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Sequencing the Post-COVID Recovery

As countries emerge from the COVID-19 pandemic, John Maynard Keynes’s emphasis on the need to implement post-crisis economic policies in the right order is highly relevant. But sustainability considerations mean that the distinction between recovery and reform is less clear cut than it seemed in the 1930s.

LONDON – John Maynard Keynes was a staunch champion of US President Franklin D. Roosevelt’s New Deal. The road to a civilized future, he wrote, went through Washington, not Moscow – a direct rejoinder to those idealists, including some of his students, who put their faith in communism.

But Keynes was not uncritical of FDR. Specifically, he faulted Roosevelt for mixing up recovery and reform. Recovery from the slump was the first priority; social reforms, “even wise and necessary,” might impede recovery by destroying business confidence. Presaging today’s debates about post-pandemic economic-policy priorities, Keynes argued that proper sequencing would be the key to the New Deal’s success.

The advisers in FDR’s “brain trust” were reformers, not Keynesians, and had a different view. Attributing the Great Depression to excessive corporate power, they thought that the route to recovery lay in institutional change. As a result, so-called Keynesian stimulus was a minor component of the New Deal – emergency treatment pending longer-run cures.

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