State intervention: the Keynesian key for switching on the post-lockdown revival
The market can eventually sort itself out, but the socioeconomic price will be too high in the absence of measures such as social grants
Keynesian economics is the economics that gets us out of recessions. It is the economics that pulled countries out of the Great Depression of the 1930s. It is also the economics that provided effective remedies after the 2018 global financial crisis and will inevitably be the economics to which governments turn in the aftermath of the coronavirus pandemic.
While our focus now is on the survival of those who live in this country, as it must be, in the months after the lockdown the question of survival will turn to reviving the economy and the role of the government in this process. The effect of the coronavirus pandemic will be severe. Estimates suggest that the economy, which has been in a cyclical downturn since December 2013, could retract by a further 4% in the short term. Once the pandemic is behind us, it will take time for private sector balance sheets to stabilise and investor confidence to improve. Household expenditure will similarly be negatively affected by the l...