Like much of life, economic theory is not black and white. In an age of uncertainty, people are understandably looking for clarity. This desire for certainty does not always fit well with academic theory.
Broadly, whatever your view on a subject, you will be able to find an expert to validate your assumptions. It is this intellectual rigor that ensures progress, but it also the reason for the level of heated debate that exists online. Whether about lockdown policies or vaccines, you can always find an expert to support your view.
Since the start of the COVID-19 pandemic, the specialisation of epidemiology that has been thrown under the spotlight. As one would expect, while people may share the same profession, it is not a given that they share the same ideas and conclusions. The idea of a definitive consensus on a new airborne virus is risible and the ability to question and challenge the common consensus should have been something that the media and population at large should have encouraged.
Sadly, as appears to have become the norm these days, this was not the case. The debate around this virus swiftly became binary and nuance was sacrificed at the altar of polarization. You either chose to agree with the consensus narrative or you were swiftly castigated as a COVID-19 denier.
This propensity of the media, and individuals on social media, to pit people against each other on every issue of the day has become an unpleasant aspect of modern life, one that achieves little aside from stoking up division. Whether it was Brexit, Trump, or the reaction to COVID-19, complicated issues are watered down into their most basic arguments and then used to cause never-ending tidal waves of anger and conflict.
Unfortunately, I believe that economic theory is the next complicated concept to be stripped down and simplified to a level that will again simply cause division rather than debate.
The extraordinary level of public spending that has been enacted over the past year, along with the level of money printing and interest rate suppression from central banks across the globe since 2008, has catapulted Western economies into an ever-expanding abyss of debt and social obligations.
History tells us that the policy of printing money and lowering interest rates leads to hyperinflation and both social and economic anarchy. It is curious that the media, so quick to point out any similarity between contemporary society and fascist Europe in the 20th Century, seem to have not recognized the similarity between the economic policies of Weimar Germany and contemporary Western COVID-19 economics.
For some, the fact that there appears to be a government money tree, and that it is one that has been created and endorsed without an immediate economic catastrophe, is proof that we are now living in a new economic age. An age that endorses the ideas of Modern Monetary Theory (MMT), the economic belief that there should be no financial constraint on government spending as long as a country is a sovereign issuer of currency and does not tie the value of its currency to another currency.
Pitted against this idea are the lessons learned from history. Lessons that remind us that the idea of MMT is far from modern. Instead, it is an idea that has been tried on numerous occasions and has always led to financial catastrophe.
As the world starts to use the success of the vaccines to get ‘back to normal’, it will need to also address the impact of the financial policies enacted because of lockdowns. This will result in a large-scale debate about economic theory, which we can only hope will be allowed to be nuanced.
If not, yet more division and social unrest will ensue, and economics will be the next topic to polarise. Only this time, the economic vaccine of reduced rates and quantitative easing will already have been used, and there will be no magic panacea to stave off a fully blown global disaster.
For now, we can only hope that inflation remains under control and rates do not rise. What could go wrong?