The COVID-19 crisis has brought great pains throughout our world. From the loss of loved ones to economic hardships for both employers and employees alike. Yet in times like these, we should take the opportunity to reflect. Reflect not only on how the crisis is being handled but also on how we are to exit the crisis.

It is my fear however, that the coming economic crisis has the potential to wreak as much havoc as the coronavirus itself. Lay-offs have already started taking place on a global level. And if the pattern subsists, we’re in for a crisis which will be far worse than the Great Recession of 2007/8. In fact I believe that this crisis will be more similar to the Great Depression of 1929, where mass unemployment took root and lasted for quite some time.

In planning the way forward, we should look towards history in order to see which solutions worked and which didn’t. Following the Great Depression of 1929, there was quite a debate between the classical economists and those who subscribed to the Keynesian faith.

Herbert Hoover, then US president, argued that prosperity was just around the corner since he believed in classical economics, thus advocating no economic intervention. However what this led to was even more economic hardship. In 1933, enter Franklin Delano Roosevelt and his Keynesian beliefs, which were modelled on economist John Maynard Keynes’s policies. FDR won the 1932 presidential election in a landslide victory and implemented what is known as the ‘New Deal Programme’.

 This programme was, in essence, an increase in government expenditure. By increasing government expenditure, what FDR was doing was increasing aggregate demand, which in turn increased aggregate supply. The result was that the American economy managed to recover and flourish thanks to the New Deal programme as well as thanks to the post-WWII boom. What I’m getting to here, is that had it not been for Franklin Delano Roosevelt, the American middle class would not be what it is today.

In times of competition, we need to move fast

Fast forward to 2020, and we’re facing a scenario that although very different to the 1929 Great Depression, will bring similar economic effects. Hence, what we must do is the same thing that Roosevelt did: invest in our people.

Naturally, the world has changed since 1933 and new economic theories such as monetarism and supply-side economics have emerged. Likewise, new economic phenomena that in the past were thought to be impossible such as stagflation have also took place, meaning that we need to keep all of these things in mind when coming up with an exit strategy.

Yet apart from looking to the past, we must also look to the future. If the coronavirus pandemic hasn’t taught us anything, it has taught us that emerging sectors such as artificial intelligence, blockchain, cyptocurrency and fintech as well as digitalisation as a whole are future-proof.

In times of social distancing and self-isolation, these emerging sectors continue to give our economies the oxygen that they desperately need to pull through.

Therefore it is more than natural to point towards these sectors, when certain social partners and economists speak about the need to diversify our economy, in order to anticipate future crises and pandemics. Yet in attracting these investments, what we must do is invest more ourselves.

First of all, we need to continue upgrading our infrastructure, while keeping in mind that the benefits of upgraded infrastructure always outmatch the costs. Secondly, we need to make sure that we create specialised clusters whereby companies in these sectors  feel at home and find it easy to operate. 

Ideas are well and good. We would however, do well to keep in mind that we’re not the only ones who have these ideas. In times of competition, we need to move fast in order to secure the best investments for our country. As the fictional character John Tuld said in Margin Call, there are three ways in which we can be successful: “Be first, be smarter, or cheat.”

Now we are no cheaters, so that’s well out of the question. But I believe that we can both be first and be smarter than the rest.

Carmelo Abela is Minister within the Office of the Prime Minister