What the Coronavirus Tells Us About Economic Policy in the 21st Century

Matthew Howard explores how the Covid-19 pandemic is forcing us to rethink our economic policies. He also discusses why a universal basic income should be the future of any welfare state. 

In my opinion, the coronavirus has told us a lot about how our economies react to crises as well as the measures that enable a country to successfully weather a crisis. It has certainly shown us that the welfare state as it stands isn't well equipped to withstand economic turmoil, but the question is, if the current welfare state is insufficient, what can be done?

I won’t pretend that I’m able to answer this question, as there is no binary solution. However, I can give an opinion on how things stand and what can be done to better equip us, should another pandemic arrive anytime soon.

According to analysis from top scientists, the coronavirus will last for at least a year in the UK. The current rate of infection is likely to slow in the coming weeks as the number of people without the virus decreases. The government previously stated that ‘herd immunity’ was the way to flatten the curve. However, they soon realised that this strategy would sink the NHS, as the number of cases would likely be far beyond its current capacity. The government then immediately began to close restaurants, cafes and non-essential shops before announcing a lockdown, preventing people from leaving their homes for anything other than shopping, work and a single exercise a day.

This is where it gets interesting: the chancellor announced plans to subsidise workers’ pay and to provide interest-free loans to businesses. One key policy that the chancellor didn’t include in his emergency measures was a universal basic income. The measures, while they were seen as a step in the right direction, did not take into account the millions of self-employed people in the UK. A form of basic income would have been able to cover everyone, regardless of their employment status. I admit to being a huge fan of this proposal, and anyone can see that it would have been a more comprehensive, effective measure.

I truly believe that UBI is the future of the welfare state, as it is flexible, easy to implement and adaptable to a situation such as the one we find ourselves in today.

The graphic above illustrates the popularity of previously unknown measures such as the basic income. The reason that this policy is linked to the coronavirus is that pandemics, as well as affecting public opinion, usually highlight the need for policy changes. The coronavirus has highlighted the deep flaws in the belief that the only source of income for people should be through work. Due to health/income related issues, people are often unable to find work. Due to the coronavirus, the unemployment rate in the US will likely reach 30% this quarter. The current social security systems in the US and UK are simply unable to tackle the unprecedented crisis that our planet faces, so we must do what we have always done as a society: adapt to changing circumstances.

I was at a lecture at the LSE in September and I asked Robert Shiller, a professor at Yale, author and Nobel prize-winner, about the UBI itself. He talked about the history of the idea in the form of the grain dividend in ancient Rome. One particularly interesting thing that I remembered was his comment on when it would be put into practice. He said, ‘one day it may be necessary’. It seems that the time has come.

I believe that the coronavirus will be a wakeup call to not only the political system, but the entire planet. This is a global issue that we must face together in solidarity. We have a chance now to fundamentally change our society for the better: we better take it.

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