COVID‐19: A Make or Break Moment for Global Policy Making

The COVID‐19 pandemic poses an unprecedented set of challenges to governments, policy makers and citizens; lockdowns and social distancing measures generate significant economic losses, fuel public expenditures and deficits and will no doubt significantly boost public debts. The burden of such measures is also likely to be disproportionately felt by the worse‐off members of society and will weigh heavily on future generations. This is both unfair and runs the risk of politically destabilizing the recovery process. To avoid these outcomes unconventional policy measure such as taxes on private wealth and digital economic activities, but also public debt monetization, should be considered. From a political perspective, governments should realize that policy coordination is the only successful exit strategy following a systemic economic shock. While the EU is moving faster than we are accustomed to, it still seems unable to respond quickly enough given the nature of the circumstances. In this picture, the G‐20, provided it acts quickly over the coming months, could emerge as the sole global policy forum left on the playing field that can avoid that national interests will prevail eventually producing collectively sub‐optimal results in the long‐run.
Governments need to try and rebalance their help for citizens and the private sector away from loans and debt‐guarantees toward transfers. In addition, targeting and speed will prove essential. More attention needs to be given to small businesses, which are structurally less able to negotiate support via the banking system and which are less likely to be able to withstand sharp economic losses given their low margins.