coronavirus economic system

Planet VS Economy: How Coronavirus Is Unraveling A Dysfunctional System

André Gonçalves - Editor & Head Of English Market

After studying and working in HR, André studied sustainability management at Lisbon's School Of Economics & Management. He is responsible for the English speaking market of Youmatter since 2018.

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People looking for the bright side of the new coronavirus crisis have been pointing out the positive ecological outcomes of the coronavirus pandemic. There is now less pollution. Less traffic. Less consumption. Less production.

This is a simple, straightforward and correct correlation. But there is no reason to celebrate. Because what planet Earth needs is a consistent long-term pollution decrease. More specifically, it needs greenhouse gas emissions to go down by 7.6% every, single, year – until 2030 (at first).

But if there is one thing this coronavirus pandemic shows is that there is a deep, undeniable connection between a healthy planet and the global economic system. It is also clearer now how hard it is to find a global political consensus on how crucial it is to act fast, which restrictions need to be implemented and how to, economically-speaking, counterbalance them.

Coronavirus: Bad For People, Good For The Planet

The consensus we spoke of above will be extremely important as climate change progresses and the need for deep structural changes becomes increasingly more evident. Right away in 2020, it is possible that “thanks” to the new coronavirus the overall human-caused environmental impact is less negative than in previous years.

The decrease in the environmental degradation humans create is a rare, almost unprecedented situation. In over a century, global CO2 emissions have not decreased significantly except during the 1929 crash, WWII, during the 2008 financial markets crisis or (very slightly) during oil shocking in periods in-between.

But make no mistake – this should not be an achievement to celebrate. First, because human lives are being lost, the health of so many others is at risk, medical professionals are going through hard and exhausting times and many people are feeling anxious up to some degree.

However, even the +8,200 deaths (today is March, 18) caused by the new coronavirus need to be put into perspective as a whole. Because as Jeff McMahon pertinently points out, more than 1,000,000 people die in China due to air pollution – not to mention 20 million tonnes of rice, wheat, maize and soybean that get destroyed. Globally, 4,200,000 people die due to exposure to outdoor air pollution and related illnesses. And let’s leave the people dying (losing their jobs and migrating) due to global warming and extreme weather events out of the math, just this one time.

The second reason not to celebrate is that at the macroeconomic level, thousands of companies, especially SMEs, are and will further face very hard times and many will not survive. Unemployment rises, people consume less and their ability, especially in less social regimes, to face health or housing situations becomes worrying.

Coronavirus Is Unravelling A Dysfunctional Economic Model

It looks like it is only in times of crisis that humanity manages to reduce greenhouse gas emissions and other ecological impacts. Particularly, during crises that affect the economic system’s functioning.

It usually goes like this: global production levels decrease or are re-oriented, traveling gets reduced and fuel demand decreases, global energy consumption decreases too. The result? Less pollution on one hand. Stock market crashes and economic recession on the other. These are the same mechanisms the coronavirus plays on.

For instance, the shutdown of many factories to avoid contagion in China reduced the production of electricity (largely coal-dependant). Moreover, confinements reduced considerably the use of cars and motorcycles and air traffic also went down. Not surprisingly: less GHG, less pollution and fewer resources exploited.

European countries (now at the center of the pandemic) and others all over the world are starting to adopt the same #stayhome measures and, as a consequence, forcing an economic recession. In Italy, the first EU country to impose a quarantine, pollution levels have also been decreasing. Does this mean the ecological effects of the new coronavirus are nothing but a symptom of an economic system in crisis that can’t help to stop polluting?

Can The Economic System And Ecology Ever Be Compatible?

The coronavirus situation, the economic slowdown, and the resulting ecological improvements make it pertinent to raise the question: is it possible to conciliate the need for GDP growth to fuel the economy with the need to stop polluting and harming the environment?

Empirical evidence shows it is difficult to put an ecological transition in place while the economy grows. And it makes sense: what drives growth is exploiting resources, producing or transforming goods and transporting them, the use of energy (often fossil fuels), selling services – all of which, ultimately, up to some degree, pollute. But if there is less consumption (and less pollution), can the economy grow?

In theory, yes, it would be possible if wealth was considered in a different way. This is what the proponents of the green growth movement stand for: the economy can and should keep growing – only it needs to be a different kind of growth. One in which the meaning of progress and how is it measured needs to be challenged.

From Business-As-Usual Growth To Green Growth

Uniting behind the science, green growth has the intention to drift away from the current model of consumption and wealth creation which is harming the environment. It acknowledges things need to be done differently in order to avoid further air pollution, biodiversity loss, soil exhaustion, water pollution and a point of no return.

According to the OCDE, green growth aims to foster the necessary conditions for innovation, investment, and competition that can give rise to new sources of economic growth that are consistent with resilient ecosystems. It wants to green heavy industry like cement, steel or mining, encourage more low-carbon energy sources, foster greater circularity (as opposed to the linear extraction-disposal model), among other changes.

However, in practice (and put simply), there are many obstacles to this green growth in which the natural world would be measured and valued too (rather than just a negative externality) as well as human well-being.

