Economics: the science that is killing the world could also save it.
2020 will be remembered as the year that the world and humankind got its big wake up call, the Covid19 pandemic. Consistent in the commentary on how countries manage this pandemic is the balance between maintaining human health and life vs maintaining the health of the economy. Countries where the misplaced concept of ‘herd immunity’ has been used to put ‘the economy’ first such as Sweden and UK, have achieved the highest number of deaths per million yet failed to save the economy. Reduction in GDP and rise in unemployment in Sweden is little better than its Nordic neighbours who have had a fraction of the death rate. Countries, like Australia, where stricter measures including social distancing and lockdowns saw initial, have relentless political commentary on the need to be ‘reopening’ to ‘save our economy’ and ‘getting the economy out of ICU’ are now seeing second wave spikes.
What is economics
You would be forgiven for thinking ‘the economy’ was a physical being when we talk about sacrificing life for it. But it’s not. Economics is the social science of ownership, use and exchange of scarce resources and attempts to explain the behaviours when these scarce resources are exchanged. ‘The economy’ encompasses all ac
tivity related to production, consumption, and trade of goods and services in an area. It applies to everyone from individuals to corporations and governments. Economics and the economy are entirely concepts of the human intellect. Unlike other sciences, controlled experimentation cannot be used to assess the impact of different variables. Instead, economics, along with other social sciences, is based on observation, interpretation and assumptions to create models. These models are then used to explain and anticipate human behaviour in managing scarcity.
Constant growth and assumptions
Stable economic growth has been held up as a desirable macro-economic objective. In theory this should result in higher standards of living and increased employment. This has been modelled on the observation of countries moving from undeveloped to developed. In developed countries, the assumptions made on past observation may not apply.
In these countries the ongoing desire for constant growth has also spilled over into stock markets and corporations. Companies that have a good profit level are hammered by investors if that profit does not continually grow. Corporations have tried to drive productivity from its workforce to the point that human health, including physical, emotional and mental, has become the cost. Additionally, whilst GDP (gross domestic product) has grown there has also been a widening gap between the haves and the have nots.
Constant growth has become the defining hallmark of economic success. Yet if constant growth was observed in nature, we would call it pestilence or plague. In human health constant growth would be called cancer. These occur due to loss of balance in a complex system. In both these scenarios action would be taken to slow, reverse or remove the growth and restore the balance.
The need to maintain constant economic growth has created a blight on the earth and on human society. It has driven us to mine resources from the earth without hesitation, to log forests without reservation, to poison our water and soil in an attempt to increase production, to pump pollution into the air and oceans as by-products of the economic need to have more and meet the goal of constant growth. The impact is killing us. From the direct environmental impacts on human health, to stress related and mental health issues associated with the relentless drive for productivity. All for the sake of ‘the economy’.
Now the world has the COVID-19 pandemic. COVID-19 is an infection that has jumped from animals (bats) to humans, a direct result of the need for economic growth contributing to the eroding of natural habitats and disturbing ecosystems. This is not the first zoonoses to do this. We’ve seen SARS and MERS-CoV. This pandemic, however, has generated the biggest drop in GDP since the Great Depression nearly a century ago. Is this nature’s way of bringing economic growth back into balance?
From sinner to saviour?
The advantage of ‘the economy’ being an intellectual human concept is that we can reshape it and redefine what a health economy looks like. We can’t simply “snap back’ as our Prime Minister, Scott Morrison, has suggested, without ending in exactly the same place as we are now. Next time, the pandemic agent may not be as kind as COVID-19.
A ‘new economy’ is needed, one that redefines what a healthy economy in the twenty-first century can look like. One that sits harmoniously within the complex system of planet earth.
One economist may just have the answer. Kate Raworth has developed a modern model of economics that does just this. ‘The doughnut economy’ as Kate has termed it, enables humans and countries to prosper, enabling essential needs to be met and whilst at the same time not pushing too hard on the earth’s ecological life-supporting systems.
Time to take a closer look at this concept and move it into reality. The sinner ‘economy’ which has driven us here could morph into the saint that will save us all.
It’s time for change.