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The next big thing is economy

by on 04/04/2020

Lets start with a proclamation,  “After the virus will be defeated,  the next big thing will be the economy”. It never happened in the  modern world, that the world economy had suddenly frozen. What does it mean, no one knows. How to restart the world economy, is a real question. 

Does have the government have the instruments to cope with the situation?

As to the question you both arised, (i would put it in a more eccentric form), whom we help to survive, the gravely ill, whose survival is very costly due to need of a very expensive medical intervention, and even then his life expectancy is short, or a pensioner, otherwise healthy, who may die of the Corona virus, because of lack of respiratory equipments. This is rather a moral question than an economic one. These moral questions have to be answered by the society through political institution, that represent the people. This is why politics exists, even if not all the politicians are always aware of it. The economists have to provide the tools, how to create optimal conditions, to implement any policy decision.

What economists are doing on the macro economical level, is to help to create stable prosperous economy, where maximum people will enjoy maximum personal material utility. This means the economy must efficiently use the limited resources,  to produce and distribute maximum value for minimum cost. (Product means merchandise and services). It has to be said, equally distributed production is usually contradictory to efficiency of its production and distribution. Another question of equality of distribution of wealth and income is, should it be on country level or on global level? It seems obscure to follow social movements, fighting for equality in their country, while not be ready to share their relative wealth with the most needy in underdeveloped countries. 

 The macroeconomic models can predict pretty well the level of unemployment and inflation rate, subject to macroeconomic policy be taken. Of course no economist can predict events like Coronavirus. But it can predict expected economic development following certain economic policy. In most of the times economic predictions problem is not a problem of cause and effect, but the effect’s timing. 

But the issue here in this forum is not if economy as profession is a worthy one.  Since many of us are in age of pension, coming from different professions, have accumulated experience, let’s try to predict what world will we wake up into, after the Corona virus will be gone, and what would be our advise, as to the kind of economy and society we expect should be created.

Let me put several questions in front of you:

In few month the Corona virus will be gone, but the most probably the economic reality will be totally disrupted. Unemployment level of 20% in the developed world is far from unthinkable. The political establishment will do its best to return to the pre-pandemic state. Government deficits will be skyrocketing. If before the crisis Quantitative easing in USA and Europe poured about 10 trillion dollars into the monetary system, this figure will double and more. There will be no restrain on this anymore. This necessarily will rise the question:

Will money continue to be accepted as socially excepted instrument of exchange?

Other sort of questions that already appeared here in different forms was, “Do we want to return to the world, where yield demanding capital, pushes the world economy to continuous economic growth up to infinite?”. This idea by itself is self contradictory,  so one day it has to stop. Isn’t it exactly now the time to do something different?

Corona virus doesn’t recognize political borders. It proved again, the main problems are global, and there are no local solutions. 

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