The government’s economic response to the Coronacrisis is necessary, but the measures must be temporary
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BY TOM HARWOOD
The left has been revelling in the unprecedented interventionism of this government in response to the Covid-19 epidemic. Over the weekend, Jeremy Corbyn claimed the response showed that he had ‘won the argument’, whilst Labour’s media outriders claimed that somehow the hundreds of billions of pounds committed by the Government were hiding behind the sofa all along and could be used for day to day spending in normal times. They are woefully wrong.
If a building is burning, it makes sense to douse the place in gallons of water, no matter the consequences for the property inside. Saving lives comes first.
Similarly in this kind of national emergency it’s right to momentarily put aside the expensive consequences of ploughing the nation with gallons of debt. Saving lives comes first.
Clearly, however, this kind of intervention is not necessary or indeed desirable in normal times. It will come with heavy costs for each and every one of us. We have to remember that there are no easy answers in times like these, those in government are navigating a twisted maze of differing evils.
What should be blindingly obvious to all of us is that the ideas that may have to be deployed in emergencies like these are almost never pathways to be pursued in normal times.
As Sam Bowman and Sam Dumitriu excellently explained in a must read piece last week this is not a normal recession. This is not a normal time. Our self-induced economic shutdown is necessary to save tens of thousands of lives. In ordinary recessions it is necessary to not prop up failing businesses, and to allow the poorly performing companies to go bust. This time, however, the government is intentionally forcing perfectly profitable companies to cease trading. The temporary policy goal is less economic activity, and the country will bounce back when the state allows individuals to go about their lives as normal again.
It is therefore necessary to bridge the government imposed economic aberration for those who are most affected.
Some socialists may think that there are no consequences to almost limitless borrowing, but just as the clean up of a drenched house in the aftermath of successful firefighting is arduous and painful, so too will be the consequence of the national fight against Covid-19. The added weight of unspeakably large debt will burden the nation, its taxpayers, and particularly younger generations for years and years to come. This is not a free ride.
It beggars belief, therefore, that there are some who advocate this grave level of state control and spending beyond this moment of crisis. There are those who joke that somehow a ‘magic money tree’ has been discovered. It emphatically has not.
You cannot borrow your way out of recession or spend your way out of debt. Thankfully, the deficit reduction of the last decade has meant that in a moment of crisis such as the one we now face there is more confidence in our ability to pay it back. Ten years of fiscal restraint left us ready to borrow huge amounts for emergencies.
This emergency will come to an end. We will get past it. With enough individuals choosing to socially distance themselves, and a sustained rapid pace of scientific research, this aberration will be over in a matter of months. When it is, we must be ready to rebuild. That will require a strict return to fiscal discipline.
Tom Harwood is an award-winning journalist and commentator. Follow him on twitter: @tomhfh