SINGAPORE (Apr 17): In the throes of one of modern history’s most devastating pandemics, governments can play a fundamental role in easing the transition for businesses. The reason goes beyond leadership: as entities with both oversight over the entire economy, as well as a long horizon with which to operate, governments are best positioned to take on a number of roles that are simply unavailable to private actors.

First, the government can play the role of insurer of last resort. Under normal circumstances, private insurers are able to help cushion the effects of unexpected events businesses, by transferring risk from one geographical location or business sector to another. But since the pandemic-induced recession is a universal shock, the only entity capable of absorbing this risk is government. Businesses, naturally, will look to assistance from the public sector, and governments should not shy away from this role for fear of possibly rewarding bad behaviour. After all, while it is true that some well-managed firms would have planned for a rainy day, it is unfair to expect the majority of firms to bear the economic burden of a crisis that was clearly not of their own making. Indeed, one way to look at taxes previously collected is to see them as premia paid for crisis insurance. Since the crisis is now upon us, payouts should now be released, in the form of government spending, to smooth the path of national welfare.

Second, governments are also an important market maker. One of the fundamental roles of government is to ensure that the social costs of private actions—known as externalities—are taken into account by households and firms. Nowhere is this more relevant than in a public health crisis, where the costs of failing to observe measures such as social distancing and personal hygiene are borne not just by individuals but by society as a whole. Governments can help “internalise” these externalities by a combination of carrots—for example, ensuring workers who are sick are taken care of and do not feel compelled to work to make ends meet—as well as sticks, such as policing and, when necessary, issuing citations and fines.

Third, the government can be the master coordinator for directed technological innovation. This fulfils the role that many wartime governments have taken on, in redirecting national resources toward defence. Although Covid-19 is not a traditional enemy, successfully controlling the epidemic requires certain resources—such as ventilators, masks, medical equipment, and (hopefully) a vaccine—which can benefit from information, usually best understood by governments in this fog of war, about where shortages are most dire and needs are most pressing.

Finally, the government can also play the role of an impartial resource allocator, at a time when market allocations may exacerbate preexisting inequalities in society. By channelling resources with an eye toward not just efficiency but also equity, the government can prevent the sort of surged-based price rationing that often emerges in the aftermath of disasters. Such action will limit the extent to which scarce resources are allocated to those with the greatest ability and willingness to pay—well-off households or large, influential multinational firms—instead of the essential service workers and those individuals that are hardest-hit by a crisis not of their own making.

At the end of the day, the pandemic may be critical in turning the tide against the notion of small government. And this means business-government relations will invariably change.

What are some things that firms need to consider in an environment where the state is back and big government the new normal?

First and foremost, we believe that it is important to keep one’s ear to the ground. As regulations and guidelines change rapidly, it is important for firms to be updated with the latest developments, just to be in compliance.

That said, don’t leave any money on the table. A dizzying array of economic handouts including loans, tax deferments, employment support, and grants (with different eligibility rules) are being put forth by governments. Firms may be eligible for more support than they realize, and it is imperative that managers identify and take advantage of the public support available. In Singapore, for example, the financial support for firms amounts to in excess of $20 billion across the Unity, Resilience, and Solidarity Budgets.

In the meantime, engage with policymakers. Even in the best of times, policymakers don’t have all the information they need to support businesses and sustain the economy. With their attention now rightly turned to health issues, it becomes more important for firms to have their concerns and demands raised appropriately.

More generally, government relations must now become an integral part of the operating standards and procedures for firms and businesses. In the rapidly-changing post-Covid-19 environment, engaging with policymakers is critical for all firms, big or small.

Srividya Jandhyala and Jamus Jerome Lim are associate professors of management and economics, respectively, at ESSEC Business School, Asia-Pacific. The views expressed here are their own, and do not represent official positions of ESSEC or its affiliates.