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Every few decades, the international economic system suffers an economic crisis, which changes its institutional path, in a way that dramatically affects the day-to-day operation of the system and the institutions it is embedded in. In such cases, we say that capitalism has been transformed and that we entered a new era in global capitalism. Among such events, we can name the Long Depression (1873–77), the Great Recession (1930s), the inflation shock (1970s) and the Global Financial Crisis (2007–09). Deep economic crises do not change capitalism by themselves; they rather provide a fertile ground for subsequent struggles about the economic order. They also are not isolated events, but rather parts of long-term processes that have started some time before – and will continue thereafter.

None of the crises listed in the previous paragraph revolutionized the economic system, but all of these crises transformed it: they accelerated processes that would have probably taken place irrespective of these events, they led to the dissolution of old institutions and created opportunities to the creation of new ones. The coronavirus crisis, like the transformative events named mentioned earlier, is likely to affect the nature of global capitalism. The pandemic marks the most severe global economic disruption since the Second World War. It has not only led to the most severe recession since the 1930s, but also to deep societal and political changes triggered by this recession.

When events of this scale happen, uncertainty regarding the future is very high, and societies try to collect any shred of knowledge in order to make sense of these monumental changes.

The immediate impact of the coronavirus crisis on individual well-being depends on the ability of the health system to deal with the pandemic. Countries differed widely with regard to the qualification of their health system. From a Political Economy perspective, a core question is whether a national health system should be predominantly private or public. Moreover, the coronavirus crisis caught health infrastructure of some countries unprepared, after several decades of lowering investment in health systems. Why was this the case and what can be done about it? Finally, some countries have autonomous and powerful central health agencies, whereas others incorporate questions of public health into government ministries. Which strategy was more successful?

Health systems can be predominantly organized in a private or in a public way. A good example for the latter would be Scandinavian health systems, but also the core of the National Health Service (NHS) in the United Kingdom that defies the usual classification of the UK as a welfare state with a high degree of commodification. The principle of commodification generally assumes that the individual has to cater for protection mostly himself or herself and that health protection should be based on the market logic (Andersson, 2020: 30; see also Chapter 3). The most well-known case for a predominantly private health system is the United States where health provision even has become an important focus for financial market speculation during the last decade (see Chapter 13).

However, health systems are not necessarily ‘born’ private or public; their character can change over time. A widely discussed issue in Political Economy scholarship is the privatization of public services, including health systems.

The burden of the coronavirus crisis did not distribute evenly: the pandemic harmed some groups more than others (see Chapter 7). How did the welfare state cater for the most severely affected victims of the crisis? Did some welfare states fare better than others? At the same time, the widespread loss of work during the pandemic has led to renewed calls for a replacement of the traditional welfare state by a universal basic income, as a simple and safe form of social security. Will this become the social cushion in post-corona capitalism or will we restore the welfare state?

The study of the welfare state ranges among the most widely established topics in Comparative Political Economy (Clift, 2014: 257–8; Menz, 2017: 217–40; Vermeiren, 2021: 90–117). The simply typology of three basic ideal types of welfare capitalism in the Global North as developed by Esping-Andersen is still a useful point of departure, even if individual countries often do not fit neatly into one type. According to his typology, the three types of welfare state differ considerably in their degree of decommodification; that is, the extent to which people are able to ‘maintain a livelihood without the reliance on the market’ (1990: 21–2). They also differ in their degree of social stratification; that is, whether income inequality is high or low.

The highest degree of decommodification is to be found in the Scandinavian Social Democratic ideal type.

The coronavirus crisis has led to an increased – although so far mostly symbolic – appreciation of (paid and unpaid) reproductive work traditionally dominated by women, such as care work (for the sick, but also for the very young and very old), education (home schooling) or food preparation. As people increasingly moved to work from home, the modern separation between the economy and the household has collapsed and therefore large parts of society have realized that this work is not only badly paid, but also often quite challenging or even outright dangerous. Correspondingly, we are hearing many calls for a positive re-evaluation of reproductive work after the crisis, even by mainstream politicians. Is this only temporary or does it lead to a permanent change with regard to the type of work?

