The role of the state in the post-pandemic world - Capital Economics
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The role of the state in the post-pandemic world

Global Economics Focus
Written by Paul Ashworth
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The state has taken on a much greater role in G7 countries during the pandemic and there is no guarantee that it will relinquish all its new powers when the coronavirus threat fades. The pandemic could accelerate the backlash against capitalism that had begun in many advanced countries in response to the increase in income inequality, with the government playing a bigger role in the economy. In addition, the unprecedented support provided by monetary and fiscal policymakers could make it harder to say no in the future during even run-of-the-mill downturns, eventually prompting a return to higher inflation, which would be exacerbated if governments also sought to control production of strategic goods.

This Focus forms part of a series exploring how the coronavirus pandemic will change the global economy. You can find other publications in this
series here.

  • The state has taken on a much greater role in G7 countries during the pandemic and there is no guarantee that it will relinquish all its new powers when the coronavirus threat fades. The pandemic could accelerate the backlash against capitalism that had begun in many advanced countries in response to the increase in income inequality, with the government playing a bigger role in the economy. In addition, the unprecedented support provided by monetary and fiscal policymakers could make it harder to say no in the future during even run-of-the-mill downturns, eventually prompting a return to higher inflation, which would be exacerbated if governments also sought to control production of strategic goods.
  • In recent years, rising income inequality has led to a growing push to reject the individualism that became fashionable in the 1980s and to return to the collectivism of the 1960s and 1970s. As it did a half-century earlier, the renewed calls for collectivism are coming at the same time as there has been a greater public focus on social justice, civil rights and poverty reduction. The pandemic could accelerate that shift in the political currents, with countries raising taxes on high income earners and boosting welfare spending, including possibly by introducing a universal basic income.
  • At the same time, the pandemic prompted an unprecedented policy response because, unlike in a normal economic downturn, policymakers felt a moral duty to support households and businesses since it was the government-mandated lockdowns that caused the economic damage. Now that policymakers have gone well beyond the previously perceived limits of monetary and fiscal stimulus, it may be harder to resist calls for super-charged stimulus during not just future crises, but normal downturns too.
  • The problems that countries had in securing imports of protective equipment and other strategically important goods in the early stages of the pandemic could also accelerate the process of deglobalisation that had begun with the deterioration of the relationship between the US and China. In some cases, countries could opt to nationalise their domestic production to guarantee supplies. But there are alternatives, such as using a combination of tariffs on imports and subsidies for domestic producers or, if the goods are durable enough and only needed periodically, it could make more sense to stockpile imports.
  • Finally, since the crisis showed that investment in pandemic preparedness proved to be woefully inadequate, the coronavirus could lead to a reconsideration of the importance of state investment in public goods. The big question is whether the surge in public debt from tackling the pandemic will dissuade spending on other public goods or, because it has demonstrated that the limits of debt are much higher than previously believed, embolden governments to pursue other objectives, such as tackling climate change, boosting infrastructure investment or preparing for other tail risks, like earthquakes and meteorites?
  • If the pandemic does accelerate the shift to bigger government, we would caution against simply accepting the conventional wisdom that would be negative for economic growth. In practice, the relationship between the size and effectiveness of government is not nearly as straightforward. A bigger public sector could increase inefficiencies, misallocate resources and earn a relatively lower return on investment. At the same time, however, extreme income inequality is also detrimental to economic growth if it significantly boosts saving. And there is little danger of crowding out when private firms prefer to return profits to shareholders rather than investing. We are more confident that a bigger and more active state would be a negative for the stock market and would eventually lead to higher inflation, however, particularly if policymakers overreact to the next run-of-the-mill downturn and/or if governments clamp down on the control of strategic goods.

The role of the state in the post-pandemic world

This Focus forms part of a series exploring how the coronavirus pandemic will change the global economy. You can find other publications in this series here.

The state has taken on a much greater role in most advanced economies during the pandemic. Even in liberal western democracies, governments used emergency powers to impose draconian lockdowns, which closed private economies and curtailed the free movement and rights of citizens. Policymakers attempted to offset some of the resulting collapse in private sector economic activity by unleashing a massive wave of deficit-financed government spending and monetary stimulus.

