Weekend reading

The COVID-19 pandemic has shed light on the structural dichotomy between the models of capitalism operating in Europe and the US; the former offers better protection for its citizens while the latter shows greater economic dynamism. This column argues that for all the harm COVID-19 has caused, the crisis has also provided an opening to rethink the versions of capitalism practised on both sides of the Atlantic. Some degree of convergence towards a better model is desirable, the authors suggest, and perhaps even possible.

Fighting the consequences of the COVID-19 pandemic poses a difficult task for fiscal and monetary authorities alike. The current low interest rate environment limits the tools of central banks while the record high debt levels curtail the efficacy of fiscal interventions. This column proposes a coordinated policy strategy aiming at creating a controlled rise of inflation and an increase in fiscal space in response to the COVID-19 shock. The strategy consists of the fiscal authority introducing an emergency budget while the monetary authority tolerates an increase in inflation to accommodate this emergency budget.

The use of helicopter money has been proposed to help combat the economic repercussions of the COVID-19 pandemic. The policy has been seen as blasphemy until now, and this column presents a political economy plan to break the taboo. The creation of emergency authority for central banks and the formation of a COVID policy committee could help establish the policy as a one-off, emergency money-financed plan, giving the central bank the authority to act quickly and then revert to the ‘no money-printing’ norm as the crisis subsides.

For years, Germany held these truths to be self-evident: no big budget deficits, no common European debt issuance and no European fiscal union. In the last few weeks, those principles have been revised with an alacrity that has stunned Germany’s neighbours. A country that was long ultra-cautious on Europe and wedded to balanced budgets seems to have had a Damascene conversion.

»Ti kipi so maliki ljudi iz davnih časov. Te malike so častili v prejšnjih stoletjih!« S prav temi besedami lahko vsak izmed teh demonstrantov pojasni rušenje spomenika iz časa, preden smo se zgodovinsko ozavestili in obsodili sužnjelastništvo kot izvor sodobnega rasizma, torej v osnovi s popolnoma enako logiko, s katero so udarniki iz Islamske države razbijali napačne »malike«. Koncept sužnjelastništva je namreč malo starejši od Leopolda II. in Georga Washingtona: kaj bi potem demonstranti gibanja Black Lives Matter rušili tam, kjer so si suženjstvo izmislili, a ni ne Kolumba ne Leopolda II.? Kaj bi na primer rušili v Egiptu?

 

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