The Economic Consequences of the Pandemic

by John Quiggin on September 4, 2020

That’s the title of the book I’m working on for Yale University Press, and also the theme of two articles I published yesterday.

One, in The Conversation, looked at the potential benefits of remote work and the likely struggle over who will get those benefits. Key paras

For the most part, disputes over sharing the benefits of remote office work will be hashed out between employers, workers and unions, in the ordinary workings of the labour market.

But what about the other half of the workforce, who don’t have the option of working from home? In particular, what about the mostly low-paid service workers who depend on people coming into offices?

If the productivity gains made possible through remote work are to be shared by the entire community, substantial government action will be needed to make sure it happens.

The other article, in Inside Story, looks at the end of the goods economy and its replacement by an information and services economy, a transformation that’s been highlighted by the pandemic. An important implication is that investment demand by private firms is likely to stay low, even as greater public investment is desperately needed.

Tech firms like Microsoft, which now determine stock market values, don’t need much capital. The book value of Microsoft’s capital stock is less then 10 per cent of its market value. The rest is made up of intangibles, a polite word for monopoly-power network effects, intellectual property, and good old-fashioned predatory conduct.

Without any need for private sector investment, interest rates will remain low unless public investment picks up the slack. With the physical goods economy fading into the past, though, we don’t need more of the transport infrastructure projects governments automatically turn to at times like these. Rather, we need to invest in human services like health (mental and physical), education and childcare, and in information platforms that break the monopoly power of the tech giants.

These are the investments that will allow Australia to flourish in an economy dominated by information and services rather than industrial production.