Corona-crisis calls for imagination, not panic, parsimony and punishment.

Jul 28, 2020

Tertiary education, including universities, was badly hit (to complete government indifference, even delight.) The cultural sector was punished — and a good deal more than sport. Lobbyists for pubs and clubs have had a field day with compliant governments. 

Everyone seems to agree that the world after the pandemic will be, and should be a different place .Many businesses will have gone to the wall. Other businesses will want to re-invent themselves, initially perhaps to hit the ground running despite new social distancing rules or to take the opportunities of some of the new work and play technology showcased by isolation. An obvious example is with remote group meeting technology, and the gains shown in allowing working from home, studying from home, and even with social and cultural activities.

Some industries have been more hurt than others, and some probably less than circumstances might deserve. Thus tertiary education, including universities, was badly hit (to complete government indifference, even delight.) The cultural sector was punished — and a good deal more than sport. Lobbyists for pubs and clubs have had a field day with compliant governments. Airlines have done badly, and their recovery will be limited until international travel is able to be resumed, if ever it is in the old style. International tourism — here and abroad — has suffered greatly.

I have commented before that coalition concern about the “undeserved” loss of jobs compares with its general lack of concern for and punitive approach to welfare recipients, including the disabled, the aged, and indigenous Australians.  Decisions to set up job retention schemes, more generous welfare payments and particular sectional schemes has not involved any letting up on cultural wars against perceived enemies of government, whether at the ABC, in arts and culture, or in the university sector, or anything to do with the environment or climate change.  That general spirit of meanness has not prevented the routine rewarding of sectors regarded as rather more enthusiastic about the directions of the coalition government, or rather more amenable to being used by it, such as the national security industry (now singing loyally and on cue to the government’s tune, under choreography), defence, given promises of more and more toys of dubious value a long time from now, and the coal and gas sectors.

No one has seen any opportunity to recognise that the coronavirus compounded many of the problems of residents of areas severely damaged by the December and January bushfires  — still suffering from slow services and a critical lack of imagination among those in charge of relief operations.  All of this was probably to be expected in this hyper-partisan age — perhaps the more so given that the Labor Party, no doubt for tactical reasons, is generally lying low — almost supine.

Beyond making sure that no enemy has been over-looked, it has seemed that a guiding part of the economic recovery strategy has been to ensure that there was no let-up in the struggle to keep government as lean and as mean as possible. If government was subsidising or creating new schemes, such as for a while, in childcare, the basis of several political fortunes, then they were to be of short duration, or with services sub-contracted outside the public sector.

The crisis was not to be an occasion for any real reversion to concepts of “big government”, let alone government provided through an enhanced bureaucracy. Even less was it to be an occasion for winding back “reforms” which, often in bipartisan operations, had squeezed both the width and the depth of government activities. In all of this, the pandemic has seemed but an interlude, not leaving any lasting monuments. Or even new styles of administration. If the imagination of public servants has been engaged, it has not been in thinking of new programs or policies.

Conventional and traditional stimulus may not be as effective as more imaginative ones. People who feel uncertain about the future will tend to save more and delay big-ticket purchases. General fear of catching the virus and becoming sick, or uncertainty about whether pandemic conditions will return may also make people more reluctant to spend. The experience, particularly in Victoria, of having to resolve social distancing measures after a let-up may also increase caution.

Likewise, we are not sure yet how the public will respond to necessary changes in the composition of demand, such as that caused by closed borders, indefinitely suspended international travel, or new social distancing requirements in shops, restaurants and places of entertainment. Some of these changes may become virtually permanent.

In time, no doubt, government deficit spending will become more focused on increasing demand generally rather than on helping people and businesses that have been badly affected. People who feel uncertain about the future tend to save more and delay big-ticket purchases, and consumer fears of contracting the virus may also dampen demand. The uncertainty by consumers may have resulted in a surge in the savings rate to an unprecedented 33% in April and may reflect pent-up demand that could be translated into more spending as restrictions ease, but much depends on how cautious consumers are.

We don’t yet know how the pandemic will change the composition of demand. A particularly long period may be required before consumption of travel and leisure returns to its former levels (if it returns to those levels at all), which would have consequences for the restaurant, hotel, airline, and oil industries, among others. Social distancing rules that may persist for many months or longer would also require cost-increasing changes in the provisions of services that involve close contact, such as restaurants, airlines, and mass transportation. Victorian experience suggests that trying to move too quickly on a resumption can cause fresh rounds of shutdowns, which themselves can sap business confidence or willingness to re-engage.

Sooner or later we can expect that the focus of fiscal policy will shift away from helping affected people and businesses to more conventional methods traditionally used in a recession and aimed at increasing demand in general while allowing the composition of output to adjust to the new post-pandemic structure of the economy.  This is the opportunity to be spending not on roads, or rail, or new airports for Sydney, but on health, education, and systemic changes to aged care. And on childcare and programs to close the gap with indigenous Australians. And on measures for mitigation and adaptation to climate change, to further improve the NDIS, and to catch up on our inferior national broadcast network.  We have long had a tendency to regard such spending as mere recurrent spending, intrinsically wasteful or non-productive.  It is in fact an investment in a new Australia, and in the Australia that benefits the interests of younger Australians — the ones who have suffered most economically from the pandemic.

We are in a moment when we need the imagination to go beyond old responses. The coronavirus has taught us much about ourselves and our society, including the fact that health is not just a social investment, but it also affects confidence and the economy.

We need more than a mediocre job from government — just what one could expect from an administration which has shown again this week that it has only the most limited sense of propriety, prudence or concern for legality when it is splashing taxpayer money around. What a waste. Some inspiration and good economic and political management could make an opportunity of the crisis to reshape the economy and our society. We are fast getting to the point of missing our chance.

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