The “grim” winter of 1973-74 bore many similarities to this year, says The Economist. Geopolitical strife had sent energy prices through the roof, feeding an inflationary surge that cut real incomes. But rather than doling out money to cash-strapped citizens, governments focused on cutting fuel consumption. “Sweden and the Netherlands introduced petrol rationing; Italy imposed a curfew in bars and restaurants.” West German chancellor Willy Brandt warned citizens they’d “have to get dressed a little more warmly this winter”. Today’s leaders have done a bit of this, “but mainly they have turned on the fiscal taps”. Britain and others are spending tens of billions helping people and businesses pay their heating bills. Several European countries are “nationalising huge chunks of their energy sectors”.
We have entered an era of “bailouts for everyone”. Three “once-in-a-generation crises” – the 2008 financial crisis, the pandemic, the energy crisis – have completely shifted expectations of “what the state can and should do”. Smaller bailouts and state guarantees have also mushroomed: “In the 1990s European governments launched about two rescue operations a year. In 2019 they launched ten.” Of course, “no one likes to see a business go bust”. But state largesse comes with big downsides, beyond the “monumental” costs. Capitalism is based on creative destruction: “Things that do not work stop, and things that work better start.” An economy-wide safety net hampers this process – potentially strangling innovation.