When we look back 14 years, we recognise that the global economy has not performed well since the 2007 financial crisis. The world’s leading economies never really recovered sufficiently from that crisis as any recovery soon proved to be fragile. By the time coronavirus hit, which caused another slump, incomes and employment had not yet got to where they were prior to 2007.

At the time, the international economic recession had been dubbed as another Great Depression (the first one having hit in the early 1930s). Probably we need to change its name to a ‘Long Depression’ – a repetition of what happened in 1873 when a severe financial crisis that had hit in that year was followed by a prolonged period of low, sluggish economic growth.

Historians do not agree as to when the Long Depression ended. Some put the date as 1879 and others extend it to 1896. In any case, there are more similarities between the current situation and the Long Depression of that time than there is with the Great Depression of the 1930s.

In both instances (prior to 2007 and prior to 1873), there had been a period of significant technological advancements. Then people talked of the invention of the telephone, the development of the car running on an internal combustion engine and the like. Prior to 2007, we talked of the internet of things, artificial intelligence and so on.

After that – in the last 14 years − the world did not experience the productivity growth that was expected. The coronavirus pandemic has continued to expose the structural weaknesses in the global economy.

Focusing on the present, there are worries about rising inflation. Inflation in the US has risen to 5.4 per cent. Inflation in the eurozone was expected to accelerate to three per cent in August from 2.2 per cent in July. Let us remember that the European Central Bank has been battling with low inflation and did all it could to raise the rate to the target of two per cent. Now we are at three per cent.

To get the global economy out of the clutches of the coronavirus and to address the longer-term structural weaknesses, we need governments to play a more active role

In spite of this rising inflation, central banks cannot just raise interest rates as that could further dampen the economic growth rate. As such, central banks know that the period of easy money through low interests and asset purchases is over but are caught in a catch-22 situation. Interest rates need to remain low.

The situation is further exacerbated by the fact that governments have run massive fiscal deficits to cushion the impact of the coronavirus on the economy. This happened when the various austerity measures taken in the last years to control public sector borrowing had not left the desired effect while the population of several countries had to contend with less public services. Just as central banks are caught in a catch-22 situation, governments are caught between a rock and a hard place.

Businesses are not in a much better shape anyway. Many businesses have had to borrow more in order to survive the pandemic and now find themselves with the need to generate a great amount of cash to pay back their loans against a background of weak economic growth.

Past experience has shown us that we cannot allow the free market to sort things out. We cannot have deregulation. It has also shown us that reducing the share of national income for labour does not work. Reducing the role of the state in the economy is also not part of the solution. We have been there already and we must admit that all these strategies have failed.

To get the global economy out of the clutches of the coronavirus and to address the longer-term structural weaknesses, we need governments to play a more active role. Governments need to eliminate wasteful expenditure but intervene more strongly in the economy to safeguard workers and consumers. We need to embrace new technologies but we must ensure that they bring benefits to the many and not the few. The market power of big companies needs to be curtailed.

This is yet another reason why post-coronavirus we will not be going back to our old ways. The new norm will require stronger governance and stronger governments with a very strong social orientation.