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Date: Mar. 2022
From: Harvard Law Review(Vol. 135, Issue 5)
Publisher: Harvard Law Review Association
Document Type: Book review
Length: 20,619 words
Lexile Measure: 1650L

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Law and Macroeconomics: Legal Remedies to Recessions. By Yair Listokin. Cambridge, M.A.: Harvard University Press. 2019. Pp. 280. $48.00.

Shutdown: How Covid Shook the World's Economy. By Adam Tooze. New York, N.Y.: Viking. 2021. Pp. xiv, 368. $28.00.

In March 2020, the world faced not only a public health emergency but also one of the most profound shocks to the global economy in the modern era--a shock deeper and broader than any other in eighty years. (1) Never before had virtually all of the world's economies suffered a contraction at the same time (Tooze, p. 5). Global output decreased by nearly 3.4% in 2020, the largest contraction since the Second World War. (2) The United States saw the largest recorded demand shock in its history (-32.9%), (3) and the unemployment rate peaked around 15% during 2020, (4) higher than at any point during the Great Recession. (5)

In response, the United States, European Union, and dozens of other governments embarked on massive campaigns of economic stimulus. Over a year and a half, the United States Congress spent almost $5 trillion across three major fiscal packages. (6) Just the first of those bills, the Coronavirus Aid, Relief, and Economic Security Act (7) (CARES Act), at $2.2 trillion, (8) was already twice the size of the Obama Administration's principal response to the Great Recession, the American Recovery and Reinvestment Act of 2009. (9) The European Union likewise engaged in massive fiscal stimulus, also outpacing its response to the Global Financial Crisis of 2008 (GFC). (10) For a wide range of nations, this has led to the largest expansion of government spending--and associated fiscal deficits--relative to the economy's size, since World War II. (11) Indeed, the urgency and scale of the fiscal response to Covid-19 has drawn analogies to war finance, as opposed to more traditional forms of business cycle management. (12)

Another arm of those nations' governments, their independent central banks, similarly engaged in financial intervention on a scale not seen in eighty years. Though the details are myriad and nuanced, this is clear simply from the growth of those banks' balance sheets. In 2003, the total assets held by the three largest central banks in the developed world--the Bank of Japan, the European Central Bank, and the Federal Reserve or "Fed" (the central bank of the United States)--added up to roughly $2.5 trillion. (13) As Figures 1 and 2 show, the GFC led those banks' balance sheets to more than double in size. But even against that backdrop, the growth since the coronavirus is astonishing. Those three central banks now hold almost $25 trillion in assets. (14) That significantly exceeds the total assets of the United States' commercial banking sector, which holds about $22 trillion in assets. (15) Over roughly a year, the Federal Reserve alone doubled its asset holdings from around $4 trillion to $8 trillion, making for arguably the most aggressive expansion of the United States' money supply since the Federal Reserve's founding in 1913. (16)

The sheer scale...

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Gale Document Number: GALE|A697327417