Changes in IMF orthodoxy highlight the need for new economic narratives and better policymaking.
In this FT article, Martin Sandbu identifies three shifts in IMF orthodoxy
- Importance of public investment and alignment of public and private interests
- Explicit support for swift lockdowns in the interest of economic vitality; it is not a trade-off of health and wealth but we have to choose health for wealth
- Likewise, net carbonisation goal is no longer a trade-off with economic prosperity but a condition and necessity
The author observes the vacillation between markets and the state over the last century, and that we are about to transcend both, in favour of an economic worldview in which government intervention can guide the private sector to perform better.
It is clear that untended free-market capitalism will not deliver the best outcomes for society as a whole. Human society has many impulses, driven by self-interest and by altruistic motives, and economies and economics do not operate in a cultural vacuum. The struggles and uncertainties still on-going under COVID-19 set the stage for re-thinking the current economic orthodoxy and challenging our accepted ways of doing things.