• The Covid-19 pandemic was a watershed moment, both in terms of highlighting the failings of prior economic orthodoxy, but also by feeding electorates’ appetite for greater state intervention in the future.

Government scorecards are now likely to place more emphasis upon social and environmental outcomes rather than purely financial goals, and as such the state should play a more direct role in economies. While increased government-directed investment may yield social benefits, it also risks resource misallocation and the crowding out of the private sector.

Social Policy

Monetary stimulus is likely to be de-emphasized, with fiscal policy being harnessed to a greater degree in order to achieve stronger and more equitably distributed growth. This approach could see increased investment in favored areas, such as physical and social infrastructure, decarbonization and defense, while also being used as a tool to facilitate redistribution, for example taxing share buybacks and windfall taxes. Electorates are likely to demand that governments become more proactive on their behalf, with greater intervention in private markets, in pursuit of both financial and social agendas.

Environmental Policy

Environmental policy is an area of increasing activity for governments, with greater recognition of the planetary boundaries that are required to sustain life and a prosperous economy. Governments are facing tough trade-offs between environmental impacts, economic growth and social consequences. These trade-offs are shaping government activity in relation to regulatory standards, taxation and subsidies. We expect governments to push on environmental policy harder than they have done in the past as the consequences of economic growth at any environmental or social cost become too damaging.

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