Political economy work on gender relations can assist us in answering this question. First, it points towards the fact that women do most of reproductive work in the household. Women spend upon average about 201 days of unpaid care work during a year, while men spend 64 days (Lokot and Bhatia, 2020: 1). Reproductive work often is ‘invisible’ in official economic data. Still it is as vital as the formal economy and indispensable for the survival of our societies. Moreover, the unequal distribution of reproductive work is not only a problem for equitable gender relations, but also has massive repercussions in terms of lost wages, social security benefits and career opportunities for those that perform the lion’s share of this work.

The effects of the coronavirus crisis on gender relations are not only limited to reproductive work but also affect other fields of capitalism, in particular via gendered occupations. Not only due to their central role in the care sector, women were at the centre of the response to the pandemic, but also because of their frequent employment in badly paid service sectors. The health crisis was followed by a major recession with increasing unemployment and the implementation of major economic stabilization programmes, particularly in the economies of the Global North. Does the subsequent recession-related unemployment and the distribution of benefits of economic stabilization programmes lead to more or less gender equality with regard to economic opportunities?

Gender-related inequalities – based on ‘socially learned behaviours that distinguish masculinity and femininity’ (Peterson and Runyan, 1993: 5, cited after O’Brien and Williams, 2020: 198) – are widespread and range from education attainments over political empowerments to health and survival; the focus here is on questions of economic opportunities. The phenomenon of gendered occupation is well documented in the Political Economy literature: women’s ratio in reproductive work occupations (see Chapter 4) or low-level service work are disproportionally higher than their ratio in society, while their ratio in digital occupations – which are more lucrative and high-paid – is lower. Moreover, the employment relations for women often are temporary and less secure than for men, thereby affecting women more strongly during periods of increasing unemployment. Due to these features, we are observing a massive gender pay gap even in normal times (O’Brien and Williams, 2020: 203–5).

The coronavirus crisis deepens the dilemma economies face with regard to immigration. On the one hand, the crisis created an immediate communitarian impetus (see Chapter 32), characterized by prioritization of domestic social ties and community-based solidarity. This trend undermines the public legitimacy to accept foreigners. On the other hand, the coronavirus crisis deepens health and economic divides between the Global North and the Global South. Therefore, migration pressures will increase. Next to these fundamental questions about the long-term trajectory of migration, the coronavirus crisis also raises immediate questions for migrant workers and their relatives; for example, with regard the closing of borders, accommodation conditions and remittances. Does the crisis lead to a recognition of the crucial work provided by migrant workers or does it negatively affect the situation of the latter?

Questions of migration do not belong to the classical issues in Comparative or Political Economy, but have found quite some attention in recent scholarship. On the one side, political economists have become involved in the very controversial debates on migration and the rise of exclusionary populism in the EU and the US. On the other side, political economists working on the Global South have developed a keen interest in the living conditions of migrant workers and the remittances they are sending back to their families.

During the last years, the rise of exclusionary populist parties in many European countries, but also in the US (Republican Party during the Trump administration) has led to a very controversial discussion of cross-border migration. Scholarship on exclusionary populism distinguishes between two basic motivations for anti-immigration sentiments.

At the onset of the crisis, the coronavirus was considered by some to be the ‘great leveler’ (Scheidel, 2017). In contrast to the economic and social challenges of the Global Financial Crisis, the virus poses a risk to everybody. Moreover, major crises such as wars and pandemics often have reduced inequality, if combined with high mortality rates that lead to a scarcity of workers, thereby improving their bargaining position (Scheidel, 2017, 2020; Sayed and Peng, 2021: 54). Finally, rebuilding efforts after major wars also reduced inequalities via massive government interventions into the private sector, based on tax increases (Scheidel, 2020: 293). However, soon concerns about corona-related inequality loomed large in the general public. The rich were able to sit out the lockdown in their villas much easier than the poor in their small apartments were, and the previous were able to work from home, whereas the latter had to risk infections in their dangerous jobs. Still, these are only two among the many dimensions of inequality. Concepts from Political Economy allow us to bring some order in the various effects of the pandemic and to study whether the crisis leads to an increase of inequality or offers opportunities for a reduction of the latter.

