Limited government optimism?
By Alberto Mingardi
Former Canadian prime minister Stephen Harper wrote an uplifting article in the Wall Street Journal. As the world moves towards even-more-interventionism for the Covid19 response, he thinks that “After Coronavirus, Government Will Have to Shrink“.
His reasons for optimism:
Yes, government intervention in the economy today is without precedent. In early April, the International Monetary Fund estimated that fiscal actions around the world totaled some $3.3 trillion—more than 50% greater than all the stimulus spending of the global financial crisis—with another $4.5 trillion in loans and contingent liabilities. Those numbers have only grown, with leaders making daily television appearances to roll out wheelbarrows more money. Most media lavish praise on governments for these actions.
So why doesn’t this herald a new age of big government? It’s simple: All this intervention has been economically ruinous. No amount of money can fully compensate for social-distancing actions whose effect is to shut down large segments of the economy. … The underlying assumption—that the economy can be restarted later as quickly as an idle automobile—is dubious.
When focus shifts from the pandemic to the economy, it will need to shift from a lot more government action to a lot less.
Plus, “Public-sector balance sheets will be an unholy mess.”
It is refreshing that a politician that had top executive responsibility is eager to put this on paper. Mr Harper may literally be the only leader in the Western world these days betting on government becoming _smaller_.
My impression – thinking of the second US “stimulus” and of a recent initiative of the Italian government which put together a bunch of pork-barrel measures, purportedly aiming to “relaunch” the economy – is that new interventions will be so widespread that distortions will be very difficult to eradicate. At the same time, it is true that, to the extent that our societies react to statism and over-regulation, they do so only in the presence of a very high dose of these, and we are now giving them possibly the greatest dose in the shortest time ever.