The coronavirus can teach us a lot about the true nature of our economy. The most important lesson: for decades, we’ve fundamentally misunderstood how our economy works.
Our economic policy has been driven by neoclassical economics. The basic idea: you have a government, and you have the private sector. Their interests diverge. For a prosperous economy, according to economists, we need “free markets”. Minimal government interference. Shrinking government. Reducing taxes. And for decades public policy has been directed to doing just that.
We’ve been told that the sole purpose of business management is to increase shareholder value. Little, if anything, more.
Now we are seeing how mistaken we have been.
A far better way to think about our economy is to understand that our Market Economy is embedded in our Civic Economy.
Our Market Economy includes activities and investments that are privately profitable and publicly valuable. Our Civic Economy includes investments and activities that are publicly valuable but not privately profitable.
The main insight: Our Civic Economy drives our Market Economy. Not the other way around.
We are seeing this today. Without a functioning public health system, a key component of our Civic Economy, our Market Economy no longer functions.