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The Silent Revolution in Economic Policy

With Western economies battered by COVID-19 and central banks running out of ammunition, fiscal policy is the only game in town. This should be openly acknowledged, and fiscal rules should be rewritten to allow for more active counter-cyclical policy and a much larger government role in allocating capital.

LONDON – Something extraordinary has happened to macroeconomic policymaking. Partly owing to the impact of COVID-19, the old orthodoxy has morphed into a new one – but without anyone acknowledging the implications of the shift, or indeed that there were any problems with previous convention.