In this Focus we analyse the ways in which the pandemic could have a more lasting impact on the role of the state in the G7 and other advanced economies. First, to the extent that the pandemic has worsened inequality, it could further the backlash against free market capitalism. Second, now that policymakers have crossed the Rubicon, it may be harder to resist calls for super-charged stimulus during even normal downturns. Third, the crisis may lead to a broader reassessment of what public goods governments should provide. And finally, the pandemic has also seen governments take a greater role in controlling strategic production. That will accelerate the process of deglobalisation.

Big government falls out of fashion

Government spending became a steadily bigger part of the economy in most western democracies during the 20th Century. (See Chart 1.) That upward trend began in earnest during the Great Depression, spiked even higher during World War II and then continued during the 1960s and 1970s – in part to fund the cold war fight against communism (Korea, Vietnam, etc) and in part to fund “Great Society” style spending on social welfare, public health care, infrastructure, higher education and even some R&D via the space race. Personal income tax rates remained close to emergency war-time highs during the 1960s and 1970s and capital restrictions meant that corporations couldn’t offshore profits to avoid tax.

Chart 1: General Government Spending (As a % of GDP)

Sources: 1800-2011 = IMF, 2012-2019 = OECD

But surging inflation eventually ushered in a revolution beginning in Anglo-Saxon countries in the early 1980s. As US President Ronald Reagan famously put it: government was the problem, not the solution. The long upward trend in government spending relative to overall GDP went into reverse in the US and the UK. More broadly, Anglo Saxon societies rejected the collectivist idealism of the previous generation and instead embraced individualism, where greed was good and the tide of unbridled capitalism was supposed to raise all boats. Tax rates were slashed for higher income earners in the belief that the benefits would “trickle down” to all. (See Chart 2.)

Chart 2: US Maximum Individual Tax Rate (%)

Source: IRS

As part of the shift from collectivism to individualism, progressively stronger curbs were placed on the power of unions. In the US, that shift was epitomised by Reagan’s decision in 1981 to fire 11,000 striking air traffic controllers, while in the UK the turning point was Prime Minister Margaret Thatcher’s victory over the striking coal mining unions in 1985. Admittedly, US trade union membership peaked much earlier in the 1950s, but the pace of decline accelerated in the 1970s and the rapid decline continued in the 1980s. (See Chart 3.)

Chart 3: US Private Sector Trade Union Membership (%)

Source: BLS

In a parallel development, western democracies also drove the push for globalisation, which gathered pace during the Uruguay round of GATT trade talks that lasted between 1986 and 1994 and the transition to the WTO in 1995. Those multilateral trade agreements removed most remaining capital controls and ushered in an era of rules-based free trade, with tariff rates on international goods trade significantly lowered.

In the UK, Thatcher’s Conservative government also began a large-scale privatisation programme in the 1980s, which returned nationalised businesses to private hands and sold off the nation’s public housing stock to private tenants. By the late 1960s, most UK heavy industry had been nationalised, including the production of coal, steel, oil, motor vehicles, aerospace and key infrastructure, including the railways, postal system, telecommunications and all utilities. The US never experienced such a marked wave of nationalisations in the post-WWII period. Nevertheless, in recent decades the private sector has, at least partly, taken over the provision of some previously pure public goods, such as the military and prisons.

Alongside the marked reduction in tariffs on imported goods from globalisation, the wave of privatisation of previously nationalised heavy industries and infrastructure meant that, by the mid-1990s, advanced economies had dismantled nearly all controls on strategic production of industries essential to any large-scale war effort or to tackle a pandemic – only restrictions on agricultural imports remained.

The failure of Eastern Bloc communism at the end of the 1980s seemed to confirm beyond all doubt that free-market small-government democracies, which valued individualism over collectivism, were the optimal framework for generating gains in wealth.

Will big government enjoy a renaissance?

The emergence of China over the past 20 years has upended that consensus, however. Although China is not a strictly Marxist regime, it is an increasingly authoritarian regime that controls much of the means of production via state firms and the financial system via state banks. Nevertheless, by taking full advantage of the opportunity afforded by globalisation, China has dramatically outperformed free-market liberal democracies in terms of economic growth over the past 20 years. Most recently it has done a far better job at controlling the spread of the coronavirus too.

At the same time, high inequality in advanced economies – due to globalisation and the lower taxes that accompanied the shift to individualism – triggered a backlash against free-market global capitalism. (See Chart 4.) Demographics may also be playing a role in the shift back to collectivism, with aging populations and rising dependency ratios in many advanced economies.

