As 2020 draws to a close, many of us cannot wait for this annus horribilis to end. And for good reason: this year has seen more than a million and a half COVID-19 deaths; an economic collapse far greater than that of the 2008 financial crisis; a boiling-over of resentment against decades of racial and social injustice; record numbers of wildfires decimating millions of acres of pristine forests; and locust plagues of Biblical proportions. […]
After averting a second Great Depression, what should policy makers do to foster recovery?
Economic policymakers are rarely popular. Central bank governors are notorious for removing the punch bowl at the party. Ministers of finance are traditionally the ones who say no to their colleagues’ pet spending projects.
In the upside-down world of recent months, finance ministers and central bank governors around the world seemed to have switched sides. They became cheerleaders for expansionary policies. The IMF has argued strongly for this, as long as countries had room to take on more debt. Despite some hiccups, it seems clearer with every economic release that the extraordinary actions governments have taken have paid off, at least in halting the slide. Economic prospects may not be quite as bright as recent market moves would suggest. But the risk of spreading financial collapse has lessened markedly.