The Challenges In Implementing Green Growth Strategies

One of these barriers is that low-carbon energies are, at the time, still far from being mainstream. And how to ensure there’s energy in cloudy, windless days? By spending money (that could be used to improve soils or R&D in health) to leave oil/coal power-plants open just in case? The question stays unanswered.

The cost logic within the economic system also makes it hard to manage resources in a circular way. It is hard (not impossible, though) to quickly and efficiently make a shift and develop upcycling and recycling structures that they are ready before, for instance, 250,000 tons of waste from the 1 million electric vehicles sold in 2017 are freed up. And how can polluting companies be charged a carbon tax without a global tax consensus? Which government would risk doing so and seeing companies moving to another country while leaving the economic and national job situation more fragile?

For instance, devices that last longer and are more easily reparable probably need to become more expensive so the industry doesn’t feel too much the decrease in sales. But then doesn’t more expensive mean more exclusive?

In short, the way the system is designed makes it hard for sustainable long term intentions to stand against the need for short-term profits that keep it running. That’s why some people stand for the idea that what’s need is something totally different. That we don’t need growth but rather, degrowth.

Degrowth: Is Stopping Economic Growth The Key To A Sustainable Word?

It can be tempting to look at this new coronavirus crisis as proof that the solution to the ecological problems lies in degrowth. The logic would be that with reduced economic growth, and therefore, less mass production (and services), pollution and environmental degradation would be reduced too.

That would be indeed great news if it didn’t put thousands or millions of companies in difficult times – as the coronavirus is doing right now. Many SMEs will shut down, unemploy (at least, partially) people and as a result, many low-income households and small employers will be highly affected. For these people, the economic recession will mean a significant loss of income and comfort that will affect their quality of life.

All this to say that when we defend degrowth theories we should keep in mind that our quality of life is, up to some point, dependant on our income. As John Cassidy points out, from a global perspective, if there were to be less growth and developed countries started relying less on the cheap labor of developing countries (which, like China, end up slowly growing their GDP and quality of life), the latter would be the ones suffering the most. Just like with coronavirus, the most economically-vulnerable are being hit the hardest and that’s why governments are now finding mitigation strategies to support them financially.

The Complexity Behind Degrowth

One of the main criticisms to degrowth is that innovation, progress and democracy risk getting lost without the growth road. Without the economic growth over the last century, poverty levels would be lower, science would not have evolved so much, there would not have been so much technological innovation…

On the other hand, it seems obvious today that we can no longer continue on a model of extractivist, linear, unequal growth – the one that commonly prevails around the globe. But decreasing is very complex and it ain’t easy to plan it while making sure a step back, concerning the quality of life and the management of humanity’s basic needs, isn’t taken.

In the end, the challenge society faces today is how to get out of a partially dysfunctional model. How to invent and implement something else – because what’s being done is degrading the planet – without losing the positive things built along the way.

Moreover, it seems necessary to make a semantic distinction between recession and degrowth as a voluntary process. What many countries are going through is that non-essential production/services are being stoped or slowing down. Some sectors will, however, remain productive and maybe even grow as they meet fundamental needs that become now more evident and fragile.

But in this kind of situation, many of the questions asked are similar to the ones degrowth proponents would have to answer before changing the system. How can degrowth be realistically implemented? How to determine what is essential and what is not to then decide where energy and resources should be first spent on? With a smaller GDP and less consumption and production, how to make sure millions of workers don’t end up without a job, without an income, without quality of life? How would wealth be redistributed? And what would wealth mean?

Of course, they have their answers – some of which are hard to be proven as they have never been put into practice before. But solutions such as a universal basic income, shared jobs (and less full-time jobs) or more wealth created on the services side thanks to tech developments are frequently mentioned.

Others, like Daniel Christian Walsh, a biologist and international consultant in systems regeneration, focus on the need to develop more centralized, cooperative and resilient systems. Systems where people become less dependant on the global world by redesigning bioregional economies that support cultures which “heal their local rivers, regenerate forests, grasslands, soils, wetlands and oceans“.

Managing Urgency And Complexity At The Same Time

Today, the coronavirus crisis is forcing governments to make quick decisions – it’s an emergency and the goal is to avoid a health disaster. Most states promise to take care of the difficulties inherent to this recession period. But will they really be up for the challenge? Will SMEs, self-employed or precarious workers really be able to recover? And what will be the consequences – debt-wise – to the economy of each nation as they allocate resources to support public services and businesses?

The same doubts arise when we think of green growth, degrowth, or whatever change that can happen in the economic system. In theory, it’s all good. But in practice, how can a nation grow green or degrow alone if it belongs to a competitive international economy? How can a country manage simultaneously the urgency (climate crisis) of changing its economic model and the complexity of such changes on both an implementation level and in terms of seeking consensus?

Look at the huge challenge it is to have inter-states coordination or to have basic health and safety rules respected in the face of a pandemic like the coronavirus. It becomes clear why the fight against climate change or the biodiversity crisis is so complex and slow. 

Hence the need to start thinking about these problems (managing water, food security or the ecosystem services) before they become emergencies as the coronavirus pandemic is today. Is it extremely complex? Yes. Should it be left unsolved and let the dramatic numbers of people dying because of air pollution or migrating because of climate instability increase? Definitely not.

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