The Covid-19 Pandemic, Heterodoxy and the End of Mainstream Economics

A key purpose of the Association for Heterodox Economics (AHE), in conjunction with the wider heterodox community, is the search for a more robust explanation of economic realities. The current Covid-19 pandemic has led to fundamental challenges for our economic system, creating substantial uncertainty and increased need for a reliable economic science that can help us understand the changes, and guide decision-makers towards effective policy. 

While heterodox economists have long recognized the limits of market mechanisms in allocating resources efficiently and fairly, COVID19 makes these limits particularly clear. This has led both corporations and the government to intervene in the economy, for example through major expenditures on income support, the direction of production — either by decree or by moral suasion, instructions on how, what and when to consume, and the identification of strategically vital sectors which are characteristic of a major planning role for the government in the economy. The naming of key workers, many of whom are amongst the lowest paid, suggests that we need to rethink how we value labour in society. The insecurity that derives from flexible labour markets has also been fully exposed during the pandemic. The problems associated with the high inequalities produced by long standing government policies, biased towards corporations and against workers, are now becoming evident

The abandoning of economic orthodoxy, when faced with real world health problems of unprecedented scope, and the marshalling of resources to directly address problems, reveals a pragmatic approach by the government. With the stroke of a Treasury pen, it has become clear that the pre-crisis claims by the government that there is no alternative to austerity, homelessness, poverty and inequality were false. That homelessness can be eradicated in days, hospitals built in 2 weeks, labour furloughed not sacked, demonstrates these arguments of ‘necessity’ are actually choices. In light of this, we hope that once the pandemic is overcome, there will be a recognition of the choices it is possible to make. One view may again prescribe austere futures, but that is one choice and there are many others. If we have been able to quickly address the health crisis, we can as quickly address the climate crisis if we choose to do so; in fact, a dramatic consequence of the efforts to halt the pandemic have been a great slow-down in carbon emissions. To make informed choices for our futures we need to open the door to the broad and growing body of theory that proposes more realistic and just solutions to the resourcing problems.

Heterodox schools of thought allow for dynamics and are aware of the inherent instability of the capitalist system. In studying economics, AHE members consider power, complex systems/feedback, law, planning, and ethics/equity. Many of these ideas are employed in mainstream economics, but normally only in an adjunct manner. The AHE proposes that a new debate about economics is now vital, galvanised by the current pandemic, in which new ideas about resilience and equity are placed to the forefront