How to reset the economy

Dear Editor,

  Please allow me to share the text below with you, because I liked the way of thinking about possible steps to go, on a path of hope, a possible direction for a resilient future:

  So far, the focus has primarily been on overcoming the COVID-19 health crisis, and rightfully so. But we also need to understand the root causes of the systemic corona crisis and plotting a part of the future. The […] measures from governments and central banks will determine economic developments in the years to come.

 

Root causes

  [Viruses] like corona are far more likely now to transfer from animals to humans than they used to be. Rampant deforestation, uncontrolled expansion of agriculture, intensive farming, […] infrastructural development, as well as the exploitation of wild species, have created a perfect storm for the spillover of diseases from wildlife to people.

  The COVID-19 disease and the crisis it triggered have exposed societal inequality and weaknesses in healthcare. Not everybody has access to affordable healthcare; not everybody can afford to stay at home.

  The pandemic has laid bare fundamental flaws in the way we have organized our economy in our unrelenting efforts to strive for economic growth. The speed and severity of the economic impact on (global) enterprises and value chains are significant. The supply-side restrictions and the fallout of demand demonstrate the absence of buffers and a lack of resilience in big parts of our economy.

  The recovery from the corona crisis is not simply a question of putting the “old” economy back on its feet. The reset we call for, addresses the root causes and [proposes] three key building blocks:

  redefine; working out what matters most;

  revalue the way we live; mixed economy and public values;

  redesign our economy; open, circular and diverse markets.

  This health crisis, rooted in how we, as humans relate to nature, has translated very quickly into an economic and social crisis. And, given the policy reactions so far, it will also transform into a debt crisis. Moreover, the crisis […] demonstrates a fundamental lack of resilience in our ecological, social and economic systems.

 

Redefine

  We have known for a long time that human progress cannot be reduced to annual [gross domestic product] GDP growth. Declining ecosystems are a threat to our wealth. We first have to redefine what matters most. It is time the concept of well-being became the foundation of government policies and business investments.

  And as we have seen in the past decades, economic growth without adequate levels of equality ends up excluding people from basic needs, human dignity and resilience. People, planet and prosperity should therefore be the central values upon which government policy rests and business investment decisions are judged. Economic growth must make way for wellbeing.

  Redefining how we think about progress in a market economy is essential to broaden policy and corporate agendas so that they encompass all vital aspects of wellbeing.

  We suggest the following combined alternative for GDP, based on:

  1. The framework of ecological boundaries as the hard, non-negotiable boundaries for economic activities. The easiest one to start with is the carbon footprint (climate change). The other eight planetary boundaries (biodiversity loss, biogeochemical, ocean acidification, land use, freshwater, ozone depletion, atmospheric aerosols) […] can be made concrete for countries or companies and local or regional scale (Steffen et al., 2015)
  2. The achievement of United Nations Sustainable Development Goals (SDGs) as an indicator for wellbeing of a country. This is the global strategy for well-being in 2030. The aim should be to try to optimize SDGs, keeping an eye on the inherent trade-offs, where, again, ecological boundaries must be respected.
  3. Gross domestic product (GDP) can still be used as an important indicator for production aligned with the other goals. In the same spirit, profits and financial accounting frameworks for companies will and should be used, supplemented with other frameworks.

  At both country and company level, this combined set of indicators will help policy-makers to find the balance between ecological boundaries and social foundation. A holistic view on well-being does more justice to the inherent complexity of the interaction between the ecological, social and economic dimensions of sustainability.

 

Revalue

  Public policy and the economic activities of companies should reflect the common shared values in each society. Revalue how governments and markets interact. Governments and institutions need to support social cohesion, not just market transactions.

 

Redesign

  The notions of well-being, a values-based economy and public institutions and investments are building blocks for a redesign of the economic framework. We have to redesign our economic system: to make it more resilient, with higher financial buffers, diverse sourcing and more local and circular production chains. We need business to be more resilient and business models to be more diverse.

  The general framework of redefine, revalue and redesign provides the right context for concrete measures that work towards a resilient, sustainable and inclusive economy. This is truly a collaborative effort by governments, businesses and communities. This is a defining moment for a reset. If we make the right choices, our economy can become more resilient, we can create better prospects for a lot of people around the globe and in the end build an economy that is also sustainable in the long term. The direction we choose over the coming 10 years will define our future. If we make the right choices, future generations will also enjoy their lives.

  This interesting text above is from a paper, written by Triodos Bank Netherlands, called: “Reset the Economy, an agenda for a resilient and inclusive recovery from the global corona crisis”, May 28, 2020. It can be read and downloaded for free from the Internet.

 

G.B. van der Leest