coronavirus economy world

Coronavirus: More Than State Socialism, The Economy Needs A Meaningful Purpose

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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The coronavirus outbreak is more than a public health crisis taking lives and leading national healthcare systems around the world to the limit. It represents a severe economic crisis. The International Monetary Fund speaks of the worst global decline since the Great Depression of 1930, predicting a global economic contraction around –3% in 2020.

Policymakers all over the globe are being forced to intervene to regulate the economy and to support economic agents in order to prevent further social damage. This is, unquestionably, an extraordinary opportunity to restructure the economy and to try to reform capitalism to make it work for the larger society.

But will political leaders be able to implement the “right” measures? More than just putting things back the way they were, many ecologically concerned people curiously wait to see if they are able to push for a fairer society and healthier planet. Many experts in different ecology and economy-related areas have been sharing what they think should and should not be done.

Another Opportunity For An Economy That Has Been Failing Us

Mariana Mazzucato, professor at University College London and author “The Value of Everything has an interesting perspective. In her piece for The Guardian, she suggests that since the 1980s governments have mostly been taking a back seat and letting businesses create wealth.

Governments have been told to take a back seat and let business steer and create wealth, intervening only for the purpose of fixing problems when they arise – she said. Having to wait for a huge systemic chock to occur before taking bold action leads to insufficient preparations and leaves governments badly to tackle crises as they arrive. It has been the case with climate change and it is now the case with COVID-19.

In a normal crisis, the typical solution for this problem would be to let governments spend public money until people start consuming and working again to reactivate the economy. But this approach isn’t likely to work since many people will not be able to go to work or consume (like they used to) to avoid the spread of the disease.

As we watch the lack of resilience of the dysfunctional capitalist economy we have been creating, and as political leaders have the chance to rebuild in their hands, there’s the opportunity to do things differently.

Why Public Systems Lack Resilience

Many experts and non-experts have been sharing their views on how to make sure we don’t get back to a “normal” that is unsustainable in the long term at all levels. The views of Simon Mair, a Research Fellow in Ecological Economics at the University of Surrey who says a different economic mindset is needed, is particularly interesting.

In his (BBC reshared) article he defends the economy should not be understood as the way we buy and sell things. Rather, his view is that we should look at the economy as the way we take our resources and turn them into the things we need to live.

Healthcare systems, supply chains or social care at being severely disrupted or collapsing around different countries. Mair points out two main reasons for this. On one hand, he claims that in an economy whose current main goal is to facilitate trade (and not to create good living conditions for all) it is hard to make money from many of the most essential societal services.

A reason for the above is because labor productivity, aka doing more with fewer people, is a major driver of profits as people are a big cost factor in many businesses. This means sectors such as health care tend to have lower productivity growth (people aren’t robots) than the other sectors, which means higher sectorial costs that are expensive to support. The other reason, he claims, is because essential jobs aren’t often the ones valued the most.

Disposable Jobs: When Less Value-Creation Is Better Rewarded

Just like Rutger Bergman, the famous UBI (universal basic income) dutch historian, highlights in this book “Utopia for realists”, Mair also alleges many of the best-paid jobs only exist to facilitate exchanges, creating no value for society.

He reflects upon the high salaries of consultants or the advertising industry and the value they truly bring to society. In a similar way, pushing for historical incidents, Bergman also compared the actual value for society of financial workers who struck for months in Dublin compared to garbage collectors whose strike in NYC only lasted for only a couple days.

The fact is many people are forced to work pointless jobs because the economy is based on exchanging value and the basic goods of life are mainly available through markets. The result? If people don’t have a job that gets them an income they aren’t able to buy these essential goods and their survival is at stake. This leads many people to give up on impactful, meaningful or joyful jobs for better-paid ones so they have a better chance to access the market. And the ones whose job is highly valuable for society get less rewarded because of, among other factors, specialization.

But what happens when workers are forced to stay home as is happening these days to avoid the spread of the coronavirus outbreak? How do people work to make a living to get essential goods – assuming the power structures won’t let that happen? They don’t. The underlying system narrative that if you don’t work you won’t live is left behind. We move towards the idea that people deserve to be able to live even if they cannot work – Blair puts it.

The Coronavirus Economic Impact And The Growth Of State Socialism

Over the last decades, the shift from the idea of an economy that exists to allow the exchange of resources needed to survive to one that exchanges value the market brought many consequences. Public services were pressured to behave like businesses and be profitable at all costs, Blair puts it. At the same time, the gig economy grew faster than regulation could keep up with which left many workers exposed to weak social protection.

But the coronavirus is challenging these assumptions. Governments around the world are making decisions that would have been called utopian under different circumstances. While Spain has nationalized all of its private hospitals and is planning a national income for its citizens, many countries such as France or Portugal admit nationalizing large businesses. Governments in Denmark and in the UK are challenging the work to live assumptions and providing people with an incomes and financial support schemes so they don’t go to work.

Sure, most States are exceeding their monetary budgets and they will need to emit debt that will bring austerity during the coming years. But the bigger picture here is that what would have otherwise looked ridiculous is actually taking place. Can this be the start of something new? Is the path for building a new economy now open?

Blair suggests the time has come to accept the system needs to change and expand the economic imagination. And for his, governments need to stop living by the 2 premisses that the market is what delivers a good quality of life, so it must be protected and the market will always return to normal after short periods of crisis.

A Pos Coronavirus Economy Means Many Questions Need To Be Asked

States around the world are intervening in the economy, providing people with living wages and nationalizing essential sectors. This state socialism looks like an important way of protecting the core functions and sectors of the economy – from food and energy to shelter or even education – and setting them free from the unpredictability of the market.

But as States try to save other less essential sectors in order to save jobs and protect the economy, they will need to keep in mind that the core business of some organizations is extremely harmful to the environment. That it is urgent to restructure the job market in a different way and to and make different questions in the quest for new solutions.

Should polluting industries like airlines or intensive cattle raising companies get support? Or should efforts be placed in creating new companies with more ecological business models? What jobs truly create value? Can we reduce the workload of workers? If useless jobs are eliminated, can the remaining jobs be shared? Without this and so many other relevant questions, all the solutions we might think we found will only deal with superficial challenges. And the deep, interconnected issues will sooner or later show up again.

Before Building A New Economy, We Need To Tell A Different Story

Blair finishes his piece wishing for a future with democratic States that build stronger social systems and protect those most in need of the whims of the market. He hopes States enable new democratic structures to develop and citizens to form mutual aid groups where individuals and small groups join forces and organize supporting structures able to quickly mobilize substantial resources – as we have been watching all over the globe in the COVID-19 fight.

This reminds me of the regenerative views of Daniel Christian Wahl, author of the book “Redesigning cultures”. He brings the idea that we need to create local democratic structures able to build up local resilience by regenerating the natural functions of ecosystems.

Like Blair, Wahl also mentions a narrative: one of separation, where we are told we are separate from nature. He challenges these assumptions and claims that sustaining ecosystems isn’t enough – we need to question how to co-exist and co-create and regenerate alongside Nature. If we keep running away from deep and personal questions and keep telling and living by the story that more wealth leads to greater happiness if the narrative doesn’t change, how can the economy?

[Photo by Jamie Street on Unsplash]

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