The COVID-19 epidemic has in a short amount of time upended much of the reality around us. The human and economic costs have been grave already. And all of it happened in the course of a few weeks, if not days.

Governments had to quickly focus on bending the curve of infections, treating the sick, keeping the broader economic system intact, and softening the immediate social and economic impact of the public health measures and their repercussions on individuals and firms.

In terms of economic policy, a quick ramping up macroeconomic action was needed: Monetary action to safeguard the financial system and support demand. Fiscal action to keep companies afloat, employment relationships intact, and finance social measures to help those hit the hardest.

This was, and to a large degree still is, the time of the nation state. This is where the power and the political authority rests to take the necessary policy action.

Adding a long-term perspective to short-term action

We are now entering a new phase; the curve of new infections has been bending, and health care systems are in full swing to provide care to the high but for now stabilizing number of patients. We now can, and need to, think beyond the short-term: first about the period ahead where we have to live under ‘pandemic conditions’ while there is no cure available. And then about how to get back on a robust growth path in the post-COVID world.

Policy choices will have to focus more on what is sustainable, not just what is effective. The public health measures, in particular the lockdown, needs to be adjusted for societies to be able and willing to live by those rules. The economic policy response will need to start focusing more on what the best use of resources is, how they can be financed in a way that minimizes long-term costs, and how negative incentive effects can be kept under control.

Policy choices will also have to become more de-averaged by groups in society, by geographies, by sectors, and by types of companies. The public health measures will need to differentiate by individuals’ and entire locations’ risk profiles and COVID-19 infection status; testing and contact-tracing will play a key role. The economic policy response will need to consider the long-term viability of individual firms as well as the sector-specific costs of extended disruptions in operations, value chains, and employment relationships.

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Original source: Orkestra