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

Servaas Storm
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Servaas Storm: Delft University of Technology

No inetwp152, Working Papers Series from Institute for New Economic Thinking

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.

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 (search for similar items in EconPapers)
JEL-codes: E00 E24 E50 E64 G20 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2021-03-08
New Economics Papers: this item is included in nep-hea, nep-mac and nep-pke
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Persistent link: https://EconPapers.repec.org/RePEc:thk:wpaper:inetwp152

DOI: 10.36687/inetwp152

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