May 19, 2020

What would Keynes do?

Reviewing two fine new books on Keynes, Jeffrey Sachs asks what the great economist would have advocated in response to today’s pandemic:

For the first time in modern economic history, we have deliberately shut down much of the economy to break the transmission of COVID-19. We display the intellectual confusion of the moment by labeling as “stimulus” the legislation to pay workers and firms during this shutdown period. This is not stimulus, but income maintenance during a temporary society-wide quarantine.

What would Keynes recommend? He would surely advocate a strong role of government to deploy the tools of public health, including testing, tracing, and isolating infected individuals. He would have ingenious schemes for restarting the economy once the virus itself is defeated. Public investments would be a large part of the response. Most importantly, he would urge that we act as an “organized community for common purposes.” The COVID-19 pandemic should rouse us, Keynes would insist, from the depths of our neoliberal fantasies. With tens of thousands of tragically and unnecessarily lost lives, with a for-profit health system that does not ensure basic public health, Keynes would bid us to launch a new era of economic and social justice, using the powers of government for our health, well-being, and economic needs, while respecting and protecting the individual. In this, Keynes would speak directly to both our hearts and heads, as he did to his own generation with such abiding and lasting wisdom, decency, and insight.

Read more here.