A Conversation On Post-Pandemic Economic Recovery

This episode of the AIER Authors Corner published on March 2, 2021, is especially timely today because the United States finally seems to be moving past Covid-19 and lockdowns. Our guest was Dr. Darcy Allen, an Australian researcher who specializes in technology and innovation. The subject of this episode was his recent book published with AIER, titled Unfreeze: How to Create a High Growth Economy After the Pandemic. Authors Corner host Ethan Yang interviewed him on specific questions and lessons found within the book. His written summary can be found here.

The first topic of discussion was the book’s name: Unfreeze. Dr. Allen discussed the general premise for this name, which involved the idea that governments froze their economies in response to Covid-19. Their rationale suggested that they needed to shut down social life to contain the virus and then restore it back to life once the coast was clear. Whether or not that worked, it is undeniable that governments have succeeded in freezing their economies. 

After elaborating on the idea of freezing an economy, Dr. Allen discussed the fact that there are unique consequences to doing so. Our leaders cannot simply expect that things will return back to normal after being shut down for so long. Businesses have closed, supply chains have been disrupted, and work patterns have been altered. There have also been numerous changes that are not necessarily negative, but still pose complications, such as industrial consolidation, greater importance of technology, and the widespread adoption of remote work. As a result, the economy will emerge, much like someone who has emerged from cryostasis, reshaped and damaged. Some sort of rehabilitation will be necessary. 

In order to make sure this rehab process is successful, Dr. Allen stresses the need to capitalize on entrepreneurship and innovation. Throughout the pandemic, we have seen radical changes in the role of technology and the functioning of work itself. Lockdowns essentially accelerated the digital revolution that was already taking place. As a result, governments must pass policy that makes it easier, not harder, for market actors to implement the necessary reforms to transition. Many laws and rules were made for the Gilded Age economy of over a hundred years past, not the new age of digital technology. The current apparatus of regulations and red tape is a massive barrier that threatens to hold back many, while only a few privileged actors can afford to navigate these challenges successfully. 

Another important reform discussed is the need to embrace polycentric governance rather than a top-down approach. This is because a decentralized style of management allows more discretion and experimentation than a cumbersome top-down model. Polycentric governance could mean a variety of things and comes in many different forms. One would be privatizing and deregulating more industries, which would allow for more dynamic management of the economy that shares responsibility between the private and public sector. Ideally, there would be enough economic liberalization to give private actors room to innovate and try new approaches, rather than conforming to a one-size-fits-all government mandate. Another form of polycentric governance would include delegating state decision-making to the most local level possible rather than attempting to impose a sweeping policy from the highest level. 

Key Takeaways 

Dr. Allen’s recommendations are based on sound economics and historical insight. No society has ever planned and regulated their way to a new and innovative future; rather the opposite is true. There is no denying that the economy has not only been damaged by lockdowns, but has fundamentally changed as well. Technology plays a greater role than ever, some jobs will never return, and labor and supply are in a radical transformation period. In order to ensure the quickest and most painless transition, governments need to understand that the status quo policy environment is suboptimal. Countries like the United States should pursue a radical agenda of decentralization and economic liberalization so the economy can not only recover quicker but also modernize. If this is not done, we may risk emerging from the pandemic, much like a person awaking from being frozen, with serious scars and blemishes that could haunt us for a lifetime.

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