Europe

Experts see greater role for public policy and state regulation in post pandemic years

The COVID-19 crisis created a recession like no other and caused unprecedented policy responses, but now attention is shifting to post-pandemic years. Will recovery be sustainable? Will this crisis prove to be a transformative event for the people and the world?

To discuss these topics, euronews spoke with prize-winning American economist, Joseph Stiglitz, and the former Italian prime minister, Mario Monti, at the Ambrosetti Forum in Lake Como.

The United States” economic recovery has been very fast. But have policymakers in the United States and in Europe been quick enough and bold enough to avoid a new Great Depression? Is there still a risk of this?

Economist Joseph Stiglitz:

“I’m not worried about a significant downturn at this point. Europe is a little bit more timid than the United States. In the beginning, Europe had much better design programmes, but the United States was less timid. We passed legislation that was basically providing support equal to 25% of our GDP. Europe has been much slower and even the packages will take one to two years to actually get the money flowing.”

Are you saying that Europe has to do more?

Economist Joseph Stiglitz:

“I think it has to do things faster and probably more.”

It is argued that we are going back to growth in Europe. How sustainable do you think this growth is for everybody?

Former Italian Prime Minister and Economist, Mario Monti:

“Well, this growth is generated in part by the huge monetary and financial and fiscal support provided in Europe at the EU level and by the individual countries. Will this path be sustainable? Not so much. What will be crucial for the sustainability of recovery is that the reforms that the EU is suggesting be introduced by member states to accompany these huge amounts of funds. It’s a big challenge because normally structural reforms, Greece knows this, Italy knows this, are made when a country is at the brink of disaster, which is not the case now. Now, countries are subsidised to do the reforms. Now, to the extent that these reforms will be implemented effectively, this will give sustainability to the growth.”

What kind of economic policies should governments follow in the post-pandemic world in order for the economies to work for the people, for the real citizens, for the real economies? We haven’t yet seen any significant differences or changes to the economic model or to the tools used in this crisis.

Economist Joseph Stiglitz:

“Well, I think in the United States, you actually are seeing a rethinking. For instance, industrial policy was viewed as something that governments should not engage in, both in the United States and Europe. Bipartisan we passed a huge bill for industrial policy to encourage research to make us more competitive. Big change overnight. People haven’t talked much about it, but it is a fundamental shift in policy. The success that we have in bringing down child poverty is a major achievement. Under Trump, we gave a tax cut for the billionaires and the corporations. We’re now really a one hundred and eighty-degree change and say we ought to be focusing on the majority of Americans, not on our billionaires.”

Do you see these new priorities also coming to Europe as well?

Economist Joseph Stiglitz:

“I think they are. You know, the pandemic both exposed and aggravated the inequalities in our society, it showed that supply chains were not resilient. The market once again had not done what it needed to do. So I think people really realise that we need a new balance in our economy. The kind of what sometimes is called neo-liberal ideology that prevailed for the last 40 years has not served our society well and that we need a rethink.”

Looking ahead to the post-pandemic world, what kind of economic policies should governments follow for people to be able to change the economy right now?

Former Italian Prime Minister and Economist Mario Monti:

“I do not think that Europe should completely change its economic model. There are some principles in it. Let’s call them the social market economy, which I think is sound. We see that also in comparison with the US or China. The problem is how to articulate our social market economies so that there are, at the same time, more social and better functioning markets without them being in conflict with each other. But certainly what the EU did when the pandemic erupted was to suspend its main EU policy instruments, rules on state aid, rules on competition, fiscal rules, the stability pact, the way in which monetary policy is conducted by the ECB. Now, all of this will have in one year or so to be put back together because Europe cannot live without some sort of rules.”

Do you see a bigger role for the state in the near future?

Economist Joseph Stiglitz:

“Yes, I do. It’s a role in many ways. You’re going to have government regulation. If we’re not going to die from climate change, we’re going to need better protection of workers, labour laws, monopoly laws. But we’re also going to need public investment and we under-invested, especially in the United States, but also in Europe, and hopefully, we’ll rectify that going forward.”

Former Italian Prime Minister and Economist Mario Monti:

“Well, the trend, which goes back to the Reagan – Thatcher era of leaner and leaner state, is probably over. On the other hand, our states will not be able to run enormous deficits again and forever. So it’s important to have a greater role for public policy, but also channelled through less financially burdensome modalities for the government and for the state.”

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