head of the Italian Institute of International Affairs and a former foreign policy adviser to senior European Union leaders. “Here in Italy it is going to change for good the perception of who is leading in the world, and it’s not the United States. It’s so strong what is happening. It’s so powerful and it’s so traumatic. The emotions that it ignites today are going to be engraved in the national narrative.”
The Trump administration may be more focused onquietly soliciting aid from other countriesthan steering the collective international response to the pandemic. Numerous U.S. states arereporting shortages of vital medical supplies, including masks, which have been exacerbated by a lack of federal government coordination over the delivery of these critical goods. This week, Trump sentan urgent request to South Korea— whose rush to roll out mass testing on its populace stands in stark contrast to the way the United States is handling the outbreak — for possible aid, including Korean equipment for testing.
“Had the United States and China collaborated more closely when the virus emerged, they may have identified its source more quickly; sounded an earlier alarm about its severity; and outlined best practices that the rest of the world could adopt to preempt its arrival and/or contain its spread,”suggested Ali Wyne of the Atlantic Council.
That time for cooperation may still yet come. “When this pandemic finally passes, the world’s nations should have a candid conversation about what allowed it to happen, and decide how to strengthen national and international institutions in ways that could prevent a repeat,”wrote American commentator Robert Wrightin a recent column. “If people like Trump and Tom Cotton … continue to gratuitously deepen tensions with China, that will be a lot harder than it needs to be.”
Building up the pillars of state Rich countries try radical economic policies to counter Covid-19
History suggests that the effects will be permanent
The Economist, March 26, 2020
Editor’s note: The Economist is making some of its most important coverage of the Covid-19 pandemic freely available to readers of The Economist Today, our daily newsletter. To receive it, register here. For more coverage, see our coronavirus hub
“The government intervention is not a government takeover,” the American president argued. “Its purpose is not to weaken the free market. It is to preserve the free market.” The imf pointed to the “unprecedented policy actions undertaken by central banks and governments worldwide”. The economic response to the financial meltdown of 2007-09 was big enough. But in answer to the Covid-19 pandemic policymakers are launching even bigger, more radical interventions. Putting the economy on a wartime footing is supposed to be temporary. A look at 500 years of governmental power, however, suggests another outcome: the state is likely to play a very different role in the economy—not just during the crisis, but long after.
The policy response has been swift and decisive. Globally central banks have cut interest rates by more than 0.5 percentage points since January and have launched huge new quantitative-easing schemes (creating money to buy bonds). Politicians are throwing open the fiscal spigots to support the economy. As The Economist went to press, America’s Congress was set to pass a bill that boosts spending by twice as much as President Barack Obama’s package in 2009 (see article). On top of that, Britain, France and other countries have made credit guarantees worth as much as 15% of GDP, seeking to prevent a cascade of defaults. On the most conservative measure, the global stimulus from government spending this year will exceed 2% of global GDP, a much bigger push than was seen in 2007-09 (see chart 1). Even Germany, whose fiscal rectitude is the punchline of economists’ jokes, is spending more (see article).
The upshot is that the state is swelling. Last year overall government spending accounted for 38% of GDPacross the rich world. The stimulus effort, combined with a fall in nominal GDP in the next few months, will push that ratio well above 40%, perhaps to its highest-ever level.
To focus just on the numbers misses something crucial, though. There are important qualitative changes under way in how policymakers manage the economy—the responsibilities they have seized for themselves, what is seen as a legitimate action and what is not, and the criteria used to judge policy success or failure. On these measures, the world is in the early stages of a revolution in economic policymaking.
Central banks have in effect pledged to print as much money as necessary to keep down government-borrowing costs. The European Central Bank is promising more or less to buy everything that governments might issue; this should reduce the gap in borrowing costs between weaker and stronger euro-zone members, which widened in the early days of the pandemic. On March 23rd America’s Federal Reserve promised to buy unlimited quantities of Treasury bonds and agency mortgage-backed securities, if necessary. The rise in borrowing caused by America’s stimulus may be matched, at least initially, by bond purchases by the Fed, which smells a lot like money-printing to finance deficits. The central bank also announced new programmes to support the flow of credit to companies and consumers. The Fed is now the direct lender of last resort to the real economy, not just the financial system.
