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Lessons for the Age of Consequences:COVID-19 and the Macroeconomy
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Lessons for the Age of Consequences:COVID-19 and the Macroeconomy

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  • Servaas Storm

    (Delft University of Technology)

Abstract

Based on comparative empirical evidence for 22 major OECD countries, I argue that country differences in cumulative mortality impacts of SARS-CoV-2 are largely caused by: (1) weaknesses in public health competence by country; (2) pre-existing country-wise variations in structural socio-economic and public health vulnerabilities; and (3) the presence of fiscal constraints. The paper argues that these pre-existing conditions, all favorable to the coronavirus, have been created, and amplified, by four decades of neoliberal macroeconomic policies – in particular by (a) the deadly emphasis on fiscal austerity (which diminished public health capacities, damaged public health and deepened inequalities and vulnerabilities); (b) the obsessive belief of macroeconomists in a trade-off between 'efficiency' and 'equity', which is mostly used to erroneously justify rampant inequality; (c) the complicit endorsement by mainstream macro of the unchecked power over monetary and fiscal policy-making of global finance and the rentier class; and (d) the unhealthy aversion of mainstream macro (and MMT) to raising taxes, which deceives the public about the necessity to raise taxes to counter the excessive liquidity preference of the rentiers and to realign the interests of finance and of the real economy. The paper concludes by outlining a few lessons for a saner macroeconomics.

Suggested Citation

  • Servaas Storm, 2021. "Lessons for the Age of Consequences:COVID-19 and the Macroeconomy," Working Papers Series inetwp152, Institute for New Economic Thinking.
    • Handle: RePEc:thk:wpaper:inetwp152
    DOI: 10.36687/inetwp152
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    Keywords

    COVID-19; public health emergency; recession; relief spending; fiscal austerity; social determinants of health; economic inequality; excess liquidity; 'disconnect' between the financial and the real worlds;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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