In a May 2, 2020, post here the term "Extended Economic Distortion" was introduced:
In this writer's opinion, too many pundits talk about the economic situation in terms of a recession or even a depression. The problem is mankind has never before seen an economy like the economy of the first two decades of the 21st Century. So we have never seen a reaction to a radical pandemic-based shift during such an economy.
The reaction is likely to lead to an Extended Economic Distortion, not a "great" recession or depression. Mistrust, a general sense of unease, is likely to be felt by most people. And the real meaning of "people" in this context is "consumers" whose spending drives the worldwide "consumer economy" which in the United States represents about 70% of economic activity.
On a May 7, 2020, I followed up with additional observations:
Prognostications from some sources indicate that an economic recovery will begin by the second half of the year. More likely the Coronavirus Crisis will lead to an Extended Economic Distortion.
...By "distortion" it is meant that the entire political economy will be twisted out of shape, away from the expected direction.
In truth this writer, among hundreds of writers and commentators, failed to anticipate how the Extended Economic Distortion would flow because I like the others had "never seen a reaction to a radical pandemic-based shift during such an economy" in a multiyear pandemic with a rapidly evolving virus which had not been in the prognostications of 2020.
Nor was the U.S. consumer behavioral reaction to the lockdown anticipated.
In other words we didn't know anything useful for forecasting and we still don't.
We do think that someday the coronavirus will be able to be reclassified as endemic rather than pandemic. We also think that someday the hugely inflationary pandemic economy probably will reverse potentially leading to a recession or depression.
The difficulty is that medical science which quite rapidly created vaccines can follow closely the evolution of the virus. But it cannot exactly predict what evolutionary changes will come next.
And, of course, economists once again have proven that economics is not a "big picture" science but rather an art painted by informed guesses. In a June 20, 2020, post, renegade economist Kate Raworth was quoted from a pre-pandemic piece as follows:
No one can deny it: economics matters. Its theories are the mother tongue of public policy, the rationale for multi-billion-dollar investments, and the tools used to tackle global poverty and manage our planetary home. Pity then that its fundamental ideas are centuries out of date yet still dominate decision-making for the future.
Today’s economics students will be among the influential citizens and policymakers shaping human societies in 2050. But the economic mindset that they are being taught is rooted in the textbooks of 1950 which, in turn, are grounded in the theories of 1850. Given the challenges of the 21st century—from climate change and extreme inequalities to recurring financial crises—this is shaping up to be a disaster. We stand little chance of writing a new economic story that is fit for our times if we keep falling back on last-century’s economic storybooks.
When I studied economics at university 25 years ago I believed it would empower me to help tackle humanity’s social and environmental challenges. But like many of today’s disillusioned students its disconnect from relevance and reality left me deeply frustrated. So I walked away from its theories and immersed myself in real-world economic challenges, from the villages of Zanzibar to the headquarters of the United Nations, and on to the campaign frontlines of Oxfam
In the process I realized the obvious: that you can’t walk away from economics because it frames the world we inhabit, so I decided to walk back towards it and flip it on its head. What if we started economics with humanity’s goals for the 21st century, and then asked what economic mindset would give us half a chance of achieving them?
Of course, Raworth has continued to advocate her views within this current turmoil. In addition Climate Change factors came together this year to provide "in your face" evidence that it is already too late to avoid major weather impacts and extreme inequalities returning mass starvation in the third world.
It is not predictable what the turmoil within the Extended Economic Distortion will paint as a "big picture" but humans tend to become hopeless, then angry when they lose their new overpriced homes and/or cannot feed their families. This can lead to conflict and violence, and to the Mussolini's and Hitler's.
I don't know if it can lead to starting an "economics with humanity’s goals for the 21st century" then creating an economic mindset that "would give us half a chance of achieving them." It would require abandoning the economic theories of 1850 which prop up our current class and corporate structures and are protected by our governments - national, state and local. Along with dealing with Climate Change, that's a lot to dump on those born after 1980.
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