Politicians, too, are ripping up the rulebook. In a standard recession firms are allowed to go bust and people to become unemployed. Even in normal economic times, roughly 8% of businesses in OECD countries go under each year, while 10% or so of the workforce lose a job. Now governments hope to stop this from happening entirely. President Emmanuel Macron does not speak only for France when he vows that no firm will “face the risk of bankruptcy” as a result of the pandemic. Boris Johnson, Britain’s prime minister, contrasts his government’s response with the one during the last financial crisis: “everybody said we bailed out the banks and we didn’t look after the people who really suffered”. Larry Kudlow, the director of America’s National Economic Council, calls America’s fiscal stimulus “the single largest Main Street assistance programme in the history of the United States”, comparing it favourably with Wall Street bail-outs a decade ago.
To that end, governments across the rich world are channelling vast sums to firms, providing them with grants and cheap loans in an attempt to preserve jobs and prevent them from going bust. In some cases the government is paying the wages of people who cannot work safely: the eu in particular has embraced this policy, while the British state will pay up to 80% of the wages of furloughed workers. The American package includes loans to small businesses that will be forgiven if workers are not laid off. Households across the rich world are being given temporary relief on mortgages, other debts, rent and utility bills. In America people will also be sent cheques worth up to $1,200.
The vast majority of economists support these measures. Nominally they are temporary, designed to hold the economy in an induced coma until the pandemic passes, at which point the world is supposed to revert to the status quo ante. But history suggests that a return to pre-covid days is unlikely. Two lessons stand out. The first is that governmental control over the economy takes a large step up during periods of crisis—and in particular war. The second is that the forces encouraging governments to retain and expand economic control are stronger than the forces encouraging them to relinquish it, meaning that a “temporary” expansion of state power tends to become permanent.
The sinews of power
In recent centuries government spending across the capitalist world has leapt. In the 1600s the outlays of the entire English state accounted for about 5% of gdp, with practically no spending on public health or education, nor much regulation of economic life, save for crude contract enforcement (see chart 2). That began to change in the 18th century, and from the end of the 19th century Britain and other capitalist countries saw increased state intervention, with more government resources being devoted to public goods such as welfare and education and commensurate increases in taxes (see chart 3).
Governments have had some lean periods. In Victorian Britain state spending fell as a share of gdp—though that was largely because economic growth was so rapid, and the measure in chart 2 excludes spending by local governments, which became exceptionally powerful over the period. In the 1980s Ronald Reagan succeeded in stabilising America’s day-to-day federal spending. His reforms, as well as those of Margaret Thatcher in Britain, reduced the role of government in fixing prices; privatisations encouraged profit-making firms to provide formerly state-run services such as power and transport. Yet even during Reagan’s presidency the number of pages of federal regulations rose by 14%.
A back-of-the-envelope calculation finds that, of the more than 50 countries for which there are long-run fiscal data, two-thirds saw their government-spending-to-gdp ratio increase between 1988 and 2018. America’s ratio of day-to-day public spending to gdp is eight percentage points higher than it was in 1962, when Milton Friedman wrote “Capitalism and Freedom”, a book which warned of the dangers of socialism.
Historians argue over why the public sector has a tendency to expand. In the 19th century Adolph Wagner, a German economist, suggested that as places got richer, demands on government grew. An increasingly complex production process needed more regulation and contractual enforcement. Wealthier people would also demand more public welfare provision, the theory goes, perhaps because they worried less about their own material situation and could thus turn their attention to others.
Wagner’s theories also pointed to what economists call “hysteresis” in fiscal policy. Governments may intend to boost spending only for a short while. But then expectations change, making such expansionism hard to undo. It is now common sense that the state should provide education to children at no cost to parents, or support people who are out of work. American governments have in recent decades cut the share of public spending devoted to welfare. However, it remains politically impossible to bring it down to anywhere near its level in the mid-1960s, before President Lyndon Johnson’s “war on poverty” was launched. The upshot is that while it is easy to ratchet state spending up, it is much harder to push it down.
Perhaps the most important lesson of 500 years of history, however, is that nothing has helped boost state power in Europe and America more than crises. Historians broadly agree that the growing fiscal capacity of capitalist countries from the 1700s onwards was linked to the need to fight increasingly sprawling and expensive wars, especially those using navies and where the field of battle was far from home. (The Seven Years War of 1756-63 is widely considered to be the first global war because it involved a large number of countries, often fighting in foreign theatres.)
To win, countries required increasingly complex, well-resourced administrations which could supply fighters with weapons that worked and food that had not rotted. They also needed the money to pay for it, whether by levying more taxes or by becoming a reliable borrower in markets—which called for yet more bureaucracy. Growing state capacity, in turn, allowed for the emergence of the capitalism we know today, with properly regulated markets, efficient telecoms and transport, and healthy and educated citizens.
