Brave new world.

Byline: Aqdas Afzal

NOW that the sun has finally set on 2020, the devastation brought about by Covid-19 is coming into stark relief. Here in Pakistan, where Covid-19 was not as intense as elsewhere, more than 10,000 people lost their lives. Covid-19 has also been an unmitigated economic disaster; GDP slid into negative territory for the first time since 1952. Where this pandemic has wreaked havoc on economies and societies everywhere, it has also highlighted ways in which economic and political systems will transform in the post-Covid world.

In terms of economic systems, Covid-19 has created a challenge for capitalism not unlike the Great Depression, when economic activity came to a near halt albeit for different reasons. During the Great Depression, Keynesian ideas that propagated the state's role in economic management became dominant. Keynesian ideas ran into stiff opposition from the Hayek-Friedman camp, especially after 1990 as neoliberalism gained wide currency and markets were declared to be the only game in town. Before Covid-19, Keynesian ideas had all but become a distant memory.

The economic disruptions in the immediate aftermath of Covid-19, however, spurred countries - and Keynesian thinking - into action everywhere. According to estimates by McKinsey and Co, a total amount of more than $10 trillion was earmarked as economic stimulus by different countries. The United States, long a bastion of free-market thinking, has injected over $3tr into its economy with the federal government sending direct payments into citizens' accounts. In April last year, even the IMF, one of the gatekeepers of the present economic system, urged governments to use fiscal policy to '...save lives and protect people'.

On a deeper level, Covid-19 is now bringing about a reassessment of the touted role of markets as the only tool for bringing about economic growth. This consensus on the neoliberal approach to organising economies is unraveling, with states taking on a more muscular and a more permanent role, especially in economic policymaking. Surprisingly, Pakistani policymakers have remained somewhat aloof from these important developments. The government has shunned fiscal activism while relying on the State Bank for injecting more liquidity into the economy. The reality remains that direct and widespread state help for common citizens is all the more urgent in Pakistan given the massive increase in poverty due to Covid-19.

Covid-19 is bringing about...