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The Day After Tomorrow

As in the interwar period, the COVID-19 pandemic will confront policymakers with the unenviable task of deciding when to declare the emergency over, and how to distribute the costs. The lesson from history is that the longer this debate is avoided, the worse the outcome will be for everyone.

PRINCETON – When (and how) to end the COVID-19 lockdown has become the leading political question in every afflicted country. German Chancellor Angela Merkel has gone so far as to describe the increasingly intense debate as a collection of “discussion orgies.”

At the heart of the issue is the question of how to distribute the soaring economic and fiscal costs associated with the crisis. The closest historical analogy is to the twentieth century’s interwar period, which offered a crash course in navigating extreme fiscal circumstances.

Like the COVID-19 crisis, World War I was a prolonged affair, lasting much longer than people initially expected. In the summer of 1914, many assumed that it would all be over by Christmas. Likewise, in early 2020, many hoped that a brief shutdown would stop the spread of the virus in its tracks. In both cases, the economic shock was grossly underestimated at the outset.