In May of last year, we wrote that the COVID crisis highlights significant gaps in our current economic and social system and calls for a reset of our economy. These shortcomings are certainly not new but are simply made worse by the pandemic. The infographic shows the timeline of unsustainable development since the end of WWII. The pandemic and the lockdown period have given us the opportunity, or rather the obligation, to redefine, revalue and rethink our economy, far from our addiction to growth and our short-term thinking. The task at hand is to rebuild a better, more sustainable and more resilient economy.
Now that a year has passed, we can take stock of what has been accomplished. On paper, it doesn’t look bad at all. Policymakers have undeniably become more aware of the biggest issues of our time: because the US and China are now also showing climate leadership, the chances of reaching “Paris” have increased a bit. The ambitious European Green Deal aims for a sustainable recovery, for which the EU has released substantial sums. The reality, however, paints a much less positive picture. Because it now looks like the post-COVID recovery will be very carbon intensive. It is also clear that only a very small part of public funds will serve to facilitate a green recovery.
What we do know for sure, a year after the outbreak of the COVID pandemic, is that inequalities in the economy have increased and resilience has diminished. The acute phase of the crisis as well as the vaccination process further amplified the inequalities between rich and poor countries: public funds allowed rich countries to better cushion the economic blow and these countries also had more means to buy large quantities of vaccines. At the same time, however, the resilience of most economies has deteriorated as national debts have increased dramatically.
These high levels of debt are also linked to a second type of inequality: that between generations. Young people could not go to school for a long time and as a result suffered from social and psychological distress, and on top of that, they are also the ones who, at some point, will have to repay the debt that we have contracted. Those who benefit (in relative terms) are the older generation: they have been relatively spared from lockdowns and are not the ones who will pay these debts in the future either.
As government and corporate debt levels in sectors that have been hit hard by the pandemic, such as the travel and entertainment industry, have increased, there are also large groups of people who are actually doing well. Better off now: Anyone with assets has only seen their wealth increase over the past year. Larger companies – such as big tech – have benefited from both increased demand for their services and the strong recovery in financial markets driven by extremely accommodative monetary policy. “Big tech” companies have grown even further. This means that the financial world has become even more disconnected from the real economy, which has resulted in a reduction in the resilience of the economy rather than an improvement.
During this time, the relationship with nature has not strengthened; we have no idea how to limit our vulnerability to zoonoses jumping from animals to humans. On top of that, 2020 was also the year that started with huge wildfires and turned out to be the second hottest year in human history. the Dasgupta journal on biodiversity, a comprehensive report on the economics of biodiversity that was commissioned by the UK Treasury, reconfirmed that the relationship between economics and biodiversity can only truly be restored if we fundamentally change the way we treat nature: not as an input to our economic system, but as an asset as such. And so, also not as something that can be protected by putting a price on it, but not explicitly marketing it.
This highlighted once again that after COVID, we are still stuck in the paradigm of short-term economic growth and profit. If the economy is not growing or a business is not making a profit, we have only one instinct: to save everything we can by injecting more money into it. And we do this without first considering whether it actually creates wealth in the long run. At the same time, we have long known that well-being is a much broader concept than just economic growth or profit.
So the reset needs a reset. A reset that explicitly focuses on creating well-being.
In a series of podcasts, Hans Stegeman explores the contours of a forward-looking economy and the means to achieve it. In the first episode ‘Need for radical change‘, Hans and famous ecological economist Tim Jackson discuss the need for a new economic system. Connect and discover a new economy beyond growth.