As a guiding principle for any profession or career, “first do no harm” is hard to beat. The Hippocratic oath comes to mind amidst reports that economists are rethinking orthodoxy about debt and public finance. After decades of warnings about unsustainable debt levels and a resulting push for austerity programs that inflicted untold harm on already suffering countries, the paradigm is shifting: A new consensus is emerging among academics that stimulus should be preferred to austerity.
This reassessment predates the COVID-19 crisis and is, in important ways, a reaction to the victory of austerity economics after the Great Recession of 2008-9. That crisis was extended because many Western governments embraced restraint rather than stimulus, and national economies sputtered as a result — an outcome that may have produced even more damaging political consequences.
Since the 1980s, economic orthodoxy has been defined by neoliberalism. That concept rests on two pillars: increased competition, achieved through deregulation and opening domestic markets to foreign competition, and a smaller role for the state, which typically means privatization programs and limits on the ability of governments to run fiscal deficits and accumulate debt.