Everything’s under control
by Biodun Iginla, The Economist Intelligence Unit News Analyst
Big government is needed to fight the pandemic. What matters is how it shrinks back again afterward
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IN JUST A
few weeks a virus a ten-thousandth of a millimetre in diameter has
transformed Western democracies. States have shut down businesses and
sealed people indoors. They have promised trillions of dollars to keep
the economy on life support. If South Korea and Singapore are a guide,
medical and electronic privacy are about to be cast aside. It is the
most dramatic extension of state power since the second world war.
One
taboo after another has been broken. Not just in the threat of fines or
prison for ordinary people doing ordinary things, but also in the size
and scope of the government’s role in the economy. In America Congress
is poised to pass a package worth almost $2trn, 10% of GDP, twice what was promised in 2007-09. Credit guarantees by Britain, France and other countries are worth 15% of GDP.
Central banks are printing money and using it to buy assets they used
to spurn. For a while, at least, governments are seeking to ban
bankruptcy.
For believers in limited
government and open markets, covid-19 poses a problem. The state must
act decisively. But history suggests that after crises the state does
not give up all the ground it has taken. Today that has implications not
just for the economy, but also for the surveillance of individuals.
It
is no accident that the state grows during crises. Governments might
have stumbled in the pandemic, but they alone can coerce and mobilise
vast resources rapidly. Today they are needed to enforce business
closures and isolation to stop the virus. Only they can help offset the
resulting economic collapse. In America and the euro area GDP could drop by 5-10% year-on-year, perhaps more.
One
reason the state’s role has changed so rapidly is that covid-19 spreads
like wildfire. In less than four months it has gone from a market in
Wuhan to almost every country in the world. The past week logged 253,000
new cases. People are scared of the example of Italy, where almost
74,000 recorded cases have overwhelmed a world-class health system,
leading to over 7,500 deaths.
That
fear is the other reason for rapid change. When Britain’s government
tried to hang back so as to minimise state interference, it was accused
of doing too little, too late. France, by contrast, passed a law this
week giving the government the power not just to control people’s
movements, but also to manage prices and requisition goods. During the
crisis its president, Emmanuel Macron, has seen his approval ratings
soar.
In most of the world the state
has so far responded to covid-19 with a mix of coercion and economic
heft. As the pandemic proceeds, it is also likely to exploit its unique
power to monitor people using their data (see article).
Hong Kong uses apps on phones that show where you are in order to
enforce quarantines. China has a passporting system to record who is
safe to be out. Phone data help modellers predict the spread of the
disease. And if a government suppresses covid-19, as China has, it will
need to prevent a second wave among the many who are still susceptible,
by pouncing on every new cluster. South Korea says that automatically
tracing the contacts of fresh infections, using mobile technology, gets
results in ten minutes instead of 24 hours.
This
vast increase in state power has taken place with almost no time for
debate. Some will reassure themselves that it is just temporary and that
it will leave almost no mark, as with Spanish flu a century ago.
However, the scale of the response makes covid-19 more like a war or the
Depression. And here the record suggests that crises lead to a
permanently bigger state with many more powers and responsibilities and
the taxes to pay for them. The welfare state, income tax,
nationalisation, all grew out of conflict and crisis (see article).
As
that list suggests, some of today’s changes will be desirable. It would
be good if governments were better prepared for the next pandemic; so,
too, if they invested in public health, including in America, where
reform is badly needed. Some countries need decent sick pay.
Other
changes may be less clear-cut, but will be hard to undo because they
were backed by powerful constituencies even before the pandemic. One
example is the further unpicking of the euro-zone pact that is supposed
to impose discipline on the member-states’ borrowing. Likewise, Britain
has taken its railways under state control—a step that is supposed to be
temporary but which may never be retracted.
More
worrying is the spread of bad habits. Governments may retreat into
autarky. Some fear running out of the ingredients for medicines, many of
which are made in China. Russia has imposed a temporary ban on
exporting grain. Industrialists and politicians have lost trust in
supply chains. It is but a small step from there to long-term state
support for the national champions that will have just been bailed out
by taxpayers. Trade’s prospects are already dim (see article);
all this would further cloud them—and the recovery. And in the long
term, a vast and lasting expansion of the state together with
dramatically higher public debt (see article) is likely to lead to a lumbering, less dynamic kind of capitalism.
But
that is not the biggest problem. The greater worries lie elsewhere, in
the abuse of office and the threats to freedom. Some politicians are
already making power grabs, as in Hungary, where the government is
seeking an indefinite state of emergency. Israel’s prime minister,
Binyamin Netanyahu, appears to see the crisis as a chance to evade a
trial for corruption.
The most worrying
is the dissemination of intrusive surveillance. Invasive data
collection and processing will spread because it offers a real edge in
managing the disease. But they also require the state to have routine
access to citizens’ medical and electronic records. The temptation will
be to use surveillance after the pandemic, much as anti-terror
legislation was extended after 9/11. This might start with tracing TB
cases or drug dealers. Nobody knows where it would end, especially if,
having dealt with covid-19, surveillance-mad China is seen as a model.
Surveillance
may well be needed to cope with covid-19. Rules with sunset clauses and
scrutiny built in can help stop it at that. But the main defence
against the overmighty state, in tech and the economy, will be citizens
themselves. They must remember that a pandemic government is not fit for
everyday life. ■
Dig deeper:
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This article appeared in the Leaders section of the print edition under the headline "Everything’s under control"
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