But that brings us to a third structural issue. When will all the current spending be paid for, and by whom? There already seems to be a reasonably strong consensus across advanced economies that early fiscal tightening should be avoided. I, for one, would welcome a tightening after the crisis has passed. But, of course, much will depend not just on the scale and speed of the recovery but also on the size of fiscal deficits. Here, it is interesting to note that expectations for additional fiscal stimulus in the US have recently been downgraded as a result of better-than-expected employment data.
As for monetary policy, the US Federal Reserve’s announcement in late August that it will shift to an “average inflation targeting” regime has been greeted as an additional form of support. But a caveat is in order. Whether the policy change sticks will depend on how inflationary pressures are actually developing. If financial markets were suddenly to become concerned about an unexpected increase in inflation, policymakers might have to shift their approach once again.
A remaining open question, one that I have raised in previous commentaries this year, is how policymakers will respond to the changes wrought by the COVID-19 crisis. Will they nurture a new business culture geared toward “profit with a purpose,” encouraging (or cajoling) more corporations to pursue decarbonization and solutions to societal challenges like antimicrobial resistance (AMR) and the threat of future pandemics? That would certainly be a welcome development, and it is hardly a step too far for our governments.
Jim O'Neill, a former chairman of Goldman Sachs Asset Management and former commercial secretary to the U.K. Treasury, is honorary professor of economics at Manchester University and former chairman of the Review on Antimicrobial Resistance.