Never waste a good crisis! Under this heading, political scientists Jack Blumenau and Benjamin E. Lauderdale describe how particular interests have used the euro crisis for institutional reforms.
There is a general problem behind this: In severe crises, politicians can no longer maintain the previous policy, but they also do not know which policy can be used to solve the current crisis problems.
That is why the times of representatives of individual interests come in times of crisis. They have policy proposals and bills in their pockets with which they have been working on politics for years. In the crisis, they put these proposals back on the table for politicians. They say with publicity: This is the medicine against the crisis. We have always asked for it. If only politics had listened to us earlier! Now is the time!
This pattern can also be seen in many places in the corona crisis. One hears the demand for higher minimum wages and a fairer wage in all social professions for the future.
This may be a legitimate demand – it does not help in the current crisis, neither in terms of breaking the chain of infection or treating the sick, nor in researching effective medicines and vaccines or rebuilding the economy after the crisis.
No supply without globalization
It is also the hour of globalization critics. They think they know that international links are the cause of the corona crisis and that we have to return to more self-sufficiency. It is undisputed that the virus quickly traveled around the world due to the high mobility of people.
However, without the globalization of the economy, we would also be much poorer and would be able to help those who are sick much worse. And a self-sufficient society would be quite helpless when an epidemic breaks out.
Where should the essential goods and food come from when the domestic economy is paralyzed by the disease? In a globalized world, at least the countries that are not (yet) affected and those that have already overcome the epidemic can provide important services.
One also hears the call for nationalization or partial nationalization of large companies, such as the Lufthansa – for transitional periods, but without a clear exit scenario. Is this a contribution to solving the corona crisis?
Lufthansa is a very efficient private company. The company and its employees are now facing uncertain transition times.
Is that a reason to really make Lufthansa a loss-making, state-controlled company along the lines of Alitalia? Airlines are not banks that pull everything down with them in an imbalance.
If necessary, they can be refurbished after the crisis by means of rehabilitation. And in the worst case, their airlines, routes and, above all, their well-trained staff would quickly be taken over by other airlines.
No empty shelves
Those who see neoliberal excesses everywhere are now demanding more state control for many goods. Will that lead to more security of supply and better product quality at lower prices?
If you didn’t get any penne rigate, arborio rice or Italian canned tomatoes in the supermarket two weeks ago, you might be a little disappointed and had to reschedule the menu for the evening. But there was no real food shortage despite the rush to the supermarkets, and just a few days later the retail logistics experts had filled the shelves with products from other pasta suppliers.
In the GDR’s planned economy, the shelves were mostly empty. And there were many goods only under the counter. They were exchanged as “goods in bulk” or moved to good friends.
And product quality? In Berlin you can still see the elegance of a “Trabant S de luxe” (waiting time for a new Trabbi about ten years), the DDR jeans from the “Boxer” brand, a retro-look color television from the “Chromat” brand or a computer from the VEB Robotron marvel. After 1990, nobody wanted these goods anymore.
The newly sparked discussion about euro bonds also uses the “favor of the hour”. In view of the crisis, France, Italy and Spain are once again calling for the communitisation of debt in Europe – not just for the crisis now, but permanently, and as a symbol of cohesion.
No plea for national selfishness
So far, the core argument for euro bonds has been that they can cushion asymmetric shocks. Those who are unlucky and are hit by a negative shock, for example because a country’s most important industry is getting into a global crisis, will be supported and, as it were, insured by the other countries that are not affected.
It remains to be seen whether the argument bears. However, the corona crisis is a largely symmetrical shock, since all euro countries are affected.
This is not a plea for national selfishness. Countries that are not (yet) affected by the epidemic should make part of their emergency infrastructure available to citizens of their EU neighbors. Temporary intergovernmental loan support can also be useful. For example as part of the European Stability Mechanism (ESM).
The EU could also play a stronger role in coordinating national policies. Unilateral border closures, which hardly change the epidemic but threaten the supply and employment opportunities of the population, show how sensible Europe-wide coordination would be.
But the crisis does not provide convincing reasons to now and quickly change the European public sector financial architecture for decades after the crisis.
So how should you prepare for pandemics and other rare disasters in the future? Do you really need more government control where there are shortages in the Corona crisis?
The next catastrophe is likely to present completely different challenges. Nobel laureate Thomas Schelling once advocated primarily increasing the economy’s ability to react to crises: this happens through more knowledge, better technologies, and through greater economic power and prosperity in the economy, so that sufficient resources can be quickly directed towards dealing with an emerging crisis.
More: The hour zero – How a responsible restart of the economy succeeds.