Questions of inequality are a core concern of substantial parts of Political Economy scholarship. Traditionally, ‘Critical’ (or ‘Marxist’ or ‘Structuralist’) approaches to International Political Economy (IPE) share a strong interest in questions of inequality, particularly on the exploitation of the labourers by the bourgeoisie, with the latter as the owners of the means of production.

During the coronavirus pandemic (as during the Global Financial Crisis), central banks were instrumental in stabilizing the economy via highly expansive monetary policy. Arguably, central banks were at least as important as governments for overcoming the economic crisis. The range of their tasks and instruments has become broader than ever before in history. This raises crucial questions about the future of central bank independence. Can we continue considering central banks as neutral, technocratic institutions or do we need more democratic accountability via a stronger involvement of parliaments in monetary policy?

The alternative options of central banks as technocratic or political (and therefore to be guided by parliaments) is closely linked to the preferences with regard to the direction of monetary policy. A conservative monetary policy prefers independent and technocratic central banks with a narrow mandate on the fight against inflation, a heterodox monetary policy gives central banks a whole range of targets, thereby increasing the need for democratic control, in order to adjucate between different targets. These preferences vary both between countries and over time.

Countries with different growth models have different preferences with regard to monetary policy (Vermeiren, 2021: 86–9): export-oriented growth models such as the German one clearly prefer a very strict (‘conservative’) central bank that focuses on keeping inflation rates very low. A low inflation rate helps in price-based export competition. Even in the case of an economic crisis, this central bank would not lower interest rates in order to stimulate the economy, given that export-led growth models seek additional demands from foreign, not domestic, markets.

During the coronavirus pandemic, most governments have taken up additional public debt. As governments faced a pressing demand to increase public spending within very short periods, the only available source of funding was borrowing. One of the core questions with regard to the economic policies in post-coronavirus capitalism is how to deal with this debt level. Shall we bring the level of public debt – usually calculated in relation to gross domestic product (GDP) – quickly back to pre-corona levels, shall it remain on the increased level or shall we even increase it, in order to fund post-crisis restructuring?

The discussion on growth models in Comparative Political Economy informs us why governments have different propensities to rely on debt-based funding. This discussion goes against claims that there is only one generally desirable level of public debt – an issue that has been a focus of contention among economists and politicians for decades. Conservative economists call for an absolute ceiling of public debt (for example, less than something between 60 per cent or 90 per cent of annual GDP), in order to avoid a decrease of economic growth (Reinhart and Rogoff, 2010). They further argue that without such a ceiling economies would be instable (for example, with regard to international financial flows), governments would be under the pressure of interest groups to spend in their favour and later generations would need to pay for high public debt today. Left economists, in contrast, argue that there should be no limit to public debt, as long as countries have their own central bank and are not at the bottom of the international currency hierarchy (see Chapter 9).

The countries at the top of the economic hierarchy – the US, Germany and a few other economies in the Global North – still have flexibility to increase their debt (see Chapter 9 and Chapter 23) and/or to rely on money creation by their monetary authority (see Chapter 8). However, the fiscal flexibility of most other economies is limited, and they will have to resort to tax policy to fill their treasuries in the medium to long run. During the coronavirus crisis, tax policy focused on tax relief and referrals, in order to support companies and stabilize domestic demand (Collier et al, 2020). After the crisis, however, the focus of policy debates rather will be on increasing taxation, given depleted public budgets. Tax increases, however, are very unpopular politically. The key question is whether governments will respond by finding unconventional new sources of revenue or whether they will rely on the conventional ones. Given that there is strong political opposition against increases of conventional taxation, governments might turn towards unconventional measures, such as nationalization of companies or international minimum company taxation standards. The latter option has received considerable media attention since the initiative of the Biden administration in spring 2021.

Although taxation is an issue with a long tradition in Political Economy, it did not find much attention in recent decades, outside specialized circles. In Comparative Political Economy, issues of taxation were largely neglected in the company-focused Comparative Capitalism research programme (see Part III on Domestic Institutions of Capitalism on the Supply Side), although tax policy can be seen as a modern form of industrial policy, with different functions in different varieties of capitalism (Haffert, 2019).