In Laurent Binet’s latest alternate history novel, Civilizations, pandemics are used as a device that propel the narrative forward. It is antibodies that allow the Incas to survive their first encounter with Western seafarers—and when the book’s heroes Miguel de Cervantes and Domenikos Theotokopoulos find themselves imprisoned in Mexico-occupied Bordeaux, it is the advent of “the pest” that allows them to escape. In history, both real and imagined, pandemics act as a Deus ex Machina: they halt all activity on the set and drastically move the plot away from its prior determined course.

And so it is with COVID-19 and the political economy of the West. With the pandemic’s arrival, most of human activity ceased, with no regard to the economic costs of the suspension. What is astonishing from a policy perspective is that almost nowhere was this perceived or resolved as a trade-off: with slightly varying degrees of hesitation, total shutdowns were imposed regardless of the cultural and state characteristics of each country or jurisdiction.

Equally unimportant has been the ideological orientation of the party in power in each state. The governments in Spain and the UK, for example, despite their radically different ideological composition, have deployed essentially the same public health measures with the same economic costs. And the same holds true of the measures currently being devised to help the economy: right- and left-wing governments alike are presiding over the largest expansion of the state in generations with equal degrees of urgency. Even in Washington, DC, decades of polarization over the extent to which the state should support its citizens have been swept aside by a bold bipartisan effort to socialize the costs of the pandemic.

Indeed, with little ideological colouring, the main differentiating factor for governments has been competence. In a future religious history of the world, COVID-19 might well be seen as divine punishment for those countries that elected incompetent populists to high office. They have almost invariably been slower to recognize the danger faced by their populations—and even when they do, they are hesitant to follow scientific advice and engage in quarrels with their own local authorities. Contrast this, for example, with the post-populist administration of Kyriakos Mitsotakis in Greece, where early and decisive action meant Greece has one of the lowest fatality rates in the European Union.

Perhaps most encouragingly, COVID-19 has brought forth bold political action, especially in Europe. The same Eurogroup that last autumn demoted a proposed Euro Area budget to a puny budgetary instrument worth €17BN (~0.15% of GDP) last month agreed to more than €500BN of common measures to combat the impact of the virus. The same leaders who a few months ago were haggling over fractions of percentage points of GDP in the EU budget are now telling the Commission to start thinking in trillions.

Of course, all of this has come at tremendous human and economic cost. The most tragic impact is being felt today, by the families of thousands of victims. But the social and economic scars of the lockdowns will be with us for a long time: unemployment, an increase in domestic violence, and a heavy mental health burden will continue to impact us for a long time to come. Finally, the enormous fiscal and monetary costs to cover the necessary relief efforts will bear on taxpayers and savers for most of the decade.

There should be no doubt: COVID-19 will leave all our societies poorer and more uncertain about the future—all economic policy can do and should do will be to mitigate and spread out these costs. But perhaps the pandemic will also leave us wiser about the choices we make as citizens and consumers.

The expedience of populism has been shown to be a very expensive option indeed when exposed to a real crisis. A fixation on moral hazard and individual responsibility has proven a poor policy guide to combatting a societal challenge, whether in U.S. healthcare or EU fiscal policy.

Nonetheless, the crisis has also revealed the resilience of Western political systems. Our democracies have been just as effective as authoritarian regimes in shutting down contagion—and done so without abandoning the civil and personal liberties at their core. The social contract of trust between citizens and government, the subject of so many obituaries in recent years, has proven a powerful keeper of the peace.

As it does in Binet’s novel, the current pandemic has wiped the slate clean: it forces us to rethink our policy preferences anew, unburdened by path dependence. As the past few weeks have shown, reducing greenhouse gas emissions and providing an economic safety net are not as politically impossible as we thought. Like the great French author, the current crisis allows us to reimagine history’s path—perhaps toward a more humane and more sustainable future.



Chief Economist at Greenmantle