First amongst loons was the IPA, closely followed by Chris Joye. Now they’re pouring forth, IPA alumnus James Paterson:
The emergency measures put in place to control the spread of coronavirus are necessary, but history shows that radical economic interventions imposed in times of crisis should be removed as quickly as possible once the crisis passes.
…As during WWII, government spending has skyrocketed, much of which will be funded by debt. Our stay-at-home orders are akin to wartime curfews. Supermarket rationing of essential goods is reminiscent of wartime restrictions.
However, at the end of the war many politicians and economic experts sought to prolong those economic controls. Sometimes they had political motivations, sometimes it was based on fear of the consequences of suddenly returning to normal.
But countries that returned to normal fastest were most able to reap the benefits of prosperity in the years that followed.
The best example was West Germany. The German economy had been centrally controlled since 1936, with stringent measures ranging from rationing to the central allocation of labour and raw materials. These controls were continued under the Allied occupation until June 1948, when Ludwig Erhard, the director of the economic administration for the British-US occupation zone, abruptly announced the end of price controls and rationing directives.
Hello, Marshall Plan.
Still more from the pond:
Andrew Stone, who left the Reserve Bank to become Tony Abbott’s chief economist in 2011, said in hindsight swaths of new federal spending announced in March — estimated to be the largest in the world as a share of GDP by the IMF last week — should be wound back.
“Government led people to believe the virus would be like a Spanish flu; that’s turned out not to be the case, and they will forgive it if it admits that, on new information, it was wrong and allows businesses to reopen,” he told The Australian.
“Most of all we need to avoid a situation whereby we’re effectively printing money to pay people to do nothing,” he added, referring to the government’s signature $130bn JobKeeper package, which begins next month.
…“Governments should immediately commence a phased, 4 to 6-week windback of the lockdown instituted since 23 March, conditional on infection rates not spiking alarmingly again,” he said.
Sigh. Is it really so difficult to imagine the counter-factual? The shutdown crushed the virus curve, as we knew it would. That’s not a reason to reject the stimulus. It is a part of it.
Reopening too fast will simply trigger a wider pandemic into Winter. That leads to an even worse, second shutdown, like Singapore.
Which will put in everybody’s heads that neither authorities nor the virus can be trusted. The damage to confidence would become permanent.
That is why the long history of research in such matters shows that harsh lockdowns leads to faster recoveries.
There are different ways to skin the reopening cat but they’re much of a muchness and must be followed unless you want to really wreck things.
It’s much easier to burnish your loon pond credentials than it is to actually read something.
