Today’s challenges demand radical action. The old orthodoxy of free markets and hands-off government won’t cut it
As western economies emerge from the pandemic, their governments face a choice: do they seek to address the profound problems that Covid exposed, or try to return to “business as usual” as quickly as possible? Their problem is that many of the issues exacerbated by the pandemic, such as wage stagnation, precarious work and rising inequality are not bugs in an otherwise well-functioning system, but inevitable outcomes of the way that western economies are now organised. So a business-as-usual approach simply won’t work. Much more fundamental change is needed.
The US government seems to recognise this. Joe Biden’s economic plans are a radical departure from the era that stretches from Reagan to Obama, when governments sought to keep taxes and public spending low and focused principally on globalised trade and the education and training of the workforce. Unlike his predecessors, Biden is pursuing large-scale public spending and taking advantage of ultra-low interest rates to borrow for infrastructure investment. His stimulus plans target the climate crisis while creating green jobs and expanding health, education and childcare – the “social infrastructure” that is essential to the economy but has often been ignored by mainstream economists.
Michael Jacobs is professor of political economy at the University of Sheffield, and managing editor of NewEconomyBrief.net