A Paradigm Shift? The Impact of COVID-19
Coronavirus may not represent the beginnings of paradigmatic change that some are hoping for…
COVID-19 has dominated politics this year and this trend looks set to continue. While, thankfully, Australia seems to have so far avoided much of the health system overload that countries such as the United States are experiencing, we are experiencing the economic effects.
With social distancing restrictions in place many businesses have been forced to close for either legislative or financial reasons. With such a massive decrease in demand, traditional stimulus approaches aren’t as effective. When your goal is ‘restarting’ the economy, that’s somewhat difficult to achieve when there is barely an economy to restart.
And this is what makes the crisis so unique — the economic aspect of it anyway. Traditional expansionary measures, monetary or fiscal, are essentially powerless to prevent what’s happened, what’s happening, and what’s coming. The economy has no choice other than to hibernate until the worst is over — unless, of course, you’re from the Institute of Public Affairs and you expect the everyone to continue on with business as usual, sacrificing countless lives in the process, to avoid economic slowdown!
From my perspective, the only thing that can be done — what is currently being done — is for the Government to support those who cannot earn a regular income until the country can start reopening. You know the details of this, I won’t bore you by going over it again.
Much has been made of what Coronavirus means for the future of economic policy, but the most prominent takeaway is this: the government has a greater capacity to protect workers and the unemployed from economic shocks than is commonly acknowledged.
Many commentators have already argued that the Government will find it difficult to decrease Newstart back to its previous level and I have, anecdotally mind you, heard some lament the ‘inhumanity’ of Centrelink.
While I understand the capacity for Coronavirus to drastically shift contemporary understandings of the role of government, I think the jury is still out on the narrative that will dominate the post-COVID world.
Certainly, many people will have had their world views shaken and perhaps the value of government intervention will be more widely recognised. However, it remains to be seen whether previously ‘radical’ policies will now become mainstream — as some people I’ve spoken to who argue modern monetary theory will become widely accepted believe.
I’d love to see our political discourse consider far-reaching and structural economic change but I don’t know how likely this will be.
Coronavirus is an external shock. Is it exposing flaws with contemporary governance strategies the world over? Yes. Will that be the way it is seen? Perhaps not.
What I think many people are failing to acknowledge is that whatever perception of the value of government intervention lingers after coronavirus is yesterday’s news, it will only be applicable in specific circumstances. Namely, during crises. The perception of the policy response will be tied to the fact that it was implemented in extraordinary circumstances.
Scott Morrison, on the 7:30 Report on the 3rd March, argued that Coronavirus would have “very real economic impacts”. Josh Frydenberg, on the 7:30 Report on the 13th March, argued that the Coalition may not be able to deliver their proposed surplus due to “external shocks”.
While these are more than likely throwaway lines from politicians trying to make themselves look good on national TV, they are good indicator of what’s to come. The virus will have been a challenge and the Government will have risen to the occasion (at least so far, I understand that there are months to go before assessments of success can be made).
Australia is in a good position. So far, we have managed to avoid a public health crisis. The extent of the economic crisis remains to be seen, but regardless of how bad it is, the narrative will be one of crisis aversion.
Reform will be seen to many as unnecessary because those governance mechanisms and institutions which require reform were not the cause of the crisis. Sure, they may have buckled slightly under pressure, but, ultimately, they were able to handle it. Reform, to the extent that it occurs, will be focused on governmental capacity to respond to crisis.
For those seeking reforms and wanting to use Coronavirus as the catalyst, be wary that it may not be an easy win. Crises present opportunities for change, but change must be earned. As we have already seen many commentators are looking forward to returning to ‘business as usual’. Business as usual means periods of non-crisis; business as usual means forgetting the weaknesses exposed by the pandemic; business as usual means minimal reform.
