A post-Covid New Deal could bring much-needed hope to the world

Christmas 1941 was grim.

- Larry Elliott

Japan had attacked Pearl Harbor earlier in the month and its armies were advancing across the Pacific. Hitler’s advance into the Soviet Union had taken the Wehrmacht to the gates of Moscow. Britain had become used to short rations and long nights of the Blitz. Optimism for the year ahead was in short supply.

Yet by the end of 1942 the mood had changed. The Germans were bogged down at Stalingrad and being pushed back in North Africa. America, mobilising its full economic power, had turned the tide in the Pacific. The publication of the Beveridge report in December 1942 came at the right time: when confidence was growing not just that the second world war would be won but that it would be a catalyst for building back better.

Like 1941, 2021 has ended on a low note. The Omicron variant has proved highly transmissible, dampening consumer confidence and prompting governments to reimpose restrictions on economic activity. Living standards – while much higher than eight decades ago – are being eroded by rising inflation. Even without tougher official curbs, the next few months are going to be characterised by weak growth, squeezed incomes and higher taxes. Clearly, a return to lockdowns as severe as those of last winter would make matters worse.