Pandemic Economics: what comes next?
How can our current economic system cope with COVID-19? What is the future of globalism and internationalism? In our latest blogpost we are seeking the answers.
If we want to be more resilient to pandemics in the future (and in parallel to avoid the worst of climate change) we need a totally different economic mindset from the one dominating the past decades, according to an article published on bbc.com. The current economic mindset is fundamentally driven by two linked beliefs:
- The market is what delivers a good quality of life, so it must be protected
- The market will always return to normal after short periods of crisis.
One of the things the COVID-19 crisis could do, is expanding this economic imagination. The author, labelling himself as an ecological economist takes us to four different scenarios, considering the prevailing value (what is the guiding principle of our economy, money or the protection of life) and the level of centralisation.
4 possible outcomes
1.State capitalism: centralised response, prioritising exchange value
State capitalism is the dominant response we are seeing across the world right now, where society continues to pursue exchange value as the guiding light of the economy, while it recognises that markets in crisis require support from the state.
This may be a successful scenario, provided that COVID-19 proves controllable over a short period.
2.Barbarism: decentralised response, prioritising exchange value
Barbarism is the future if we continue to rely on exchange value as our guiding principle and yet refuse to extend support to those who get locked out of markets by illness or unemployment. It describes a situation that would probably not happen by intention, but may happen by mistake if a government fails to step in in a big enough way during the worst of the pandemic and eventually lead to the collapse of both state and community welfare systems.
3.State socialism: centralised response, prioritising the protection of life
In such a scenario, the state steps in not to protect markets, but to protect the parts of the economy that are essential to life, so that the basic provisions of life are no longer subject to the whims of the market. Payments are made to all citizens directly by the state and are not related to the exchange value they create.
This scenario may emerge if the pandemic is prolonged and the recession is so deep and supply chains are disrupted to such an extent that standard Keynesian policies (printing money, making loans easier to get and so on) don’t work anymore. It may seem a positive outcome, however, authoritarianism may appear as a risk.
An article published on euronews also argued that one of the lessons we could already learn from this pandemic is that
in case of emergency, a smooth integration of private services with public ones is needed, for the steady provision of crucial supplies in the service of the community rather than for profit maximisation.
Another lesson should be the reprioritisation of economic activity and public investment towards sustainable, less polluting and less resource-consuming activities, with emphasis on human security and well-being with respectable standards of living for all.
4.Mutual aid: decentralised response, prioritising the protection of life.
Mutual aid is the second future in which we adopt the protection of life as the guiding principle of our economy, but without the defining role of the state, relying rather on individuals and small groups organizing support and care within their communities.
This kind of scenario could emerge from any of the others. We know that community responses were central to tackling the West African Ebloa outbreak. And we already see the roots of this future today in the groups organising care packages and community support. We can see this either as a failure of state responses, or as a pragmatic, compassionate societal response to an unfolding crisis.
These visions are extreme scenarios, and likely to bleed into one another and only future can tell what combination of them will help to survive in certain countries. And what is waiting for us on an international level?
On a global level the most important question may be the future of globalism itself.
Many prognosticate the slowdown of globalism, driven by the diversification of supply chains with a focus on local suppliers, as highlighted e.g. in an article published on bbc.com.
The latter article also draws attention to how some critical events (World War I and II) transformed the international relations, with a shift to nationalism and protectionism after World War I, and then to more cooperation and internationalism after World War II.
The future of power relations on a global level is another question engaging many people recently. Many believe that COVID-19 may accelerate the shift in power and influence from west to east, as highlighted in the article published in the Guardian, as well.