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The argument about lockdowns is over. Such is the virulence of the new variants of Covid, certainly more infectious and seemingly deadlier than in the first wave, that there is little or no

prospect of the present restrictions being eased, let alone lifted, before Easter. This first month of 2021 may well prove to have been the most lethal of the pandemic so far, worse even

than last April. Nearly 24,000 people have died already of the coronavirus since January 1, and by February the total will have passed the 100,000 mark. If we are to avoid macabre new

record-breaking mortality rates, then restrictions may have to be tightened even further — for example, by imposing hotel quarantine on all visitors. Lockdown is the worst solution, apart

from all the others. As Mrs Thatcher would surely have said, there is no alternative. But if that argument is, for the moment, resolved, the question of how we are to pay for it is still

very much open. And the answers are not for the faint-hearted. Every country in the West afflicted by Covid is facing the same problem. The likelihood is that the UK is already in the midst

of a “double-dip” recession, after the spectacular but short-lived recovery of the third quarter of 2020. Even if figures for the last quarter are not as bad as expected, the economy is

shrinking again by now — and nobody can predict when it will return to growth. At times like these, economics really earns its old sobriquet of “the dismal science”. A slump on this scale

must surely result in severe contractions in public spending, higher taxes, or both. Yet governments continue to spend vast sums on the pandemic; and so far we have yet to be presented with

the bill. Borrowing, Keynesian pump-priming and quantitative easing have kept the global economy afloat. The UK’s national debt is now heading for levels not seen since the postwar era. It

has only been possible to raise such prodigious loans by keeping interest rates close to zero. We do so by the grace of God — and the international market for gilts. We have accomplished the

transformation of a market economy into one that in many respects, temporarily at least, more closely resembles a wartime command economy. Though this has been far from painless for

millions, it would have been far worse for most people without the numerous interventions engineered by Rishi Sunak and the Treasury. Such colossal feats of improvisation as the expansion of

hospital capacity or the testing and vaccination programmes should not be taken for granted. In peacetime, they are unprecedented. And they will all have to be paid for. The trick is to do

it in such a way that we end up with a health service that exists to serve the country, rather than a country that exists to serve the NHS. In the United States, there is cautious optimism

that the pandemic will be followed by a boom. As Larry Summers, a former Treasury Secretary puts it: “If we get Covid behind us, we will have an economy that is on fire.” The Biden

administration favours big government for ideological as well as pragmatic reasons. Even central bankers now favour turning on the taps. Despite her past role as the first woman to chair the

Federal Reserve, Janet Yellen, the new Treasury Secretary, thinks the risk of inflation is a price worth paying for a return to growth. As a less enthusiastic economist, Irwin Stelzer,

commented over the weekend, the pandemic may herald a return to a new era of big government — but it is small government that has produced the goods, the jobs and the growth. Here in

Britain, the country chose to entrust its finances to a Conservative Government only just over a year ago. Boris Johnson and his colleagues are fiscal conservatives too, at least on paper.

Yet they are presiding over the greatest expansion of public spending in history. This is a time to return to first principles, if we want to know how these circles can be squared. It is

worth reading one of the founding fathers of economics on the subject: David Hume. Yesterday, we published a highly suggestive piece by Benedikt Koehler: “David Hume on America’s public debt

dilemma”. In his essay of 1760 _Of public credit_, Hume set out more succinctly than anyone the stark choices that face governments forced to incur debts during dire emergencies. “Either

the nation must destroy public credit, or public credit will destroy the nation.” As Koehler shows, Hume anticipated what is now known as public choice theory: neither inflation nor taxes

are politically palatable, while it is always easier to leave the repayment of debt to posterity. Yet he was well aware of the damage done by deficits. And so he concluded that in certain

circumstances the unthinkable must be thought— namely that governments may be forced to default on their debts. “Thousands are hereby sacrificed to the safety of millions.” The notion that

G7 economies such as Britain or the United States might default seems outlandish, but Hume’s logic cannot be faulted. Nor, as Koehler observes, can his psychology: “so great dupes are the

generality of mankind”, he predicted, that were such a “voluntary bankruptcy” to occur, “it would not probably be long, ere credit would again revive in as flourishing a condition as

before”. And indeed the history of defaults supports his contention. Germany, for example, was forgiven its debts after 1945 ; since then, its credit has been among the best in the world. It

is a safe bet to say that the Western governments, including ours, will not do anything as spectacular as an official default. But we should not be surprised if they attempt to achieve a

similar effect, while disguising their “voluntary bankruptcy” as “crisis management”. The Biden administration, with a fresh mandate and control of Congress, will do literally anything to

escape from the bind in which it finds itself. And if other major economies do the same, there is safety in numbers. Hold onto your hats: restarting the global economy after Covid will be

the bumpiest ride anyone can remember. A MESSAGE FROM THEARTICLE _We are the only publication that’s committed to covering every angle. We have an important contribution to make, one that’s

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