Our cover this week is about the profound shift taking place in economics as a result of the covid-19 pandemic. Much as in the 1970s when clubby Keynesianism gave way to Milton Friedman’s austere monetarism, and in the 1990s when central banks were given their independence, so the coronavirus marks a new paradigm. It is characterised by government borrowing, money-printing and intervention in capital markets—all underpinned by low inflation. Each era of economics confronts a new challenge. After the 1930s the task was to prevent depressions. In the 1970s and early 1980s the holy grail was to end stagflation. Today policymakers must create a framework that allows the business cycle to be managed and financial crises to be fought without a politicised takeover of the economy.
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