Chart 4: US Income of Top 5% (As % of Total)

Source: Census Bureau

In recent years, calls have been growing to use the state to redistribute wealth via higher taxes on the rich, to clamp down on excessive executive compensation, to raise the minimum wage, and to boost welfare spending, including possibly by introducing a universal basic income. In short, there is a growing push to reject the individualism that became fashionable during the last couple of decades and to return to the collectivism of the 1960s and 1970s. As it did before, the renewed calls for collectivism are coming at the same time as there has been a greater public focus on social justice, civil rights and poverty reduction.

Admittedly, the collectivist revival has, up to now at least, had only limited success. In the UK, the Labour Party led by Jeremy Corbyn endured a spectacular defeat in the recent election, with voters rejecting old-style nationalisation and higher tax policies. In the US, although a few progressives have won seats in Congress, Bernie Sanders and Elizabeth Warren were ultimately easily defeated by the more mainstream Democratic candidate Joe Biden. But the success that the collectivists have had has forced more mainstream politicians to shift to the left and adopt some of their policies.

As the Democratic presidential nominee, Joe Biden recently unveiled a $2trn climate plan, which would be partly paid for using a significant rise in taxes on corporate profits and high-income earners. In the UK, Boris Johnson’s Conservative government boosted welfare spending and introduced programs to prevent workers losing their jobs. In the US, the Trump administration similarly supported the expansion of unemployment benefits and protecting jobs via the Paycheck Protection Program.

This echoes the historical experience of the 1960s and 1970s. Although it was the Democratic President Lyndon Johnson who declared war on poverty in 1964, it was the Republican President Richard Nixon who repeatedly tried to have his Family Assistance Plan passed by Congress between 1969 and 1972, which included a universal guaranteed income as its centrepiece.

The big question is whether the pandemic will accelerate that shift back to collectivism? The pandemic has, in theory, worsened inequality, with the job losses disproportionally falling on low-wage sectors like leisure, health and retail, which have been most affected by ongoing physical distancing requirements. The rebound in global stock markets and the unexpected strength in housing markets will also further widen the wealth gap. Furthermore, although not directly linked to the pandemic, there has also been a big wave of social justice protests in western democracies – principally with the Black Lives Matter movement in the US. But it is too early to tell whether this is the beginnings of a more significant swing in the pendulum back from individualism to collectivism. November’s US elections will be the first major test of whether the pandemic has led to a more fundamental shift in western societies.

Firing the bazooka

The pandemic did prompt an unprecedented response from monetary and fiscal policy, in part because many economies were still suffering the after-effects of the financial crisis little more than a decade earlier. The financial crisis had already taken monetary policy into largely uncharted territory, while the fiscal policy response pushed public debt burdens to levels usually only seen after major wars.

In the aftermath of the financial crisis, most central banks in advanced economies introduced large-scale asset purchase programs, aka quantitative easing, and cut policy interest rates – first to near-zero and then in some countries slightly below zero. Lending programs channelled credit to banks and, in some cases, directly to households and firms. After allowing Lehman Brothers to fail, US policymakers adopted the belief that the systemic risk of further financial institution failures outweighed any moral hazard risk. That justified the unprecedented policy action that followed.

The pandemic prompted an even more aggressive policy response because, unlike a normal economic downturn, policymakers adopted the guiding principle that since much of the economic damage was caused by the mandatory lockdowns imposed by governments, they had a moral duty to cushion the blow to households and businesses.

To support households, many advanced country governments introduced some form of job guarantee, modelled on the German Kurzarbeit programme, under which the government pays a share of workers’ wages to avoid them having to be laid off. The result is that unemployment rates have barely increased at all in most European countries and the UK. Even in the US, the Federal government attempted to limit job losses by introducing the Paycheck Protection Program, which provides loans to firms that are forgivable if they retain employees. In addition, the CARES Act introduced a major enhancement to unemployment benefits, which meant that more than half of laid off workers suffered no loss of income. The upshot is that in some countries, household income increased during the pandemic – as the boost to government transfers more than offset the drop in private wages.

