Fear is a very powerful human weakness, the pillar supposed to maintain order in primitive societies where law enforcement encountered binding technological constraints. At a time when investigating a crime or a moral offence was an inefficient and costly endeavour, an almighty god overseeing every human deed and sentencing a perpetual judgment served as a stronger complement of state police; or – better said – as the best secret police that has ever been created.

Do you fear the uncertain? Then behave. This veil has been lifted by William Shakespeare. In the author’s rightfully most renowned passage, Hamlet engages in the monologue that has brought the essence of the rising modern era into literature: “To die, to sleep; / no more. […] ‘Tis a consummation / devoutly to be wished. To die, to sleep; / to sleep, perchance to dream – ay, there’s the rub.” This famous sentence is often misquoted as a lyrical aspiration towards a dreamlike world. Rather, the dream is here the unwanted hurdle from where the tragedy of ineptitude comes. From the possibility that there could be something else after death – as a dream in our otherwise completely unconscious sleep – descends the dread which “puzzles the will / and makes us rather bear those ills we have / than fly to others that we know not of”.

In the environment of early modern Britain – where King Henry VIII had stood against the pope but few decades earlier – the seeds of humanism found a fertile soil to grow. Shortly after a scared Galileo had been forced to abjure the knowledge achieved thanks to his ground-breaking empirical method, a praised Isaac Newton applied it to formulate the law of universal gravitation, and John Locke made use of the same inductive reasoning to design his theory of society as a contract signed by free men. The former paved the way to science and the industrial revolution, the latter to the political philosophy of the Enlightenment and the era of constitutional rights. Thanks to these turning points of human history, we now live in a world where technological gains and civil rights advancement should have made the quest for fear a mere unpleasant memory of a past where states had no better mean to impose their policies. But is it really the case? Some events in the last decade suggest alarmingly that we are still far from the best of the possible worlds.

The first memory I have of a stock market collapse dates back to a summer day of my teenage. After the European Council of June 2011 and the Italian Prime Minister’s refusal to implement the austerity measures demanded by the Commission, panic selling had been hitting the Milan stock exchange throughout the month of July, until a letter from the ECB in early August spelled out the following demands to the government: commit to achieve a deficit of 1% of GDP in 2012, and the full budget balance by 2013. It was the time when the spread with the interest rates of the German federal bonds was deemed to be the one, absolute, synthetic indicator of the probability of economic default of another Eurozone member state. Such measure peaked in November, when Italy needed to add 5.74 percentage points to the German interest payments on its sovereign bonds, and Berlusconi’s parliamentary majority collapsed. At that time, the government deficit amounted to 3.7% of GDP, and the overall public debt stock to roughly 1.2 times the size of the economy. If we have to judge by the same criteria as twelve years ago, what would such spread be right now that deficit is 8% and public debt 145% of GDP?

Clearly, I ought to be careful with intertemporal comparisons, because the underlying conditions of the economy and the consequent outlooks are different. In 2011, Italy was in the middle of a recession and the current account was negative, while the opposite is true in 2023. Yet, if any causality exists, it is far from established in which direction it runs, whether from economic conditions to interest-rate setting or the reverse. In fact, if austerity-oriented markets demand that the government enact a contractionary fiscal policy during a recession to overcome the fear that it might default on public debt, then this latter not only cannot help the economy recover through countercyclical policies, but it is also forced to demand higher tax payments or to cut welfare expenditures when they are most needed. It took a power change and one year of fiscal austerity before we could hear Draghi’s “Whatever it takes” speech, which marked the end of the state of financial emergency in the Eurozone. Would the economy have recovered earlier if European authorities induced confidence, rather than fear-sparking laughter at their peers? Based on the current experience, where the notion of spread with the German bonds goes completely forgotten in the news, and markets are calmer despite worse public finance parameters, I cannot exclude a positive answer yet.

A perhaps more relevant difference between 2011 and the current times is that the sovereign debt crisis was asymmetric with respect to Europe, as only the Mediterranean countries have been affected by the wave of distrust and fear that followed the Greek insolvency declaration. In contrast, the actual conditions are the product of two symmetric crises that hit almost equally on each member state: the pandemic, and the Ukrainian war. In both cases, fear has been a central element in the process of approving questionable decisions again. While twelve years ago the questionable decisions went in the direction of posing excessive limits to the state’s scope of intervention in the economy, double-digit inflation rates remind us that we are currently facing the opposite problem. Indeed, inflation has two possible origins, and the role of public policy is not secondary in either of these: A contraction of the quantity of goods supplied, and an expansion of the quantity of goods demanded. I analyse the two cases separately.

