This paper argues that the pandemic may lead to a major paradigm shift in economic thinking. In times of crisis, governments necessarily claim more control and responsibility over the socio-economic order. Residuals of such government activism are likely to remain as will the impact of the pandemic on the economy.
While the world economy is bracing for a profound crisis due to the coronavirus pandemic, an important discussion has started on how the pandemic may transform the world economic order in its aftermath. This paper argues that the pandemic may lead to a major paradigm shift in economic thinking. In times of crisis, governments necessarily claim more control and responsibility over the socio-economic order. Residuals of such government activism are likely to remain as will the impact of the pandemic on the economy. More interventionist, proactive governments may replace the minimalist, neoliberal governments that have dominated the post-1980 world. In many ways, this represents restoring the welfare state and a return to the post-war Keynesian consensus in policymaking. Another likely consequence is a retreat from the hyper-globalisation of the recent decades. In the context of developing countries, this implies that developmentalism and industrialisation policies may once again become the norm.
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