After the pandemic struck, central banks resumed their purchases of government bonds on an even larger scale than during the financial crisis and, particularly in the case of the US Fed, took an unprecedented role in credit intermediation to the private sector. Using the Treasury’s capital to insulate it against losses, the Fed rolled out a wide range of lending facilities grouped under its 13(3) emergency powers. Even during the financial crisis, the Fed largely restricted itself to buying risk-free government bonds and lending only to banks. But during the pandemic it has bought corporate bonds and offered direct loans to not just banks, but businesses and state and local governments too.

The justifications for the unprecedented policy stimulus during these two crises are genuine. In the aftermath of the financial crisis, the systemic risk of a potential collapse of the entire financial system did warrant near-zero interest rates and quantitative easing. The forced closure of much of the private sector during the lockdowns required policymakers to go even further, channelling money and credit directly to households and businesses.

But now that the Rubicon has been crossed, policymakers could find it harder to say no during a run-of-the-mill economic downturn. The Fed has already relaxed its inflation targeting framework, will no longer tighten policy pre-emptively as the unemployment rate declines, and has reframed its maximum employment goals to be “broad-based and inclusive.” We expect other central banks to follow the Fed’s lead over the coming years.

In September 1979, Arthur Burns, who was Chair of the Federal Reserve up until 1978, gave an infamous speech on “the anguish of central banking”. He acknowledged that the Fed “had the power to abort the inflation at its incipient state 15 years ago or at any later point, and it has the power to end it today. At any time, within that period, it could have restricted the money supply… to terminate inflation with little delay. It did not do so because the Fed was itself caught up in the philosophic and political currents that were transforming American life and culture.” For Burns, the anguish of the central banker in the 1960s and 1970s was that even though they had a strong disposition to control inflation, Fed officials felt unable to do so because raising interest rates would frustrate the will of the democratically-elected Congress, which was intent on expanding welfare spending and living standards.

Burns’ speech is infamous because, only a month later, Paul Volcker was installed as the new Fed Chair. Nevertheless, the parallels with the current situation are hard to ignore. Most central banks are less singularly focused on inflation now. The Fed has switched to an average inflation target, which explicitly allows for an overshoot of the target to compensate for close to a decade of undershooting. In a similar vein, the Bank of England and the Bank of Canada have pledged to leave their policy rates at near-zero until their inflation targets have been “sustainably achieved”.

There are also growing calls for monetary policy to take other objectives into consideration – including inequality, minority unemployment rates or even climate change. As part of that shift, the Fed will now interpret maximum employment as a “broad-based and inclusive goal”. The upshot is that, even if it has only taken the first few steps along the path, the Fed is in danger of becoming caught up in the political currents transforming America again. Other central banks will find it hard to resist succumbing to the same forces.

At a time when aggregate demand is still depressed and underlying inflation is low, there are few downside risks of running a very accommodative monetary policy. The bigger danger is that, echoing the Japanese deflation experience, central banks might not be able to generate enough inflation to get it back to target. Nevertheless, more activist monetary and fiscal policy could eventually lead to a bout of higher inflation over the longer-term, not because central bankers don’t have the tools to rein in demand, but because they will be persuaded not to use them by pressure from politicians and society more broadly.

Rethinking the provision of public goods

The coronavirus outbreak could ultimately lead to a reconsideration of the importance of state investment in public goods too, since the crisis showed that investment in pandemic preparedness proved to be woefully inadequate.

It is almost certain that countries will spend more on pandemic preparedness in the future, even if a vaccine eliminates COVID-19. The big question is whether the surge in public debt resulting from tackling the pandemic will either dissuade spending on other public goods or, because it has demonstrated that the limits of debt are much higher than previously believed, it could alternatively embolden governments to pursue other objectives? Those objectives might include tackling climate change, boosting infrastructure investment or preparing for other tail risks, like earthquakes and meteorites.

In the aftermath of the financial crisis, many advanced countries undertook a painful period of fiscal austerity. That was prompted by fears that investors would otherwise shun their bonds, driving the government’s borrowing costs higher. In a worst-case scenario, which became a reality in Greece, the surge in long-term interest rates could rapidly make debt burdens unsustainable. But that austerity was undertaken at a time when the conventional wisdom was that allowing the public debt burden to rise above 90% of GDP would materially slow economic growth and raise the risk of an eventual debt crisis. The conventional wisdom has changed dramatically since then. Gross government financial liabilities now exceed that threshold in nearly every major advanced country. (See Chart 5.)

