Designs for a sane economy after Covid-19

We can't decouple growth from its adverse effects and it's becoming clear that the same economic thinking that got us here won't get us out. A cultural shift to ‘enoughness’ and non-consumptive means of happiness could be the way forward after Covid-19, argues Lucie Greenwood. 

Talk of economic transition in a post-Covid-19 world is everywhere. If the past is anything to go by, shocks of this magnitude hold potential to divert the course of socio-economic history. For those concerned that a ‘business as usual’ economy is fast steering us towards climate and ecological collapse, while simultaneously failing to serve human wellbeing, the pandemic is seen as a circuit-breaker affording a rare opportunity for intentional redesign.

The 2020 Budget has been a disappointment to many in this regard. While it contains Green New Deal-type allocations, including waterway restoration and rebuilding the railway network, these are ‘loose change’ relative to the planned $50 billion dollar spend. Hope remains in that there is a long list of undecided projects, which could fall in the category of green infrastructure, but we can be far more aspirational than that. Aotearoa’s Virtual Town Hall conversations have already hinted at the possibility of adopting Kate Raworth’s ‘doughnut model’ (following in Amsterdam’s footsteps) to guide transition towards an economy that meets core human needs while respecting planetary boundaries.

These are two excellent first principles for designing a sane economic system. A third, called for by Rachel Taulelei, is to ground economies in place, to reflect local ecologies, cultures and aspirations.

To turn these three principles into more than talk, we urgently need to weave them into a clear vision for an alternative economy for Aotearoa New Zealand. Equally, there is a need to take pause. Designing anything truly transformative depends first on an honest examination of the unquestioned assumptions on which our current economic system rests.

Humans are unique in their capacity to invent stories to dictate how things must be. While this capacity serves to ignite unified group action, there is a pervading danger of becoming trapped in the grip of stories with destructive outcomes – for as soon as we say there is ‘no alternative’, the somewhat curious human tendency arises whereby we attempt to solve our problems with the same thinking that created them. I see two well-known stories – among a handful ripe for challenge – that could act as serious roadblocks to economies emerging in any fundamentally different way after coronavirus.

Our fixation with infinite growth, faith in markets, and distrust in governments to play an entrepreneurial role – are just stories. They reflect no great universal or objective truths. But together, they lie at the root of a vast array of complex social and environmental problems.

The first and most obvious is infinite growth. Our obsessive focus on a target of 2-3 percent GDP growth per annum allowed us to overlook the fact capital was accruing disproportionately to the elite while child poverty and inequality rose. While the 2019 Wellbeing Budget committed to invest in and measure the things that matter to New Zealanders, like clean rivers and leisure time, its continued endorsement of economic growth sits ill at ease with its sustainability and climate related ambitions.

A quick and common counter-argument here is that we can just decouple growth from its traditional adverse impacts (on climate, forests, waterways, soil heath, etc). Unfortunately, ‘green growth’ does not stack up against analysis. To date, there is no evidence it is possible to absolutely decouple growth from resource use or carbon emissions. In the context of a fast dwindling carbon budget to avoid warming beyond 1.5°C, this is deeply concerning. Even renewables won't be able to save us in time, which is why the IPPC’s only scenario that gives us a possibility of preventing catastrophic levels of warming (and doesn’t rely on questionable negative emissions technologies) is one of de-growth.

If growing our way out of growth’s mess amounts to a narrative of the non-fiction kind, we urgently need to shift our train of thinking back to reality, and focus on what needs to be done now to bring us into line with this hopeful scenario. Doing so will open discussion to solutions – crowed out by a ‘growth-first’ mind-set – that may prove key to placing us on track to a safe climate future. For instance, a cultural shift to ‘enoughness’ and non-consumptive means of happiness.

An economy that aims for ‘enough’ might be a good thing for human wellbeing also. The problem with the growth imperative is not only ecological. It is also gives strength to a second story – the market mechanism as unquestioned champion – which we all know has failed in its promise to deliver prosperity to all. 

As soon as we say there is ‘no alternative’, the somewhat curious human tendency arises whereby we attempt to solve our problems with the same thinking that created them.

To generate the conditions for competitive productivity, governments had to create artificial scarcity. They did this, for example, by extending the market mechanism to what was once affordable or free, such as social security, public housing, and transport, and deregulating the labour market, which has made employment more precarious. While these actions incentivise us to do more work – so aiding the expansion of the economic pie – they have created new forms of scarcity for the many (for example, in the form of low wages relative to housing and commodity prices).

Democratic governments need to close the yawning gap between its mandate to work ‘for the people’, and economies that simply don't. Our own has labelled the free markets a ‘blatant failure’ – and yet, policy-makers remain trapped in an ideology that confines the role of government to correcting ‘market failures’ and using market-based mechanisms as a first port of call.

The result is addressing symptoms not causes. The Government’s response to the housing crisis, for example, has been to build more affordable homes, which does not address the underlying issue that houses are being used as financial instruments – price is no longer determined by what a buyer is willing to pay, but rather their value as a security for financial instruments and speculation. Addressing problems such as the housing crisis require much bolder action.

Markets need to be re-constructed, re-purposed and often constrained in order to produce the outcomes we value, without the ones we do not.

An economy that is socially fair needs to re-distribute existing wealth, and overturn artificial scarcity by removing or restricting the market mechanism from essential goods and services to expand the pool of public wealth. Additionally, because a large part of new scarcity stems from an overly financialised economy, the Government should be emboldened to restrict activities that amount to siphoning value out of the real economy. For example, businesses and financial institutions that prioritise shareholder value (and executive pay) over investments in long-term value creation, such as R&D, worker training and wages.

An economy that is environmentally viable demands careful, democratic thought on what ‘living green’ actually looks like. How do existing sectors need to change to reduce material throughput and reverse damage done? What emerging or new sectors align place-based aspirations with our national aspiration to transition to a low-emissions sustainable economy? How can Māori – including Māori businesses take leadership in this transition? And, finally, what silver linings could be gained from a societal commitment to less materialistic and energy intensive lifestyles?

Answers to these questions must join the threads of existing conversations on economic transition to form a clear vision capable of placing us on a trajectory to system change – as opposed to piecemeal actions that amount to sticking plasters on what is already broken.

Governments experiencing any discomfort at stepping into a market-shaping role should look to the work of LSE economist Mariana Mazzucato, who has worked with the US government and the European Union to develop mission-orientated policy, to ‘tilt the playing field’ to create transformative change.

Our fixation with infinite growth, faith in markets, and distrust in governments to play an entrepreneurial role – are just stories. They reflect no great universal or objective truths. But together, they lie at the root of a vast array of complex social and environmental problems, and in not challenging them, we give them the power to constrain what could be.

New stories are essential to release both humans and ecosystems from their grip – to break free from the madness of a system that is clearly incompatible with life – and to design something new that works for people’s happiness, speaks to the uniqueness of place, and protects and regenerates the natural systems upon which we and all other species depend to live.   

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