Throughout history, pandemics have often had profound economic effects. The most famous of all, the Black Death of the mid-14th century, wiped out between a third and two-fifths of the population of western Europe. The labour shortages that followed are credited with hastening the end of the feudal system.

Covid-19 is nowhere near as deadly as the Black Death, but the shock it has dealt to an already vulnerable global economy has been immense. Perhaps inevitably, there is talk of life never being the same again.

But this is what was said last time. Many on the left thought that when the banks nearly went bust in 2008, the dominant free-market model would be replaced by a more progressive alternative.

It didn’t happen. The scale of the crisis wasn’t enough to bring about fundamental change; those who were the largest beneficiaries of free movement of capital were rich, powerful and well dug in; and the narrative that emerged about the 2008 crash was at odds with what really happened.

Narratives matter a lot. Franklin Delano Roosevelt’s message to the American people in the 1930s was that their lives had been wrecked by Wall Street’s greed. FDR positioned his government as the friend of the unemployed and the enemy of reckless speculation. The story told by the Thatcherites and the Reaganites in the late 1970s was that organised labour had become too powerful, and the big states that emerged from the New Deal era were strangling enterprise.

The best example of how narratives shape political outcomes happened in Britain after the last crisis. The truth about the 2008-09 recession was that it was a global phenomenon facilitated by the deregulation of finance and inadequate supervision of banks. This allowed a debt bubble to inflate over many years. When it popped, the banks found themselves unable to meet the losses on their wild speculation. London’s role as a global financial centre meant Britain suffered more than most.

But the narrative that emerged was different. The story told by the Conservative-Liberal Democrat coalition government of 2010 was that Britain’s problems were the result of the previous Labour government’s profligacy. Budget deficits had been run in good times and had exploded when the economy started to contract. The Conservatives offered any number of soundbites: Labour had crashed the car, it had maxed out the nation’s credit card, it had failed to mend the roof while the sun was shining. Britain would have to endure a painful period of austerity to mend the hole in the public finances, but Gordon Brown was to blame.

It all looks a bit different this time. Although his approval ratings have picked up, Boris Johnson’s task of weaving a compelling narrative out of twin economic and public health crises is much more difficult than the challenge that faced David Cameron in 2010.

Johnson has been forced to go further and faster in his response to Covid-19 than Brown did back in 2008. The cost of lost output is unknowable because it is unclear how long the economy will be locked down, but it will be enormous – and inevitable. The government has decided to keep all but essential workers at home. It therefore has no choice but to protect jobs and incomes, whatever it takes. The budget deficit is going to balloon, just as it did at the end of the noughties, and for the same reason: recession means the government spends more and takes in less in tax.

Nor will it be realistic for Johnson to say that he has no alternative but to impose another period of belt-tightening when the economy eventually comes out of hibernation. Austerity was an economic failure, resulting in a lost decade for wages, sluggish growth and public finances in a worse state than they were before the last crisis.

But austerity has also proved a political liability for the Conservatives. The public is in no mood to stomach NHS cuts. Nurses and care workers are a lot more popular than bond dealers and bankers. To scrap infrastructure projects – the customary, if short-sighted, response of hard-up governments down the ages – would be a repudiation of the manifesto that won the prime minister his election victory less than four months ago.

One of the problems a party faces when it is in power for a long time is that blaming the opposition for the mess it allegedly left behind no longer cuts it. The Conservatives have been in power for a decade. They will eventually be held to account over how prepared the UK was for this crisis.

Questions will arise: was the NHS equipped to cope with a pandemic? The years ahead of the financial crisis saw the biggest sustained increase in health spending since the creation of the NHS in 1948; the years since 2010 have seen the smallest increases. Was the welfare system in a better shape to cope with the sharp contraction of the economy in 2008, or in 2020? Benefits were far more generous a decade ago than is the case today. Labour actually made a much better job of mending the roof.

For the right, this is the second major economic crisis in little more than a decade. It’s the second time the state has needed to come to the rescue of an economic system where the gap between rich and poor has widened, corporations pay as little tax as they can get way with, too little attention is paid to the climate emergency, and a large proportion of the workforce is one paycheck from penury. For the left, it should be an open goal.

• Larry Elliott is the Guardian’s economics editor



