The emergence of coronavirus has created a crisis in economies across the globe that seemingly forces governments to choose between the economy and the health of their citizens. This false dichotomy has inadvertently exposed the sham of these countries’ social safety nets and the economy as a whole. The sudden surges in unemployment seen around the world were never a foregone conclusion; they illustrate a failure of policy – both existing social policy and crisis response policy. Further, this either-or assumption has created a ghastly calculus that is entering the public sphere: how many lives is the economy worth? It didn’t need to be this way.
The idea that horrendous and irreversible damage to the economy is inevitable from the policies needed to prevent the spread of the virus is taken as a truism when really it merely betrays a lack of imagination. It demonstrates a fundamental misunderstanding of how the economy works and what the economy even is. This supposed trade-off could have been largely neutralised with good policy, and fortunately it still can.
A Failure of Policy
The beginning of the policy failure was the lackluster response of governments to the inevitable difficulties people would encounter with social distancing measures and eventual lockdown orders. Governments sought to work within existing social security structures, exposing the weaknesses inherent in those systems. In addition to this mechanical failure was the political one. Politicians bent over backwards not to do too much – a little money here, an increased benefit there – it was a collective effort by the governing class to do just enough and spend as little as possible. This was often accompanied with the tired refrain of needing to be “fair”, which to these policy-makers means ensuring people couldn’t cheat the system. If a few needy people slip through the cracks it’s worth it to prevent a hypothetical grifter from getting an extra buck.
This has created a toxic cocktail of insufficient support for those who need it. Fortunately, governments eventually realised this and began to roll-out expanded programs. Many countries have seen relief for renters and mortgage holders, enhanced employment insurance benefits, deferrals of loans, and increased child benefit payments. The most novel among these have been wage guarantees where governments promise to pay part of a worker’s salary while they are employed during the crisis. Some of these measures require the workers to be furloughed; some do not. This has helped a large segment of society and provided much needed relief to workers and companies by allowing them to maintain staff and reduce costs. While these changes and innovations have improved things, they are still largely piecemeal and incomplete, with large segments of the population slipping through the cracks including students, the self-employed, family businesses, and others. These current measures are not enough to save the economy and alleviate the hardships faced by workers. The less we are willing to spend now, the more we will have to spend later to restart the economy.
A Failure of Politics
One curious thing that the government response has demonstrated is the fundamentally political nature of many of the supposed economic problems facing modern countries. Many countries have significantly liberalised immigration rules for doctors and nurses to allow new immigrants to join the front lines in the fight against the coronavirus. Governments around the world are boosting healthcare spending to provide the necessary equipment and resources to their healthcare systems. Countries are even tackling seemingly tangential problems in an effort to protect their citizens: the United Kingdom, after a generation of inaction, has announced that it will provide shelter for all homeless people in an effort to reduce their exposure to the virus.
For years politicians have been using economics to defend their inaction on these issues. They have claimed that immigration hurts the economy; that increased healthcare spending is unnecessary; and that governments can’t afford to tackle social problems like homelessness comprehensively. Now, in a time of crisis, the politicians are finally being exposed – the issue was never that it wasn’t economically feasible (economists have been presenting reasonable policy solutions for years) it was that governments lacked the political will.
Most important of all, countries are realising that much economic activity can be continued in non-traditional ways. The lockdowns instituted around the globe have forced many to work from home or find unique productivity solutions: teleconferencing, flexible hours, and reorganised work environments have all taken off. Governments themselves are even starting to work digitally, with the UK holding virtual committee meetings and Canada exploring virtual sittings of parliament. Despite the hiccoughs, alternative ways of conducting business and administration are functioning and this will improve with practice and infrastructure. Conversely, it has also exposed what work is actually essential. The need to run national economies with a skeleton crew has exposed the fundamental truth about our modern economies: not everyone needs to work for the economy to function, but everyone needs to work to live. We must restructure our economies in a way that keeps this in mind in order to tackle both the current crisis and restructure our societies after we recover. Productivity is not only measured in profit margins, and forcing people to work because they have no other choice creates unproductive labour and detracts from other productive contributions to society. We can weather the storm and rebuild our economies, but we need to do so in a way that benefits more people.
Within Our Grasp
Many of the building blocks of a better economy are ideas that are already floating around in the minds of many. Some of them are even being proposed by governments during this crisis. One fundamental aspect is that we need to encourage productivity, but not in the traditional sense. Productivity is not only measured in the monetised output created by workers – this has been an uncontentious assertion among economists for quite some time. There is plenty of economically productive activity that is not paid for by anyone: from housework, to childcare, to entertainment, and beyond – this is becoming even more pronounced with the increase of free online entertainment content that anyone can create and everyone can consume. These elements of our economy are important and necessary but they are hard to monetise and probably should not be monetised. The second fundamental aspect is that we need to remember that production does not drive the economy by itself – you can make as many fridges as you like but if no one is able to buy them or no one wants to, there is no contribution to the economy.
