As we have seen in the case of welfare states, countries differ considerably in their ways to tackle economic challenges, with very different institutions in conservative, liberal and social-democratic welfare systems. The discipline of Comparative Political Economy focuses on these institutional differences, in contrast, for example, to approaches that focus on the commonalities of capitalism across economies understood as separate national entities (for example, Kaczmarczyk, 2020; Bruff, 2021).

To put it very simply, we can compare institutions on the demand and on the supply side of the economy. This section studies the macroeconomic institutions and policy choices on the demand side, whereas the subsequent section addresses the microeconomic institutions supporting different varieties of capitalism on the supply side. The most prominent contemporary Comparative Political Economy approach addressing the demand side of the economy is the ‘Growth Models’ approach (Baccaro and Pontusson, 2016; Stockhammer, 2020; Vermeiren, 2021). Its basic distinction is between debt-led and export-led and growth models, named after the main source of demand in the Global North, whereas the emerging research on growth models in emerging economies mainly distinguishes between two types of investment-led growth models, one fuelled by foreign direct investment and one by state-directed development (Schedelik et al, 2020).

During the pandemic, all economies reacted in a similar way. Central banks reacted with a highly expansive monetary policy (Chapter 8) and governments stimulated the economy with immediate fiscal impulses (Chapter 9). Even during the Global Financial Crisis, governments did not increase their budgets to such an extent. The reason for this unprecedented response was a unique feature of the crisis. The pandemic-related closures imposed by governments worldwide halted production processes. It led to laying off workers and therefore undermined private demand. Correspondingly, public funds were needed to prevent the economy and society from collapsing, to keep both people and businesses alive, and to prevent suppliers from going broke. After the crisis, however, economies with different growth models will use different ways to recover the funds that were necessary for economic stabilization during the crisis: (1) they can extract funds from the private business sector and/or households via taxation or nationalization of companies (Chapter 10); (2) they can borrow from the private business sector and/or households via additional public debt (Chapter 9);