The devastation wrought by coronavirus is, above all, a matter of human suffering to be lamented. But we must also note another casualty of the pandemic: it puts the final nail in the coffin of an economic philosophy that has dominated policymaking for over three decades.
The experience of “stagflation” of the 1970s, and public debt spikes in the 1980s, produced a reaction in the form of a particular set of ideals of fiscal responsibility. Aiming to keep public deficits and debt to moderate levels became a mark of politicians’ seriousness; so did forswearing an increase in the state’s tax take to fund ever larger public spending as a share of national income. Bien pensants looked askance at “tax and spend” and “borrow to spend” alike.
Before the pandemic, this perspective had already been losing its grip, as expert opinion was becoming more tolerant of debt and more concerned about the damage of public spending cuts in the aftermath of the 2008 global financial crisis. With the economic fallout from Covid-19, received truths about fiscal responsibility will become impossible to hold on to.