Concerns grow about government action taken for the economy for Covid crisis.
No other time since the fall of the Soviet Union has so much of the worlds market now being influenced directly by governments. From Paris to Canberra governments have stepped into the economy during the COVID crisis. This influence is not just limited to the Western world. Governments in the developing world bracing for disruptions and possible reductions in aid have acted. Some have argued that government intervention is necessary and reasonable. Consequences, however, exist even for reasonable actions. Mission creep exists along with worry about the rushed nature of the policies. This article addresses concerns that are only becoming more relevant.
Governments have not unity in a globalized economy
President Donald Trump has already famously used trade tariffs to preserve what he believed was American interests. Other countries that had criticised this move are now seriously considering them. If this is paired with the previous actions, then economic inefficacy will rise and the globalised supply chains requiring immediate replacement. With many firms already hurting, having to restructure is another burden added on. Another unknown is how governments will react to the actions of each other. Firms are now managing risks along with being forced to adapt to sudden policy.
Restrictions on economic actions are still occurring, and they are going to be lifted.
Bans on what landlords can do and threats towards lending institutions have prevented bankruptcies and evictions to a significant degree in the United Kingdom and Australia. In the United States bans on evictions have occurred at the State level with different individuals and firms being covered. When these restrictions are stopped, then all of the market actions will occur at the same time. Unfortunately, a lot of the economic policies made in response to COVID will be lifted at the same time. Concerns about what is going to happen when a singular policy is revoked exist all of them together is even more complicated unknown.
However, if organisation could be even achieved among the different entities involved in this process, then other concerns exist. The government stepping into the housing market, for example, would be them selecting which tenants or landlords will be at the start of the market downturn. This could be a benefit or negative depending on who is asked. If the government is going to increasingly start to control economic functions, then it is straying ever more into the planned economies of the 20th century. Wanting a planned economy is terrible in itself, yet making a government do the functions of a planned economy with no experience is a disaster waiting to happen.
Allegations of direct government intervention into the stock market are starting
This is harder to find evidence of, but then again does not require evidence to cause damage. If the belief that the government has gotten involved in the stock market during this time becomes widespread, then damage will happen. Faith in the government in a general sense is not very high and the confidence in the government to pull out of the market in a sensible manner is even lower. It is known that some semi-government groups and banks had entered the market to ensure stability but the amount and who remains uncertain. This uncertainty can have a damaging impact on market activities. If this signals a more active involvement of governments in stock markets then a new large entity has entered the markets.
If the government or government institutions are getting involved then we have to hope that is limited or they are more competent then the average or even educated citizen believes. With the markets already trying to process all the data that has occurred during the pandemic, this adds more stress. Risk makes crashes worse and prevents rallies from growing stronger. If recovery is wanted then this does not help.
The action may be something you agree with but the impacts matter:
Even those who agree with all government actions should be concerned about the impacts that can occur. For those who want even more government action than seeing how the existing actions work will be especially important. It is uncertain if we have the time to see how these involvements play out before the impacts are especially horrific. Pandemics are not the norm and a lot has changed in the roughly hundread years since the previous ones.