The optimal priority of economic policy in response to global economic crises depends on the nature and underlying causes of the crisis. However, in most cases, a balanced approach that integrates stimulation of domestic demand and stabilization of productive sectors is necessary. 1. If the Crisis is Demand-Driven (e.g., Recessions, Deflationary Shocks) Priority: Stimulating Domestic Demand Policy Measures: Expansionary fiscal policies (e.g., government spending, tax cuts, direct transfers). Monetary easing (e.g., lower interest rates, quantitative easing). Strengthening social safety nets to boost household consumption. Rationale: A crisis characterized by falling consumer demand, high unemployment, and deflation requires boosting consumption and investment to restart economic growth. 2. If the Crisis is Supply-Side (e.g., Production Disruptions, Supply Chain Shocks) Priority: Stabilizing Productive Sectors Policy Measures: Support for key industries (e.g., subsidies, tax incentives, credit guarantees). Infrastructure investment to improve productivity. Policies to ensure supply chain resilience and reduce dependencies. Rationale: If production capacity collapses (e.g., due to a pandemic, war, or energy crisis), demand-side policies alone won’t be effective; restoring supply chains and productive sectors becomes critical. 3. If the Crisis is Structural (e.g., Financial Crashes, Debt Crises, Inflationary Spirals) Priority: A Mix of Both Approaches Policy Measures: Addressing financial instability through banking sector reforms and liquidity support. Managing inflation through supply-side interventions (e.g., reducing trade barriers, supporting energy efficiency). Balancing short-term demand stimulation with long-term structural reforms. Rationale: Structural crises require a dual approach to prevent stagflation (simultaneous inflation and stagnation) or prolonged financial instability. Conclusion A flexible and dynamic policy approach is ideal. Initially, governments may need to stimulate demand to avoid economic contraction, but long-term recovery depends on restoring and stabilizing productive sectors to ensure sustainable growth.

Reduce labour market frictions either through job retention schemes or training of new unemployed workers.

Introduce policies that build liquidity in minco and small firms as they are most likely to be credit rationed. This is often through loan guarantee schemes (direct), although in the GFC bank recapitalisation (indirect).

Las políticas anti-crisis deben enfocarse en estabilizar el sistema financiero, impulsar la demanda con estímulos fiscales, apoyar a las poblaciones vulnerables, reducir tasas de interés, gestionar la deuda, fomentar la cooperación internacional, diversificar la economía y fortalecer la regulación financiera.

For developing nations, I think it’s essential to focus on negotiating better loan terms with institutions like the IMF, including options for debt relief and longer repayment periods. This can create the breathing room they need to invest in crucial areas like health, education, and infrastructure. It’s also important to strengthen social safety nets to support vulnerable populations during difficult times. Additionally, investing in projects that promote sustainable development can generate jobs and drive economic growth.

In contrast, for developed countries, I believe the priority should be on implementing broad fiscal stimulus measures that invest in infrastructure and technology to boost overall economic productivity. They have the resources needed to provide direct support to affected businesses and workers, which is crucial for a quick recovery. Strengthening regulatory frameworks in the financial sector is also vital to prevent excessive risk-taking and ensure stability.

While both developed and developing countries need to collaborate on challenges like supply chain disruptions and trade barriers, it’s important that we tailor our approaches to each group’s unique economic context. By acknowledging these differences, we can come up with more effective policies that support recovery and promote sustainable growth around the world.

Anti-crisis policies should prioritize protecting jobs and vulnerable populations, ensuring liquidity in financial systems, maintaining public health infrastructure, and stimulating demand through targeted spending, while maintaining a long-term path to sustainability.