Archive for April 7th, 2020

Mitigating mass layoffs in the COVID-19 crisis: Austrian short-time work as international role model

April 7, 2020

Matthias Schnetzer, Dennis Tamesberger and Simon Theurl in this voxeu research:

From economic trilemma to pandemic trilemma!

April 7, 2020

Prof Harold James of Princeton Univ in this piece:

The coronavirus crisis is forcing a dramatic reassessment of how government and the economy function. As Matthew M. Kavanagh of Georgetown University argues in The Lancet, the pandemic has revealed a trilemma: it is impossible to have a medically healthy society, a healthy economy, and a healthy democracy at the same time.

The implication is that if we want airlines to keep flying and restaurants and pubs to stay busy, more people will have to get sick and die. On the other hand, if we shut down these activities, the economic downturn will be much more severe than the 2008 global financial crisis, with rates of unemployment similar to those of the Great Depression – and possibly much higher. Many of the businesses – especially small shops, restaurants, and service providers – that are closed “temporarily” will in fact never reopen.

In thinking about the nature of the current crisis, one can also imagine a rigorous and intrusive system for identifying infected individuals and immediately tracing their contacts. With modern surveillance technology, it is possible to determine who sat next to you on the bus, or who handed you a receipt when you went to the store. But while such information can be enormously valuable in containing infections, collecting it implies an equally enormous loss of privacy.

At the moment, the only society that comes remotely close to realizing this surveillance-state scenario is China, under whose “social credit system” every action is monitored and then “graded” by the state. Indeed, as many commentators have pointed out, China’s response to the COVID-19 crisis seems to have been more effective than that of any other country.

Does this mean that if one wants to have a democracy, one must choose between a healthy economy and a healthy population, whereas if one wants a healthy economy, one must choose political liberty or physical wellbeing? In macroeconomics, this kind of choice is known as the trilemma.

He then points to Mundell’s economics trilemma and Rodrik’s political trilemma. He says in reality, we hardly go through these stiff choices. Bur we negotiate through the choices:

The upshot is that in the real world, apparent trade-offs are not always absolute; rather, they are negotiable, or even illusory. In the case of COVID-19, we must protect public health while also preserving the social and political fabric of our lives. To that end, it is already clear that the release and sharing of medical information across borders will be necessary for organizing an effective coordinated response, not just to this pandemic but also to similar challenges in the future. It is also clear that the response to the crisis  widespread testing and contact tracing, which entails a partial – but certainly not a complete – loss of privacy.


Crises, by definition, always force a choice. One’s response can be short-sighted, panicky, and destructive, or it can be radical, innovative, and constructive. It is worth remembering that in addition to China, South Korea has also managed to control the epidemic, and it has done so without abandoning its democracy. There is no reason to think that the choices we make in response to this crisis cannot result in longer-term dynamism and resilience.

Nice way to think about the choices…

Can Liberal Democracy survive COVID-19?

April 7, 2020

Ana Palacio (former Minister of Foreign Affairs of Spain) in this piece:

Together with threats to life and limits on liberty, the coming economic crisis will deepen doubts about Western liberalism and weaken its position in the global contest of ideas that is currently underway. It is thus imperative that Western leaders not only limit the spread of COVID-19, but also foster social cohesion, devise a credible path back toward growth and normalcy, and reinvigorate the values and institutions that underpin liberal democratic societies. To succeed, they will need to revive the ethos that citizenship entails both duties and rights. The scenes of heroism by medical professionals, service workers, and community members that the pandemic has produced should help to advance this objective.

Even if Western leaders manage to limit the COVID-19 outbreak’s short-term fallout, it will mean little without forward-looking efforts to strengthen liberal-democratic systems from within. Such a failure would leave the West vulnerable to a China that, accurately or not, is presenting its model as the best solution to the challenges of these interesting times.

The West should have thought some of these things much earlier. But for a long time they were just cheerleaders of China and its economy…

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