Envisioning a new economic system after the transition from pandemic to endemic: Serbia's perspective
Authors: Đuričin Dragan , Herceg-Vuksanović Iva 
Published: March 2022

In the last two and a half centuries, industrialization, propelled by a catalytic impact of free-market capitalism, has been contributing to prosperity and breaking the limits beyond all imagination that during the history inhibited the development of human potential. Unfortunately, neoliberal capitalism, as the last and most extreme variant of free-market capitalism, has shown some hidden fractures. After the Great Recession of 2008, the problems due to inbuilt fault lines and misconceptions erupted to the surface. Over the last two years, marked by the COVID-19 pandemic, the world economy has been passing through a complex crisis, a crisis within the spectrum of crises. Again, the flip side of a major success proved to be a major failure. The new virus simply magnified and accelerated doom and gloom in the economic system. The major strategic shifts such as climate crisis, structural crisis of capitalism, microbe mutations and superinfections, and, particularly, the Fourth Industrial Revolution, have contributed jointly to the disruption of incumbents in business, regulatory settings and society as a whole. Exponential change is the New Normal. The economic system is simply surrounded with exponentiality. Neoliberal capitalism has definitely hurt sustainability, along with renewability and inclusivity, of the global economic system and the entire planet. In a time of the explosion of systemic, climate and biological risks, a delicate and subtle issue has emerged as to how to adjust the existing system to exponential change conceptually, financially and operationally. In fact, the current economic system is not able to adequately respond to exponential challenges by transforming threats into opportunities. In times of the climate crisis, the pandemic is just the tip of the iceberg which, by the way, is melting away. The COVID-19 is not a perpetual virus. Someday the pandemic will end. In fact, the transition from pandemic to endemic is imminent. Accordingly, in the post-pandemic world key performance will be the capacity of a new economic system to respond positively to ever-increasing old challenges, in particular to the climate emergency and related issues. So, the green transition is an imperative of modern Economics. At the start of the pandemic, most governments relied on expansionary monetary and fiscal policies with the aim of relaxing the "fear of fear" (unspent savings and pent-up demand). During the crisis money pumping was about US$ 13 trillion on a global level. The continuation of this policy has pushed the world economy into an unstable mode because it leads to an increase in aggregate demand that largely exceeds the supply level, drives wage-price spirals and deepens other structural imbalances. In the context of extremely low or even negative interest rates, economic agents take an extra high credit risk and the state takes an unmanageable sovereign risk. Consequently, today's debt in many core economies is substantially higher than in any previous stagflation episode. When the inflation risk premium pushes interest rate hikes, public and private agents with an increasing debt burden and lower earnings face insolvency threat due to such a hawkish turn. Among many negative scenarios, overheating and stagflation followed by growing indebtedness are the most dangerous outcomes. Given today's ultra-loose and even costly anti-crisis core economic policies, the confidence in the "invisible hand" of the market and unconventional and experimental economic policies, praised by mainstream economists as a panacea for all imbalances, has definitely disappeared and may be easily turned into a pipe dream everywhere. There is not much time to respond to the New Normal. Humanity has less than a decade left until climate change becomes irreversible. The response should be prompt, comprehensive and compatible with exponential change. So, mitigation of a complex crisis requires the consideration of more radical ideas. Without a paradigm change, the economy will not be able to resolve the current crisis and work in a sustainable and inclusive way for the sake of people and nature in a rapidly changing context of the New Normal. Every crisis is a catalyst for change. To reimagine the economy, apart from the shift to the circular model of growth and heterodox economic policy platform, public governance must change, too. Moreover, to take advantage of the leading trends, the economic system must follow substantially different economics rules in many fundamental aspects. In an emerging system, the government and basic economic agents will work symbiotically with the aim of serving nature and human needs through industrial policies and impact investments, devoting concerted efforts to coordination and fostering experimentation on all levels. Automatic macroeconomic stabilizers will play the role of a liaison between structural and core economic policies by maintaining a sustainable balance between private and public sectors. In Industry 4.0, governance should also respect the sustainable development goals, as well as environmental, social and governance metrics arising from mission-oriented governance or Governance 4.0. The aforementioned does not mean that after the paradigm change we will have a new precisely defined blueprint that will tell us in detail what to do. Economics is not big science, but a social or contextual science. In the age of Industry 4.0 characterized by endless innovative amalgams arising from the intersection of breakthroughs in AI, robotics, and life science, Economics can treat the economic system only as a nonlinear one. So, what the paradigm shift brings to the emerging contours of new Economics is not a new theory, but the nexus of new rules we can follow in the context of exponential change. The purpose of this paper is not to endorse, but to discuss the subject from the title with a special focus on Serbia. Our intention is just to provide the overview of emerging intellectual trajectories relevant to the current crisis mitigation and to sketch out the nexus of economics rules that will pave the way for a resilient, sustainable and inclusive economy. A common concern is related to the circular economy growth model and heterodox economic policy platform because both elements are able to address the key pressing issues in times of exponential change. Bearing in mind that Serbia does not have a significant fiscal space or fully convertible currency, on the one hand, and the lack of retained earnings in the private sector and valuesubtracted public sector, on the other, the key issue for Serbia's future strategy is going to be fixing the green transition finance. The paper is structured in four parts, except Introduction and Conclusion. In the first part we review the neoliberal economics rules and associated policies as well as the unconventional policies that were intended to address the challenges brought by the Great Recession of 2008. In the second part we point to the fallacies and contradictions of the experimental policies measures implemented during the COVID-19 crisis and call for a turnaround in the economic system. The contours of a new economic system based on a completely different nexus of economics rules and policies arising from the circular economy growth model and heterodox economic policy platform are described in the third part. Finally, in the fourth part we portray the key macroeconomic trends in Serbia's economy in 2021 and identify the areas that need restructuring in order to be ready for a transition toward a climate-minded and health-minded economy.