Path dependency is one of the most powerful forces in politics, and indeed life. You can see it everywhere but it’s particularly important – and dangerous – at the moment in the government’s economic response to the lockdown. Chancellor Rishi Sunak’s measures to support incomes during the lockdown grouped salaried workers into two groups: those who could work remotely from day one of the lockdown and those who could not.
The former category is obviously significantly smaller and less complex than the latter. I’ve spoken to several businesses whose ability to transition to homeworking was only financially viable because a comparatively small number of their workers needed new hardware to do so. This need tended to be at its most acute among workers under 30 who had a smart television and an iPhone at home, but no computer to work on, and workers over 50 who had no computer at home.
I’ve spoken to other, essentially identical businesses, which have furloughed employees simply because, while they were just as capable of providing their services via remote working, they couldn’t afford the financial costs of that transition. Comparatively small amounts of government spending, particularly compared to the large costs of furloughing, could fix the problem.
The furlough scheme is a good idea because it protects both incomes and jobs – but it should be one of a suite of government policies available. Although the end of lockdown is some way off, the economic cost of it is dominating much of the political debate, both in the government and the media. I think there are two issues here: the first, which I mentioned in my morning email today, is, just as “enacting a lockdown” depends on public support, so too does “exiting the lockdown”.
Don’t forget that a large number of people had taken steps to limit social contact before the government’s advice changed, and that many are now taking their cues from abroad and from scientific research suggesting that mask-wearing is a net positive in fighting the disease, rather than from government advice. While there is certainly a great deal of pent-up demand in the economy – many people are desperate for a decent night out etc – there is also a lot of ambient fear and concern about contracting the virus. The government should assume that people will observe a degree of voluntary lockdown until a vaccine is found – and that this will have implications for the economy.
That speaks to the second issue – which is whether the British economy, and indeed economies in general, are operating at peak lockdown performance. This is palpably untrue when you think about it, as the level of transition assistance that businesses have been provided is slim to non-existent. Global governments have provided varying degrees of income and job protection – but little to help businesses to operate in a different form.
Getting the economy into peak lockdown performance may well be a more useful exercise than engaging in debates over when the restrictions should end – but it’s a task that requires us to free ourselves from the idea that the lockdown economy can never be any bigger than it was the day that Britain shut down.