The economic damage arising from the Covid-19 pandemic has been as unexpected, widespread and damaging as the onset and malaise of the Great Depression in the 1930s. Then, when Bolshevism and Fascism posed serious concerns for Western democracies, a series of domino banking collapses and associated job losses delivered a credible threat to the economic and political order. Conditionsweremuchworse in theUK thanelsewhere. By thepost-FirstWorld War decision to restoregold-convertibility to sterling, thenecessary associatedacts of deflationbrought chronic recession to the country from1921onwards. After theWall Street Crash of 1929, the need to place impoverished families back into work became an overriding worldwide concern. Out of that experience, JohnMaynard Keynes wasmotivated to spell out a thesis for increased state expenditure to alleviate unemployment and destitution. While it is rare for economic policy not to create controversy, there is now close to universal agreement on one detail: Deflationmust always be avoided. Not only does deflation raise the real value of a country’s debt, but falling prices also discourage expenditure. Franklin D. Roosevelt’s accession to the US Presidency in 1933 saw his ‘New Deal’ programme give varying support to three ‘Rs’ (Relief, Reform and Recovery). Although these were broadly in line with Keynes’s recommendations, many point to the expenditure made necessary by the Second World War effort as the key driver in the recovery of the US economy. Regardless of which view is taken, postwar attempts to sustain full employment by fiscal fine-tuning (varying government expenditure and taxation) proved disappointing; and it slowly dawned that monetary policy warranted much closer attention. As money and inflation attracted more 40 |
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