– April 30, 2020
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A recent article in The Economist raises an important issue with respect to the coronavirus outbreak. A big government may well be needed to fight the pandemic, but how will it shrink back once the pandemic crisis is over? “The state must act decisively. But history suggests that after crises the state does not give up all the ground it has taken.”

In Crisis and Leviathan, Robert Higgs explains how crisis after crisis, the U.S. government increases in either size or regulatory reach. When a crisis occurs, there is a demand for the government to “do something.” Responding to this demand, governments increase their size and regulatory outreach. However, once the crisis is over, spending and regulation do not go back to their initial levels. The result is an increase in government size and regulatory reach from one crisis to the next. 

The “coronavirus” pandemic has changed the world in a matter of weeks. Countries around the world are mandating lockdowns and “stay-in-home” orders. In some cases, as in my home country Argentina, citizens abroad are not allowed to re-enter their home countries. There is a risk that whatever justified measures governments are taking because of the pandemic outbreak will remain as unjustified powers once the pandemic crisis is over.

We should be careful about learning the wrong lessons from this event. For instance, that the lack of health resources is due to the greed of health providers overlooking the effect of inefficient and excessive regulation. 

Or, like in Argentina, that the government has the right to suspend constitutional rights; is it legitimate for a government to forbid the return of citizens to their home countries? In short, we should be careful of providing unsound justification for a police state. It does not follow from being acceptable for the government to do something that anything is acceptable.

Look at the figure below, which shows the idea behind the ratchet effect. The horizontal axis tracks time. The vertical axis measures the size and regulatory reach of the government. The first two crises show an increase in government powers. The third crisis, which represents the coronavirus outbreak, shows a significantly larger increase in government size (bailouts, spending programs, etc.) and regulatory powers. The wrong arguments in favor of a police state during the coronavirus crisis can lead to a larger state once the pandemic outbreak is over.

There is a substantial difference between having a small government that is ready to act if needed in the case of an emergency (war, pandemics, etc.) and having a government that is always with state-of-emergency powers. Societies around the world have granted their governments powers to do whatever is needed. The same societies should forcefully reclaim those rights once the crisis is over. 

Nicolás Cachanosky

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Nicolás Cachanosky is an Assistant Professor of Economics at Metropolitan State University of Denver. With research interests in monetary economics and macroeconomics, much of his recent work has focused on incorporating aspects of financial duration into traditional business cycle models. He has published articles in scholarly journals, including the Quarterly Review of Economics and Finance, Review of Financial Economics, and Journal of Institutional Economics. He is co-editor of the journal Libertas: Segunda Época. His popular works have appeared in La Nación (Argentina), Infobae (Argentina), and Altavoz (Peru). Cachanosky earned his M.S. and Ph.D. in Economics at Suffolk University, his M.A. in Economics and Political Sciences at Escuela Superior de Economía y Administración de Empresas, and his Licentiate in Economics at Pontificia Universidad Católica Argentina.

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