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Redefining the economic model in the aftermath of COVID-19 pandemic

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By Claire Hollier – Public Policy Consultant

Amidst the COVID-19 pandemic, demands and needs are changing fast, so fast that recalibrating to the previous norm, is outdated – its past:  remote history.

There is no doubt, a crisis this scale, reshapes the economy and society in lasting ways.  From an economic point of view, the OECD Secretary General, José Ángel Gurría ascertains that the global economy will take years to recover from the pandemic crises, reflecting that it is ‘wishful thinking’ to expect countries to bounce back quickly.

From a social perspective, this pandemic will allow us to revisit our social priorities.  Surely, safety, health and shelter on one hand and reserves, savings and insurances will become prominent in our to-do list.  How about, luxury goods and entertainment activities?  Guess we have fallen some steps from Maslow’s hierarchy of needs.  In the aftermath of one of the biggest global crises in modern history, amidst inevitable new scores in unemployment rates, is it morally acceptable, for those who can, to pursue lavish lifestyles and luxurious goods and services?  Hardly.  It is useless therefore, for the economy to attempt to bounce back to a foregone reality.

With our collective mindset taking a leap into the unknown, this economic and social impasse, may ironically be the golden opportunity to shape how economies and societies remerge in the aftermath of COVID-19 pandemic.  Let’s revaluate what went wrong, draw lessons and strive to emerge positively changed.

This pandemic might very well mark the end of society’s romance with hyper individualism and market economy.  If anything, indisputably, in times of global crisis, it is governments, not privately-owned businesses who are expected to uphold and safeguard our basic, fundamental needs.  We turn to governments to uphold national security, retain public order and guarantee public health and employment.  In times of crises, pandemic or earthquakes, there seems to be a common understanding that it is governments who ought to intervene, because we know that such dramatic events demand collective action.  By far, if left alone, the market is in no position to address crisis.  Survival of the fittest, is an understatement.

One of the short comings of a market economy, made evident during this pandemic, is the lack of government participation in public goods.  Many utilities, such as healthcare, transportation, energy sectors amongst others, had throughout the years, gradually undergone a global shift from nationalisation to privatisation.

Decades of peace and tranquillity have instilled a trajectory of market economy that foregoes public goods.  In those peaceful days, it was the market which prevailed.  It dictated its priorities through the creation of rules and institutions to protect the free movement of capitals, goods and services only.  Movement of people was allowed – upon economic needs tests, to serve the free movement as previously mentioned.  And inter-governmental institutions such as the World Trade Organisation and global private powers such as rating agencies, multinational corporations and financial centres legitimised and safeguarded the predominance of this type of economy.  The result is the indoctrination that the market system, where the economy is an end in itself, is the only way to effectively supply goods and services.

No wonder then that, no rules nor resources at international level were introduced for welfare, labour and environmental standards.  These aspects, in the framework of a market economy, are merely considered a ‘cost’ at the expense of the economy – left to fragmented national policies, under pressure by the private sector and limited public resources.  An example is the Paris Agreement, introducing a model of ‘voluntary, nationally-determined contributions’ by governments, many of which expected to be delivered through the wonders of the market economy.

Back to the current scenario.  In these unsettling times, entire nations are declaring national emergency status and calling for governments to take back control of privatised hospitals, deploy the army and close borders.  We now ‘discover’ that health is a public necessity and that market forces fall short in providing the assurances and peace of mind that public health and welfare systems guarantee.

If anything, this pandemic made glaringly visible the economic and social costs of lack of public goods, not to mention the lack of global health standards such as wet-blood wildlife markets in China and the ability to quickly identify and respond to a pandemic.  Same reasoning applies to environmental disasters caused by climate change.

In this scenario, the re-emergence of the deteriorating welfare state, may be pronounced.  In Europe, the welfare state emerged in the aftermath of World War II.  Today, we may insist that governments take back control of public healthcare, energy provision and anything we deem vital for the well-being of society.

Does this imply, that the aftermath of COVID-19 pandemic necessitates swinging from a market-based economy to a system of state-induced economy?  Not necessarily, as direct state intervention has had its downfalls.  Uncontrolled and excessive state intervention also led to resources being misused through over-spending, often motivated by political parties’ agenda.

Moving forward, how should the social and economic paradigms emerge in the aftermath of the COVID-19 pandemic?  How about finding comfort that these aspects are two sides of the same coin and their mutual survival depends on them working for one another rather than at the cost of one another?  None can thrive without the other.  Let’s embrace their complementarity rather than focus on them being rivals.  Put it differently, let’s get set to embark on a virtuous circle of socio-economic sustainability rather than perpetuating a system of socio-economic inequalities and disparities.

To complicate matters, there are many more variables to consider and put in the equation.  A sustainable, social-conscious economy requires a high degree of pluralism in economics.  One which does not prioritize amongst variables.  And one where the variables do not function at the cost of the other.  It recalibrates the value of the environment, social welfare, the economy, education, political participation and culture (amongst others), in an equitable manner.  This does not mean that at any point in time all variables are treated equally.  Its primary objective is to maintain a level of equity, and that it deploys means to enhance a sector which at any point in time is significantly falling behind others.

And this is hardly nouvelle theory.  It is reminiscent of, and perhaps supplementing the Human Development Index (HDI), a crude index which does not solely rely on economic indicators.

In the aftermath of COVID-19 pandemic, the new norm is recalibration.  The answer is in the descaling of superfluous market economic activity and shifting focus to address foregone needs (such as the environment) and sustain a more than adequate social welfare safety net.  It goes without saying, that adapting businesses might find fruition in this recalibration.

Claire Hollier – Public Policy Consultant

Disclaimer:  This disclaimer informs readers that the views, thoughts and opinions expressed in the article, belong solely to the author, and not necessarily to the author’s employer, organization, committee or other group or individual. 

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