The spread of novel coronavirus infections threatens the world economy. Kyoto University Prof. Masahiro Nei suggested some ways Japan could help people and businesses overcome economic issues, during a recent interview with The Yomiuri Shimbun. The following is excerpted from Nei's comments in the interview.
Although the economic downturn caused by the new coronavirus is said to be comparable to that during the Great Depression, its nature is different. This time, to prevent the spread of infection, economic activities have been forced to halt, which has prevented some people from working. Therefore, this is a supply-side shock rather than the lack of demand that British economist John Maynard Keynes (1883-1946) regarded as a cause of the Great Depression.
This is an acute emergency. Following Keynes' example, measures must be considered based on the realistic situation.
First, economic assistance to those who are deprived of income is needed. The government and the Bank of Japan must provide financial support to avoid bankruptcies of small and midsize companies that, under normal conditions, could stay in business.
It has also become obvious that people are clearly divided into two groups. There are those who can tolerate this situation to some extent and those who are immediately unable to make a living. This is because economic disparities have widened. The government should consider introducing a universal basic income system that guarantees a minimum level of income.
If the government sits on its hands, there is a risk that the depression will be prolonged. It is understandable that fiscal spending will increase in times of crisis.
Meanwhile, the latest crisis has led to a heightened necessity for telework or online classes. It cannot be said that companies, schools and society are able to deal with them adequately. This indicates the fact that existing internet technology is not being put to full use, clearly showing the need for efforts to promote innovation in technology.
According to American economist Joseph Schumpeter (1883-1950), innovation is not necessarily invention. He argued that even conventional technologies can bring about innovation if they are used in a new fashion.
Although this innovation is driven by enterprises, the role of governments is still significant. Even in the United States, which is said to be a country of free competition, its government has actively supported promising industries such as information technology.
Now is the time to concentrate on dealing with the current crisis. There are, however, many points to consider after the pandemic has been controlled. In the pursuit of efficiency, environmental issues or economic disparities may have been neglected. Keynes insisted that balance among economic efficiency, individual liberty and social fairness should be achieved to deal with economic issues.
What economics should be will perhaps be questioned. It must be knowledge not only about how to distribute resources efficiently, but also about issues of justice and fairness.
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Nei was born in 1962 and, after graduating from Waseda University School of Political Science and Economics, earned a PhD in Economics from Kyoto University. His research field is the history of contemporary economic thought.
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