The governments action against the economic consequences of the pandemic is testifying of a deep disruption in the principles which have been, for near half a century, the foundations of economic policy. They have put at the disposal of enterprises and employees the financing allowing them, for the time being, to cope with the activity fall and the employment cuts resulting from it. The State-guaranteed loans allowed banks to support their clients without taking themselves risk. Its taking of part-time unemployment benefits financing had the same purpose: they offered to enterprises the possibility to keep their employees without affecting the unemployment insurance system. The budget deficit increase was then financed with a very low and even negative interest rate thanks to the action of central banks which were buying directly when their status allowed them to do it or on the market, which had the same impact, when that was forbidden, as for the European Central Bank, the bonds issued by the States.

But these actions, imposed by the situation seriousness were temporary and defensive. They had not as an objective to put the related States back on a growth trend allowing them to regain activity which had been lost during the crisis. From 2020 autumn, governments then decided to prepare “rebound plans”. In the United States, it was not without electoral ulterior motives. Once he was elected, Joe Biden announced he will go even further than what Donald Trump had proposed. He has just got the Congress support to launch a 2 000 billion dollars investment plan on a eight years period dedicated to infrastructures which will be added to the measures prepared by the previous administration. In Europe, the States did the same, each one adding to the measures adopted at the beginning of the pandemic, public expenditures plans with the purpose to favor the rebound. A 750 billion euro plan was even negotiated in Brussels, including for the first time the solidarity principle: the States will not automatically receive the resources according to their size. Some amounts will follow a redistribution principle. Even if this plan has not been yet ratified by all the States and has just been contested at the German constitutional Court, it will come sooner or later in application.       

These choices were justified through the reminding that, after the 1929 crisis, President Roosevelt, inspiring himself with Keynes thoughts had proceeded the same way to make the American economy rebounding and had reached his objectives. It was not the first time the English economist had a right vision. He had left the British delegation which was negotiating the Versailles Treaty because he thought that the reparations asked to Germany were too heavy and they would unbalance the country with heavy political risks. But to limit his contribution to the rebound concept through public investment was too restrictive. What he demonstrated, in his works, is that market forces did not allow in any circumstances to reestablish major economic equilibriums, especially regarding employment. So the State had to intervene. He had then invented the economic policy concept and the solutions which will dominate the thirty years which followed the war.

But the liberals, hostile by principle to any State intervention, rapidly opposed to him another tool, able to guarantee growth and financial stability, the monetary policy, through the fixation of interest rates by the central banks, which will become during forty years the unique thought. To have ignored it, the left, in 1981 has been and is still today stigmatized. Its choices would have been at the origin of the deepening of the trade deficit and of three monetary realignments leading to the French franc devaluation. That trial is not justified because the aggravation of the deficit had as its only origin the increase of the cost of the country oil imports resulting from the brutal rise of the dollar which was the consequence of the increase of American interest rates. The European Monetary System instability was coming from its conception which ignored the analysis proposed by the Canadian economist, Robert Mundell: it is not possible to have between different countries in the same time, fixed exchange rates, autonomous monetary policies and capital flows freedom. The euro creation has allowed to remedying to that initial default.

Until the apparition of the pandemic, policies based on public expenditures will fall into disrepute to the benefit of monetary policies. We will find its expression in the Maastricht Treaty architecture whose main purpose is to guarantee ECB independence and to master if not to limit public deficits and debts. Everything has changed with the crisis resulting from the pandemic. If central banks through the financing of the “whatever it costs” which was necessary to soften its consequences, have played their role, they did not have the tools able to make the economies rebounding. It is what has been observed in the United States and in Europe and what has lead different governments and European institutions to come back to traditional Keynesian remedies. We can add that the IMF supported the idea of increasing public expenditures. The Washington consensus became out of fashion.

In the U.S., this come back is without complex: 2000 billion dollars will be spent during an eight years period to modernize the country infrastructures, roads, bridges and cities streets which need it a lot. The projects are clearly identified, works can start and employment in the housing and public works sector will benefit of it as the rest of the economy. That reminds us the Great Projects in Paris and the creation of the Special Fund dedicated to Major Investments in 1982.

In Europe, the project of reforming Maastricht Treaty criteria targets to get free from the budgetary constraints which are not any more fulfilled for a long time by many States and the determined public indebtedness ceilings. But the rebound plans are more ambiguous. They seem to be inspired by political communication considerations as by economic efficiency. They depend, for a large share, of the attitude of the economic agents about the proposals of support the State would offer to them. But nothing guarantees that these ones will have recourse to them. For example, in France, subventions to home owners for thermal renovation are limited in function of their revenues, which will exclude these who are the biggest energy consumers and these who, even with these subventions, will not have enough resources to finance the works. The impact on growth and employment will be reduced by the same amount. The situation would have been different if, for instance, the State would have asked EDF to launch without waiting its modernization and renewing program of its nuclear power plants through giving it necessary financing or if it had been launched a renovation program of SNCF rail tracks. The impact on growth and employment would have been immediate.

The reasoning is the same regarding the supports of investment projects in new technologies. Nothing allows us to be sure that the enterprises will elaborate such projects. We observe, as for household a high increase of their indebtedness resulting from public loans but, in the same time, of their cash because they are worry about their future and have a wait-and-see attitude which risks to offset a significant share of the public action in favor of the rebound.

So Keynes is back but his comeback is much more effective in the United States than in Europe and, especially, than in France where the State has, with success, fulfilled its fireman mission but where we are still waiting for it plays its strategic role and it directly involves itself in supporting the economic rebound.