First, supply contractions typically stem from higher energy costs, which make firms unable to produce the same quantity at the same price as before, without losing profits or generating losses. It is hard to deny that the sudden decision of disentangling European production chains from Russian fossil fuels has played a major role in the rising energy costs. Due to the choice of getting rid of Russian imports, European countries met with other producers on less favourable terms, often without even achieving the aim of cutting the enemy’s core resources out of the rest of the world. For example, European import of Indian diesel is 25% higher than in March 2022, but Indian diesel is refined starting from the same Russian oil that we have ceased to buy. Thanks to the gap we left, India is purchasing it at discount prices, and in massive amounts: The quantity Delhi imports from Moscow has grown from 70,000 to 1.6 million barrels in a year, according to Reuters. Needless to say, no discount is offered in the final price of the diesel sold back to Europe, as our demand elasticity for energy imports de jure alternative to Russia is particularly low. To cope with this inelasticity, we are also ready to give up our green hopes, relaunch coal mines and nuclear power plants, and even generate a 20-billion-euro revenue by issuing 250 million more CO2 polluting permits, as per the Commission proposal approved by the European Parliament in February 2023.

Second, the surge of inflation is also explained by the excess demand generated by skyrocketing government expenditure, such as because of the unprecedented numbers devoted to post-Covid recovery plans, or the rising amounts meant to finance the armed competition with Russia.

With regards to the latter, various degrees of transparency are observed across NATO members, from the very detailed facts and figures of the United States military budget – which has grown by 52 billion dollars only due to the Ukrainian cause as of January 2023 – to the state secret imposed by Italy. The consequence of this novel arms race is that steel producers such as Nucor and US Steel have more than quadrupled their market value with respect to three years ago. Hence, while the poor have even more difficulties making ends meet, the fortunate who invested in steel-producers stocks during the pandemic would gain four times their capital by selling them right now. How could such a regressive policy be justified, but by the fear that a lawless tyrant might wake up one day and invade another European independent state? But, in the end, is our fear of Vladimir Putin justified? To put it in Seneca’s words, cruelty stems out of weakness. Putin has invaded Ukraine because he leads a declining power, and a weak economy heavily dependent on fossil fuels, incapable of generating the soft power to maintain its own sphere of influence, from which Kiev wishes to depart. Only true desperation could make this very same, weak autocrat escalate the conflict to third countries that are not only external to the Russian influence zone, but also member of a US-led alliance.

With regards to the former cause of the excess demand, i.e. the unprecedented amounts of public finances spent on post-Covid recovery plans, another full chapter on the role of fear could be written, but I try to stick to brevity as much as possible. Why have lockdowns been imposed all over the world? To avoid the spread of a pandemic that in its worst outbreak (Peru) has been responsible for a mortality rate of 4.9%, according to the Johns Hopkins Coronavirus Reference Centre. By comparison, two other viral epidemics of the early 2000s – SARS and MERS – had average mortality rates of 9.6% and 34%, respectively. Also in this case, simple comparisons are not the finest, as Covid has definite specificities, such as being a highly transmissible virus. However, the example of Sweden under the advice of Anders Tegnell, can come to our help. Even if the Nordic country has never mandated social distancing, its Covid mortality rate is measured as 0.9%, and the cumulative Covid-related deaths at the end of 2022 were 2120 in a population of more than 10 million, the same ratio as in neighbouring Finland and Denmark, according to the WHO Covid-19 Dashboard. What’s more, recent research by Jefferson, Dooley et al. (2023) implements a meta-analysis across different studies, and they do not reject the hypothesis that wearing face masks did not help contain the spread of the virus. Due to the design of the study and the low power calculations, the impossibility of making assertive statements such as that face masks are ineffective still subsists. But what emerges clearly from this research is that face masks have been less efficient than mere hand washing in fighting Covid. As the two examples show, social distancing measures appear disproportionate to the threat posed by the pandemic, but public opinions across the world were fine with suspending constitutional rights and making extraordinary public expenditures of 10% of GDP in a single month, once the fear of the disease had sparked.

Under the power of fear, lives have been turned upside down, and states have pushed their debts to the stars in order to avoid the collapse of the economy. The result is that incumbent governments in these three years have sit on billions that they are redistributing discretionarily to various sectors of the economy. As a simple example, the highly indebted Italian state mobilized 100 billion euros (5% of GDP) and used another 400 billion as guarantee just in the first lockdown month. It is a scholar example of taking two birds with a stone, as these interventions help steading the roots of the incumbents’ power and tie the hands of future policies all the same. It is also for this reason that protests like those ongoing in France, demanding a more participated approach to crucial decision-making, have become so popular.