In the midst of a crisis, many policy makers feel compelled to throw everything they have at the problem, no matter the expense. But if massive global calamities on the scale of COVID-19 and the global financial crisis strike every decade or so, instead of every century or so, can we continue to follow a “whatever it takes” approach to fighting them? Chicago Booth’s Raghuram G. Rajan considers how concerned decision makers should be about creating problems for tomorrow as they try to manage the problems of today.
There is going to be a real question of whether the global financial crisis, this global pandemic, these are not once-in-a-lifetime or once-in-a-century events but are going to happen every 10 years or so.
Are we justified, as societies, pouring so much money into defending against them, when, in fact, we are mortgaging our children’s inheritance, and then their children’s inheritance, and we’re building up enormous amounts of debt? Should we think of a different approach as we go forward? How much is it OK to spend on trying to deal with these calamities?
Today, it seems as if countries across the world are saying, “anything it takes.” But is it really feasible to keep spending “anything it takes” every 10 years?
We haven’t brought down the debt from the last time we dealt with problems, in the global financial crisis. In fact, we’re going to add substantially to debt at this time. Is it going to essentially handicap future generations? And what is their say in all this? Especially in this particular case, when we are really trying to save the elderly in our societies. Are we mortgaging the future of the young for that?
These are the kinds of knotty issues that I think we’ll have to deal with, moving forward.