Chart 5: Gov’t Gross Financial Liabilities (As % of GDP)

Source: OECD

At the same time, however, long-term government bond yields have fallen dramatically. (See Chart 6.) The upshot is that in many cases, governments are now paying less in interest costs on their debts, even though those debt burdens are close to double what they were relative to GDP in 2007.

The unprecedented low level of interest rates on government debt, particularly in real terms, has created an opportunity for governments to pursue long-term investment projects that they previously may not have believed were cost effective. As the Democratic presidential nominee, Joe Biden has pledged around $4trn in total, to be invested in tackling climate change, spending on infrastructure, education and housing. The progressive wing of the Democratic party has gone even further, promoting a comprehensive Green New Deal programme. In France, the government is touting a big green recovery programme. But not all countries are taking in the same path. In the UK, the Conservative government briefly mulled a significant increase in taxes to “pay” for the costs of the pandemic, although the resurgence in COVID-19 cases appears to have put any changes on pause.

Chart 6: 10-Year Gov’t Bond Yields (%)

Source: OECD, Eikon

Protecting strategic production and supplies

The problems that countries have had in securing imports of protective equipment and pharmaceuticals during the pandemic, in addition to the supply issues experienced in food production and cleaning products, could persuade those countries to adopt measures that protect domestic production of goods deemed to be of strategic importance to national security. This is another way in which the state may impose more control over the economy.

Just as nations once protected their heavy industries in case they were needed to ramp up production of military hardware, the current crisis has shown how offshoring and complex global supply chains can threaten supplies of crucial equipment like N95 masks, re-agents, swabs for testing and protective clothing. Developed economies are almost totally dependent on a few emerging countries for their supplies of goods like generic drugs and rare earths. As the EU’s top diplomat Josep Borrell recently noted, Europe does not produce even one milligram of a drug as basic as paracetamol. The US may be largely energy independent now, but European countries are also heavily dependent on Russia and Ukraine for their natural gas supplies.

In some cases, countries could opt to nationalise their domestic production to guarantee supplies of crucial goods. As we noted earlier, by the late 1960s most of the UK’s heavy industry and key infrastructure had been brought under direct government control. That would represent a clear expansion of the state’s role in the economy.

But there are alternative options to nationalisation, such as levying prohibitive tariffs on imports of those goods and providing subsidies for domestic producers, which would make domestic production profitable for private firms. Even as they slashed tariffs to near-zero on almost all goods trade over the past few decades, most developed economies maintained very high tariffs and quotas on agricultural imports, and gave generous subsidies to farmers, to ensure national food security. The downside of protecting production by domestic firms with tariffs, however, is that it inevitably leads to higher prices for consumers, since the labour costs of those firms will be higher – explaining why the production was originally offshored.

The other alternative is that if the goods are durable enough and only needed periodically, then it could make more sense to stockpile imports rather than to promote higher-priced domestic production via tariffs or nationalisation. Since the Arab oil embargo in the mid-1970s threatened its energy security, the US has maintained a strategic petroleum reserve held in underground tanks in Louisiana and Texas. It currently holds around 650 million barrels of oil. With imports of crude oil currently running at around 6.5 million barrels per day, that reserve is roughly equivalent to 100 days’ worth.

Switzerland established a national stockpiling system between the world wars and still maintains it today, storing between three and six months’ worth of essential foodstuffs and other goods. Those goods are kept in reserve in the warehouses of private businesses rather than in a government-owned central stockpile. Last year a public outcry stopped plans to end the stockpiling of coffee and this year the stockpiles of high-demand goods like toilet paper meant that, unlike in other countries, the Swiss didn’t experience shortages.

Stockpiling is also the only option to guarantee supplies of goods that can’t be produced domestically because of resource constraints. Mainland European countries and Japan are never going to become major energy producers.

Finally, governments could use emergency powers to force private firms to switch to production of strategically important goods during a shortage, which is akin to a temporary nationalisation. In the US, Trump invoked the 1950 Defense Production Act in mid-March, although he used those powers only sparingly: in late March demanding that GM ramped up production of ventilators and in late April using those powers to keep meat processing plants open during a spike in coronavirus infections. The Defense Production Act does give the President relatively broad powers, however, to control and direct production by private firms. Although the Act has been used very sparingly in recent decades, future Presidents may now feel more emboldened to take control of private production in any future crisis.

