A Turning Point for Political Economy

IMF Blog, June 1, 2020

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Five months ago we set out to write in this issue of Finance & Development about political economy—how politics affects the economy and the economy affects politics.
The pandemic, with its appalling loss of life, has brought the Great Lockdown and frozen the wheels of commerce.
People’s lives have been turned upside down, punctuated by furloughs, facemasks, and fear.
While this health crisis reoriented our focus, the issue of political economy is more relevant than ever.

Policies are made not just on the basis of economic analysis but under the influences of non-economic social and political forces.
The crisis compels thinking about how people and the economy will adjust in a post-pandemic world.
Managing the effects of the pandemic prompts a real discussion of how best to implement the policy response to reach all segments of the population.
To a large extent, economic policy will shape society’s resilience to the emergency and its aftermath.

Importance of institutions, identity, and trust — contributions by Jeff Frieden, Andrés Velasco, and others.
Migration and remittances — Antoinette Sayeh and Ralph Chami weigh policy solutions as this crisis robs millions of migrants of work opportunities, slashing remittances, the single most important flow of income for many poor countries.
Resilience versus efficiency — Ann Florini and Sunil Sharma argue that dealing with systemic fragilities requires that resilience—society’s ability to absorb and adapt to change—receive equal billing with efficiency.
Social cohesion and solidarity — articles discuss policies that protect and lift the most vulnerable as jobs disappear and inequities deepen.

The crisis of this scale is a global turning point, forcing economists and others to expand their imagination and experiment with radical new ideas about how the world works.
Kristalina Georgieva notes in her essay that such a reimagining could lead us to a greener, digitally smarter, fairer, and more compassionate world.
The pandemic may be a chance to reset the fundamentals of our social and economic life.

The interdisciplinary field of political economy owes its emergence to Alberto Alesina, a great scholar who passed away on May 23.
IMF Chief Economist Gita Gopinath reflects on Alesina’s far-reaching influence.
GITA BHATT, editor-in-chief, Finance & Development

A Turning Point for Political Economy — Gita Bhatt, June 1, 2020.