How many of the "pandemic response" policies are really temporary, and which ones are likely to stick around long past when the outbreak dies down?
There have been a myriad of responses to the ongoing pandemic, ranging from shutting down schools and borders to printing money and giving subsidies. Most, if not all, measures meant to combat the spread of the disease or to lessen the economic pain it causes are temporary. The question I want to discuss in this week’s post is if we should expect these measures to stay or if they truly are temporary.
In the words of Milton Friedman: “nothing is so permanent as a temporary government programme”. This quote can certainly seem harsh but there are some notable examples like the British income tax or the Bank of Japan’s asset purchasing programme. There are two forms of policies I expect will live on past the end of the pandemic, Quantitative Easing (QE) and closed borders. I think that QE will be too painful for the economy to stop once it is started, and every time a central bank increases the amount of assets the central bank will buy it becomes a permanent increase, so the Fed and other central banks’ ramping up of QE will likely outlive the pandemic by many years. Border restrictions are a bit different to QE in that I think it’d be fairly easy and very worthwhile for many states to reverse any temporary increases in border restrictions. That being said though, there are some states where it’s politically important to be tough on immigration which might take the opportunity to simply never cancel these temporary restrictions. I think this might be the case for Poland and Hungary which would have some very interesting implications for the European Union, and it’d be very interesting to see if Brussels were able to force them to comply with EU regulation.
What do you think? As always I’d love to hear your thoughts, and make sure to read last week’s post if you’re interested, it can be found here. Come back next week for a new post!
Written by Karl Johansson
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