In a parallel development, the US Federal government has also been aggressive in securing pharmaceutical supplies via agreements with private firms. As part of the Trump administration’s Operation Warp Speed initiative, when the government invests in possible vaccines it requires as a condition that production of the first 300 million doses is reserved for Americans, even from foreign firms like the British AstraZeneca. The US also secured the next few months’ worth of production of Remdesivir, which is one of the few therapeutic drugs that have been proven to be effective in alleviating COVID-19 symptoms.

For goods where there is currently no domestic production in most advanced economies – which would include pharmaceuticals and medical equipment – we don’t expect those governments to impose tariffs to try a kickstart the growth of domestic industries. Since those goods will only be needed periodically and are durable, it makes more sense to stockpile imports. But the breakdown in supply chains at the height of the pandemic could lead to greater protections for goods that are already produced domestically, including agriculture. Moreover, if we continue to see mounting geopolitical tensions over the next few years, countries would have an added incentive to enforce stronger protections of their heavy industries, including metals and vehicle production. Finally, although the shift had already begun before the pandemic struck, we also expect to see increasing controls on technology, with possible restrictions on exports and imports of both hardware and software.

Pandemic heightens concerns about globalisation

Although the pandemic has brought the problems with unfettered free trade into greater focus, a broader push back against globalisation had already been growing in recent years. In our series of pieces on the end of globalisation (see here), we already anticipated that China and the West would decouple. The pandemic just adds to the list of reasons why we think a period of de-globalisation lies ahead. (See here.) This is not just a President Trump thing, but rather reflects China’s emergence as a superpower with a different approach to economic management and an entirely different set of values to the major western democracies. The way in which China recently strengthened its control over Hong Kong with the new security law is an obvious illustration that those differences are becoming harder to ignore and it prompted a more unified response by western countries.

All things considered, we don’t expect the pandemic to trigger any large-scale nationalisation programs in western countries. But it could accelerate the already growing trend toward de-globalisation; with countries seeking to nurture domestic industries that could be strategically important in a future public health crisis via import tariffs or subsidies. It could also convince western governments to block more foreign takeovers of domestic businesses, particularly by Chinese firms.

Conclusions & economic implications

It is too early to tell whether the pandemic will accelerate the backlash against capitalism that had begun in many western democracies in response to the increase in income inequality. That backlash is driving a shift back to the collectivism of the 1960s and 1970s, reversing the swing to individualism that began in earnest in the 1980s.

As part of that shift we could see government playing a bigger role in G7 and other key advanced economies in the coming decades – with higher taxes on the rich and more redistributive spending. But we would caution against blindly accepting the conventional wisdom that big government is necessarily bad for economic growth. The link between the size and effectiveness of government is not straightforward. There are plenty of examples of large and active governments – such as those in Scandinavia and Singapore – that have outperformed their peers and plenty of examples of countries with very limited government – particularly African states – that have dramatically underperformed. Even within the US, GDP growth was significantly stronger in the 1990s, when the Clinton administration was raising taxes, than it was in the 2000s, when the Bush administration repeatedly reduced taxes. (See Chart 7.)

Chart 7: US Real GDP & Marginal Tax Rate

Source: OECD

We agree that the public sector can be inefficient, misallocates resources and often earns a relatively lower return on its investment. But at the same time, extreme income inequality can also be detrimental to economic growth if much of the income accruing to those at the top of the distribution is saved. Furthermore, despite unusually low interest rates over the past decade, private firms have proven to be very reluctant to undertake new investment at all. With little danger of public investment crowding out the private sector, even inefficient investment would be positive for economic growth. Even if the impact on long-term economic growth was not negative, however, bigger government would probably weigh on the stock market.

Although we are uncertain about the potential impact on economic growth, we are more confident that the possible changes discussed in this Focus would push inflation higher. In particular, if the unprecedented support provided by monetary and fiscal policymakers during this crisis makes it harder to say no during even run-of-the-mill downturns in the future. Furthermore, in an extension of the backlash against globalisation, if the pandemic prompts governments to take a greater role in controlling production of strategic goods, by nationalising production or imposing tariffs on those goods to nurture production by domestic firms, that could also be expected to lead to higher inflation over the longer term.


Paul Ashworth, Chief North America Economist, paul.ashworth@capitaleconomics.com