Governments are leading Covid19 economic stimulus/ recovery experiments with little precedence to guide them. Three models have emerged, a green recovery plan is among them. And while there is hope the pandemic will create broad public support for government-led transformation to a sustainable economy, the idea remains more a dream than a probability.
Bill Gates rang the pandemic bell in 2015, and now he is leading an eight-lab effort to find a vaccine for Covid19. It is a great approach, one which has each lab working in cooperation and competition in a race to a solution.
In some respects, this is what national governments are doing as they move to stabilize their economies and develop plans for recovery.
But whereas scientific methods guide the search for vaccines, national governments are facing unfamiliar public health impacts on their economies. Not without analogies to traditional economic turbulence, governments are still unsure of which stimulus levers they need to pull and by how much.
Three approaches have emerged.
Cryonomics puts economy on ice….
The first is the Big Freeze.
This is best exemplified by Denmark, where they are betting on interventions that will allow their economy to simply ‘thaw out’ after the pandemic as if it were December 31, 2019. The government is paying the salaries of nearly every person in the country and has provided liquidity for almost all businesses, allowing them to pay fixed overhead costs – rent, loans, etc. – until the economy opens up again.
Germany and France are employing some elements of this strategy, though less aggressively than their Scandinavian neighbor. With an strong emphasis on helping workers, the two countries are, however, providing a different and more varied mix of support, including business loans, payroll taxes, and direct subsidies.
Since this is the first-time governments have tried to ‘freeze’ an economy in place, the outcome of ‘Cryonomics’ remains uncertain.
Traditional (but GIANT) intervention…
The second strategy, one being employed by most governments, treats the economic chaos caused by the pandemic as it if was any other type of economic downturn, albeit a giant one.
The now $3 trillion plus being provided to business and employees in the US is an example. Regular unemployment insurance is being bolstered, a ‘paycheck protection plan’ was given to individuals (infamous one-time only $1,200 check), small and large businesses can access government loans for liquidity purposes, and some larger industries will get bail outs, etc.
(Note: while the guy in the above video has quite a potty mouth, the analysis is not wrong and his view is that of pretty much anyone losing substantial income to the pandemic in the USA. Policy makers would do well to take notes).
This approach is a dog’s breakfast of interventionism, being directed as it is by the controlling Republican party’s politically laden vision of free markets. So unlike Cryonomics, there is no expectation the economy will look the same after the pandemic. Poorer, weaker businesses will go bust, and new and stronger businesses will emerge, theoretically healthier for having survived the crisis. Ditto individual or family economies. The strategy may work, but then again, picking up the pieces of an entire economy is much different from simply dusting off your workspace and starting working.
A green recovery plausible but not probable….
The third approach focuses on a green recovery. As residents of many cities are seeing blue skies for the first time in decades, calls for green recovery planning is gaining support and, given the climate crisis is in an early phase, makes considerable sense, yet it is still more an idea than concrete action.
Few politicians pre-CV19 supported a transformational economy to defend against what will be far deadlier and steeper climate change and biodiversity-loss curves. And those that did, were often vilified by at least as many, if not more, than those who actually support a greener economic transformation – just ask Alexandria Ocasio-Cortez about how unbelievably vicious those attacks can be. While vitriol buys social media space, in the end, apathy wins the day as the great majority of people are simply indifferent to a green transformation.
beyond a handful of sustainability experts, few understand what transformation to sustainable means in most sectors of the economy other than in the energy sector.
Even though there is far from sufficient public support for a sustainable economy, the virus pandemic has undoubtedly opened the door to more meaningful talk of transformation. Amsterdam has gone the furthest and will use the ‘doughnut economy’ sustainability principles to manage its development in the future. At the same time, the EU is urging its 27 member countries to develop green recovery plans, and is considering introducing carbon reduction targets more ambitious than those agreed to pre-CV19.
Popular economics aka voters do not favor transformational stimuli
At one end of the spectrum, it seems, is an ardent desire to let capitalism crash and burn. At the other: a crash and burn, let-the-chips-fall-where-they-may capitalism sentiment prevails. But if you ask most people, they just pray the pandemic ends so they can go back to where the world was on December 31, 2019.
Most folks have only so much bandwidth for change, especially whilst in lock down survival mode. Moreover, any suggestion of government acting for the ‘common good’ even in a time of crisis, is often vehemently, even violently opposed by a virulent few to great effect.
A plausible road to transformation
What we know for certain is that past economic crisis offers scant guidance the way science helps Mr. Gates’ efforts to find a vaccine. Experimentation will be messy and uncertain.
The opportunity to learn from how governments approach solutions will be of enormous value if the time is taken and the resources applied to dispassionately and objectively monitor the outcomes of different approaches free of political interpretation which is, like a transformational economy itself, plausible, but not probable.
While my dreams tell me a flowering transformation is possible, it is not (yet); change at best will be more in terms of uneven increments, as different parts of the economy respond necessarily to change. Health care and energy will be the first up.
Yet there is hope, for at the very least, a new lifestyle ethos could emerge from the crisis, one that favors time to do the things we love with the ones we love, over our perverse, greater than full-time pursuit of money and things. I also hope we can come to learn civic action requires government intervention, and that this is not a bad thing if citizens are informed, vigilant of overreach, and demand honesty and transparency in governance.