The winners of those wars also seized control of resources, from sugar and spices to linens, which proved integral to industrialisation. So it is no surprise that historians contend that wars and other crises have been an engine of economic development. It is no coincidence that the Netherlands, the first country to embrace capitalism, in the 17th century, was also at the time the world’s pre-eminent naval power, fighting and winning numerous wars over the period; or that Britain, which came to dominate the seas in the 18th century, then became the world’s largest economy. According to Larry Neal of the University of Illinois at Urbana-Champaign, the Industrial Revolution “occurred precisely during and because of the Napoleonic wars” of the late 18th and early 19th centuries.
The responses to crises since then have further consolidated the power of the state. France’s top rate of income tax was zero in 1914; a year after the end of the first world war it was 50%. Canada introduced income tax in 1917 as a “temporary” measure to finance the war. During the second world war income tax in America turned from a “class tax” to a “mass tax”, with the number of payers rising from 7m in 1940 to 42m in 1945 (today more than twice as many Americans are caught in the net). The second world war also led to calls for the introduction of cradle-to-grave welfare systems. So did the dynamics of the cold war: governments across the capitalist world wanted to forestall a communist rebellion. The state-led model pursued in Europe from the 1950s to the 1970s, in which bureaucrats controlled services from power networks to transport systems, would have been unimaginable without wartime experience, where the state managed practically everything and ordinary people made tremendous sacrifices, whether on the battlefield or at home.
The new ideology
What will be the lasting effects of the covid-19 pandemic? Start with the size of the state. Over the next year government debt will rise sharply, as spending jumps and tax revenues collapse. When the economy recovers, attention will turn to paying it down. “Capital and Ideology”, a new book by Thomas Piketty, a French economist, shows that after the first and second world wars many governments in the West turned to heavier taxation of the incomes and wealth of the richest to achieve that goal. Another option is “financial repression”, where governments force citizens to lend to them at below-market rates (see article).
Central banks’ innovations will also have lasting consequences. Few economists believe that the explicit co-operation between the fiscal and monetary authorities risks creating runaway inflation, as it has done in Venezuela and Zimbabwe, any time soon. (If anything, the bigger worry right now is deflation, not least because of a collapse in oil prices.) However, just as the use of quantitative easing in 2008-09 opened the door to more of the same down the road, it will become harder to make the argument that the “magic money tree” does not exist. Politicians in the future may lean on central banks to peg interest rates at zero to support government borrowing, even during times of economic growth and low unemployment. If central banks promised to fund the government during the coronavirus pandemic, they might ask, then why shouldn’t they also fund it to launch an expensive war against a foreign enemy or to invest in a Green New Deal?
The final impact of the current interventions relates to policymakers’ tolerance for risk. No one cheers when a firm goes bust, but often the process helps shift resources from less efficient to more efficient uses, thus raising productivity and average living standards over time. The novel notion that the government needs to preserve firms, jobs and workers’ incomes at practically any cost may endure, especially if the intervention proves successful in narrow terms. The policy will formally end once the pandemic has passed, but political pressure for similar support schemes—from the nationalisation of tottering firms to the provision of a universal basic income—may well be higher the next time a sharp downturn comes along. If politicians are able to preserve jobs and incomes during this crisis, many people will see little reason why they should not try again in the next one.
Calls for a more activist fiscal-monetary government will come against a backdrop of structurally higher demand for state spending. The public sector tends to provide labour-intensive services in which productivity improvements are difficult, such as health care and education. It must match the salaries of workers in other sectors in order to retain its own, even as they become less productive relative to the overall economy—a phenomenon which raises the cost of provision. Long before the coronavirus pandemic, fiscal wonks argued that government spending would soar during the 2020s, even in the absence of a crisis. That was not only or even primarily because an ageing population would raise demand for health care, but because health systems would be able to treat a wider range of illnesses more effectively, which would push up costs.
The likely economic effects of the pandemic reach far beyond the role of the state. Countries could become even less welcoming to immigrants—the better, they may believe, to reduce the likelihood of infection from foreign arrivals. On the same logic, resistance to the development of dense urban centres could mount, thereby limiting construction of new housing and raising costs. More countries may seek to become self-sufficient in the production of “strategic” commodities such as medicines, medical equipment and even toilet roll, contributing to a further rollback of globalisation. But the redefined role of the state could prove to be the most significant shift. The rules of the game have been moving in one direction for centuries. Another radical change is looming.■
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This article appeared in the Briefing section of the print edition under the headline "Building up the pillars of state"
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