The idea of interventionism is growing stronger and more justified in a society plagued by pandemic and economic crisis
As Bloomberg notes, throughout human history, upheavals like wars and epidemics have caused changes that have necessarily outlasted the upheavals themselves. For example, the plague that swept through Europe in the 14th century provoked an increase in wages as labor became scarce.
The coronavirus pandemic would also have long-term effects on the economy, which would not be good for capitalism and globalization. Even before the Corona Crisis, the idea was gaining popularity that the market alone could not ensure prosperity. Now the idea has become a reality.
State mechanisms at the height of the crisis helped keep economies from collapsing. At the same time, the influence of governments has grown enough for financial elites to worry. This is especially noticeable in the European Union, which has targeted technology giants, whose dominance does not give smaller companies a chance.
“Of course, the public sector has a role to play in the economic recovery after COVID-19, but it goes beyond providing the unemployed with a livelihood”, – Bloomberg writes.
The pandemic prompted governments to intervene in two main ways: politicians imposed unprecedented quarantine restrictions and provided large-scale economic support, including loan guarantees and capital injections. The case for such state intervention in the economy was overwhelming. But European governments seem unwilling to play only a temporary role in supporting business.
“The risks of a return to the old methods of interventionism that characterized Britain in the 1970s and Italy in the 1980s are not far off”, – the agency wrote. – “If governments do not relinquish control of bankrupt businesses after a pandemic, it will result in significant spending in the public purse.”
The politics of encouraging such a transformation would be extremely difficult. It is much easier to continue to invest in a struggling company than to shut it down and retrain employees to work in other areas. But long-term recovery from a pandemic depends on policymakers’ ability to understand their own limits.