Reconciling these two aspects is important in retooling our economy to work for the benefit of all. We must provide people with sufficient sources of income so that they can and are able to buy the things that are produced while also recognising the reduced need for direct work and the value of currently unpaid productivity. We don’t need new tools to achieve this, policy-makers love to obfuscate issues by creating indices and metrics to generate new ways to measure the extent to which they aren’t doing anything. All we actually need is the political will to implement policies that have already been outlined by economists and researchers.
The required solution is underpinned by a universally guaranteed income. A universal income would remove the stress many feel from precarious employment and uncertain pay. By providing income to everyone we would ensure that all members of society have sufficient funds to live (and therefore consume) and drive economic demand. Similarly, we would remove the problem of unpaid productivity by effectively paying people unconditionally for that productivity. While the fact that sudden losses of income are problematic for people and society as a whole is nothing new, the severity of the problem has never before been felt as widely as it is now. With the current crisis, people who had never before experienced income insecurity are feeling the bite of not having enough and governments are realising that the only solution is to supplement that lost income. While many governments are going about it in a piecemeal way, some are seeing the opportunity for a basic income (even if only temporarily). Both the SNP in Scotland and the Socialist government in Spain have called for a basic income as a solution to the current crisis, with Spain going so far as to announce its intention to introduce one (it remains beyond the power of the Scottish government to do so alone). While in the United States, Andrew Yang continues his effort to keep the policy front and centre during the current health crisis by rolling out income assistance to New York families.
But this must go hand in hand with a more sustainable state. A significant aspect of the current crisis is how woefully unprepared the government was for the severity of it. This is highlighted in the early discussion in all countries of the inability of their health systems to cope with the massive increase in need for health services. This is an interconnected issue that requires a two-pronged solution. After twenty years of seeking a ‘lean’ government states have been hit by the fact that what ‘lean’ actually meant was reducing capacity – capacity that was needed in a crisis. Health systems were cut to the bare bones, public services were slashed and privatised, and government services were reduced. In the name of cutting ‘waste’ politicians gutted the very mechanisms that allowed them to fulfill their core function: protecting their citizens. Out of this crisis should spring an acknowledgement that public services are necessary and properly funding them is imperative. Business tax competitiveness is nice, but not if it comes at the cost of protective equipment for hospital staff. A key aspect of building an economy that works for the benefit of more people is making the taxation system of the economy fairer. Governments need to start taxing income and wealth correctly, taking into account not just take-home pay from employment but wealth generated through assets. This would generate the income necessary for governments to fund public services correctly and provide for their citizens.
A Better Now and Then
The great benefit of this moment is that if we respond correctly and rebuild the economy in a way that is beneficial we will have a system that could more easily function in a crisis such as this. With a basic income for all, the government would not need to worry about supplementing incomes of wage earners, it would not need to be concerned about the self-employed falling through the cracks, and it would not need to expand social security measures as much. Similarly, with a more robust tax base, the government would not need to be as worried about lost revenue due to the lockdown of the economy. Finally, these measures combined would make a lockdown more feasible earlier in the crisis and could stop the spread of the disease in its tracks without the massive difficulty in restarting the economy afterwards. At the emergence of the first few cases, governments could enforce the closure of businesses and restaurants without concern for the income of staff and owners – the only relief necessary would be a tax and rent holiday during the closures. In this way, businesses and the economy more generally would be able to hibernate for the required time without the threat of businesses declaring bankruptcy and closing permanently. After the crisis, these businesses could reopen with minimal trouble.
While these reforms would be better to have before the crisis ever happened, it is not too late to institute them now. A guaranteed income, targeted rent and tax holidays, and reforming the tax code for after the crisis can all happen now and still benefit the vast majority of people. If we want to tackle the crisis and land on our feet, we need to give people enough money to get buy and make sure that businesses can weather the storm while keeping staff on board. This will allow people to meet their basic needs now and let businesses reopen after the crisis without the need to take time to seek new employees. By properly preparing our economy to hibernate, we can reawaken it post-coronavirus and get back up to speed quickly with minimal disruption. We still have time, but if we wait too long and the unemployment rate climbs and businesses close, we will have a very difficult time pulling ourselves out of a needless depression. This is an opportunity to redefine what productivity means, redesign how our economy works, and re-evaluate how we live. We cannot miss this chance to force politicians and policy-makers to develop a system that actually works for those they are supposed to be accountable to.