Emergence from the coronavirus crisis cannot be to ‘business as usual’ but must urgently open a transition to socio-environmental sustainability.
The 2008-09 global financial crisis left the world with a new mountain of debt. Subsequently, global debt dynamics moved from advanced to emerging economies and from the private to the public sector, but by 2016 debt was again moving upwards in all sectors and regions of the globe.
This ‘great debt’ period ‘coincided’ with a period of persistently low growth—what came to be termed the ‘great stagnation’. More debt had to be serviced from ever slower growth. The evident economic unsustainability of this model came to complement its social unsustainability—manifested in socially destabilising inequality, collapsing middle classes and additional poverty and hunger across the globe.
These interacting dynamics came to accelerate the environmental unsustainability of our socio-economic system. In this context, many researchers were projecting (before the Covid-19 crisis) the break-out of another major financial crisis in 2020, with some vulnerability indicators flashing red in all high-, middle- and low-income countries (see for instance here, here, here and here).
This was the state of the global economy when the Covid-19 crisis struck. Since January 2020, gradually, different parts of the world have entered a lockdown, leading to an economic freefall. Although this is not happening simultaneously, and is in some countries being somewhat eased, the 2020 global economic recession is expected to be of such magnitude that it will make the 2008-09 ‘Great Recession’ seem an event of minor importance. The explosion in unemployment, the destruction of economic future for great parts of our societies, is just unprecedented.
What has been the response? On the one hand, another wave of ‘quantitative easing’ (including an expanded range of eligible assets and relaxation of collateral standards for refinancing operations), lowering further the cost of money, and giving further incentives and guarantees to banks to extend loans. On the other hand, emergency fiscal measures aiming to support health services, sustain those in temporary unemployment and the self-employed, avert mass lay-offs and offer debt rescheduling (including postponements of social security, tax and utility payments) to help corporations and households (and thus the financial sector) avoid defaulting.
Respective measures have also been taken at an international level, aiming to support the poorest and most vulnerable countries. The rationale of the ‘response package’ is to deal with a situation akin to a natural disaster and lead us back to ‘normality’ as soon as possible.
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Maintaining this ‘business-as-usual’ approach would be disastrous. Adding more debt to an economy which has been struggling with high indebtedness and many years of socially disruptive austerity would have catastrophic consequences. It would temporarily bail out a bankrupt economic model, for a second time in little over a decade, feeding a larger and more dangerous socio-economic collapse in the near future.
Equally important, the race to achieve a V- or U-shaped recovery would most likely push climate change beyond the point of no return, prolonging existing unsustainable practices and industries and diverting funding away from the needed global ‘green new deal’. This should not be allowed to happen.
Attempting to go back to a morally, socially and environmentally bankrupt past is no option and should be resisted at all costs. Achieving a V-shape ‘recovery’ is meaningless if this leads to a socio-environmental collapse a few years down the road. Rather, what we should aim for is a sustainable recovery, which serves the necessary transition of our societies to a socially and environmentally sustainable future.
Extending financial support to the record number of people whose livelihoods have been destroyed and/or are unemployed, as well as to an unprecedented number of enterprises (especially small-and-medium) devastated by the enforced lockdown is an essential emergency measure in a warlike situation. This should include thorough debt reworking arrangements throughout the economy (including households), to avert a violent domino collapse with dangerous systemic implications for the economy and society.
The true challenge, however, is to use these extraordinary measures not to create a new generation of ‘zombie’ households, companies and countries, but to guide the required transition to a sustainable tomorrow.
In this framework, the state should quickly shift from the crisis mode of lender-of-last-resort to a transitional mode of employer-of-last-resort and driver of the implementation of the green new deal. Emergency cash transfers and debt reworkings at individual level should be transformed into job guarantees and (re)training schemes, boosting green, sustainable and care skills, practices and industries. Emergency support to private corporations should carry with it green, labour and responsible-investment incentives and conditionality.
Significant changes in public economics and accounting standards should also be introduced to support this transition. The aim should be twofold: first, to align our economic measurements with our social values, by adjusting the composition and calculation of gross domestic product; secondly, to register and manage the use of money as a public good, as opposed to a private, interest-bearing asset.
The neglect of money as a public good over recent decades has led to excessive inequalities and vulnerable societies. With the resources and technology available, access to food, shelter, education and health should not depend on it. This is not only a moral issue: as climate change and the pandemic make evident, resilience and sustainability cannot be achieved without securing basic human rights.
It is also evident that adopting state-centric strategies and securing these rights at a national level is not enough. The challenges we face today require pulling together knowledge, resources and expertise at a global level, through global structures.
Equally importantly, the transition described above cannot succeed without the active engagement of those called to carry it forward. It passes through the reinvigoration of our democracies, the active participation of citizens in shaping this transition itself. That’s why a developed education should not be a choice but a democratic responsibility, supported and expected as an integral part of citizenship.
The battle over the nature of the ‘recovery’ from the Covid-19 crisis seems the best shot we have to move to a sustainable socio-environmental model. It may also be the last shot we have, before a wider social or environmental collapse.
A version of this piece was previously published by Global Policy
Andreas Antoniades is senior lecturer in global political economy at the University of Sussex. He is the principal investigator of the SSRP project ‘Financial Crises and Environmental Sustainability’ and co-editor of Global Debt Dynamics: Crises, Lessons, Governance (Routledge, 2019).