Save the economy! What does that mean?!

Miriam Meissner

We’re now a few months into the Corona pandemic and, while some of our governments have reacted dangerously late, most of them have reacted. Within a matter of weeks – sometimes days, sometimes hours – we’ve radically changed. We’ve changed how and how much we shop, if and how we travel, how we interact with each other and – importantly – how we set our priorities.

We’ve discovered that we don’t suffer much if certain – such as car and aviation – industries go into shutdown for a while. We’ve noted that it often doesn’t harm our success to cancel a business trip. We’ve learned that we don’t feel significantly less well if we cannot go out to shop for gifts, decoration and other knick knacks. At the same time, we’ve also experienced that empty supermarket shelves are scary. That we need our pharmacies to stay open. That we appreciate if our hospitals have capacity to treat us – just in case.

Yet, as was to be expected, the first politicians, media and public influences are now starting to enquire about the one thing that in our society usually comes first: the economy. “But what about the economy?”, they ask. “But we cannot let the economy suffer any longer!”, they warn. So, what do they mean? What is this abstract entity that – by all means – we cannot leave unattended? Who is this mysterious deity we shouldn’t dare to upset? 

Campaign poster showing William McKinley holding U.S. flag and standing on gold coin “sound money”. Source: United States Library of Congress.

There are different definitions of what economy means. One is that ‘economy’ refers to the social system by means of which we allocate scarce resources. Another one is that it refers to our system of collectively producing and exchanging goods and services in order to fulfill our needs. Yet another definition is that economy refers to the system of trade and industry by means of which we generate wealth. 

So far so good. Yet, this is not what people mean when they ask: “But what about the economy”. Instead, what they mean is this: “But what about economic growth?” What they fear is that the Corona-induced industry shutdown could mess with a figure we tend to treat as holy: our GDP. “Our survival depends on GDP growth!” they might say. “We need GDP to save our jobs. We need it to make ends meet”.

In response, it is worth taking a moment to consider what GDP actually means. The Gross Domestic Product measures the overall monetary value of goods and services produced within the borders of a country throughout given time period (usually a year). In so doing, GDP does not say anything about the quality of the things we produce. Nor does it say anything about whether or not we distribute these things fairly. 

GDP is indifferent as to whether or not our wealth consists of food, healthcare and education, or if it is drugs and plastic kitsch. It does not register if 1 percent of our population owns 40 percent of our collective wealth. It doesn’t care about whether or not our wealth is based on renewable energy, or if it relies on a fossil industry that will – eventually – destroy the foundations of our livelihoods on this planet. Finally, GDP is indifferent to all of the values we create but don’t sell. If I clean my home, care for my children or cook my own food, GDP won’t register the values I created. If I hire a cleaner and a nanny, and have my food delivered, then this counts as GDP. Strange, isn’t it?

What this means is that GDP doesn’t say much about our wealth and wellbeing. We therefore shouldn’t care too much about its decrease! 

This is NOT the same as to say that our economy doesn’t matter. Our economy does matter.  It matters that we keep alive a system of production and exchange by means of which we satisfy our basic needs (and on top of that some extra pleasures!). It matters that people don’t lose their homes because our businesses had to hit the Corona break. 

What is wrong, however, is the idea that – in order to ensure these needs be fulfilled – we need to incessantly and indefinitely grow the GDP pie. What’s wrong is the idea is that we cannot – not even temporarily – stop growing the overall amount of stuff we trade. What’s wrong is that politicians are ready to sacrifice lives in order to not upset the holy lord of GDP

In this situation of crisis, we should worry less about recession, and think instead about fulfilling our most important needs in a fair and sustainable manner.

To that end, we need to shift the logic from growth to redistribution. In a situation of shutdown (for good reasons!) there is no other option. We need to consider if it’s really okay that the super-rich jet off for their holiday homes amid this pandemic, leaving hundreds of square meters of primary residence empty – while others are struggling to pay their monthly rent. We need to ask if it’s really okay that some hire private doctors and nurses, while the capacity of our hospitals is stretched thin to the bones.

All of this is not a question of whether or not we produce enough wealth, but how we distribute the goods and services that exist already. In addition, we need to ask ourselves if our economy is really structured to meet our primary needs. 

What Corona demonstrates is that we have a great deal of industry that is completely useless when it comes to meeting our basic needs in a times of crisis. Depending on national context, we might have great infrastructures to produce smartphones, but not enough hospital beds to care for the sick. We might have great vehicles to travel the planet, but not enough agriculture to feed our population in case the global food supply chain breaks down. 

So – what about the economy? Currently, our economy is ill-fitted to meet our needs in times of crisis. It is ill-fitted not because it isn’t big enough, but because it’s directed towards growth instead of needs – and because it doesn’t care about justice. 

To make things even worse, our economy as it functions today will also lead to more frequent and severe health and environmental crises in the future. Our environmental authorities know by now that further pursuing the path of unlimited economic growth will drive global heating and biodiversity loss (which is likely to have caused the Corona pandemic!). They also know that the strategy of ‘green growth’ – that is the attempt to decouple GDP growth from its negative environmental ‘externalities’ – has failed so far, and that it will most likely keep on failing us in the future. 

What is needed, therefore, is a so-called post-growth economy. What does that mean? It means that we forget about the goal of growing our GDP and instead set up an economy that is oriented towards three main values: collective wellbeing, justice, and ecological regeneration.

It is high time not to save the economy but to transform it into a new economy. An economy that strives without incessant growth. If we fail to do so now, then after the crisis will always be before the next. 

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s