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Economic crises, and the C19 pandemic certainly is one, have a habit of initiating a major change in economic orthodoxy.
Arguable examples include mercantilism after the collapse of the feudal system, Adam Smith after two long pan-European wars, end of the Gold Standard post-WW1, Keynes after the Great Depression and WW2, ‘market reforms’ after the 1973-5 recession & crash, and the ‘Washington Consensus’ after the collapse of communism 1989-91. Then came the 2008 financial crisis, which was still unresolved when C19 hit. To a great extent, each crisis arose from the ‘flaws’ in each new orthodoxy.
Each of these changes was highly controversial at the time, at first, and even subject to ridicule. But it is easy to forget that the emerging new ideas were aimed at particular problems perceived at the time, where the prevailing orthodoxy no longer had perceived relevance for the problems faced. The new ideas that endured above others did so in that context.
We appear to have reached that point now. But it’s very messy.
In the UK the post-2008 orthodoxy we are probably leaving behind had already become something of a hybrid. Austerity in public spending aimed at partial debt reduction, was still there, but reductions in regulations had gone. Monetisation/Quantitative Easing had been introduced to purchase bank ‘assets’ (derivative securities). These bank assets had initially been the cause of the 2008 crash, as their value evaporated. However, the asset purchases still continued twelve years later, keeping interest rates artificially low, but leaving international markets awash with cash; evidenced by a rise in international share prices, to two to four times what they used to be, relative to company profits. Culprits’ reward.
Up until Brexit, this was the hybrid orthodoxy.