By Aima Ahmed
People are the economy, so let’s put them at its heart
Increasing the wellbeing of people is a more worthwhile goal to pursue than economic growth. To truly move towards a wellbeing economy, we need to fundamentally change the way we think about people and the economy.
We live in a fast-paced, interconnected and sophisticated era with information available in real time at our fingertips, access to markets unbounded by geography and technology that has exponentially improved our lives.
This is the peak of civilisation and the productivity puzzle is indicative of that- we just don’t know what more to do to increase economic growth, so in a way, this is a success.
And yet the virus has brought everything to a halt and frenzy. Something that isn’t even visible to the eye has forced us to stay at home to reduce the spread of the virus.
It looks like the universe is trying to humble us and make us question our illusion of strength and blind reliance on current capitalist systems that increase inequality at unprecedented rates. Or maybe it’s just a reminder of the national and global socioeconomic inequalities that have exacerbated the way that people are able to cope with the consequences of the virus.
Why worry about the economy when people are dying?
Amidst this health crisis, people are worried about the economy and what its downturn means for them- it’s not an unfounded fear as interest rates are lower than they’ve been for a while (fiscal stimulus that predicts less public spending which is what happens during a recession), small businesses are at the brink of collapse (or have already) and a staggering number of people have applied for welfare in the UK compounded by the perils of being an indebted nation borrowing to consume.
So, fears of economic prospects aren’t much different in principal from fears of the pandemic effecting the health and wellbeing of people.
This is the case particularly for the socio-economically marginalised such as people belonging to Black, Asian and minority ethnic (BAME) communities, women and those that live in poverty as these are the people that are already disadvantaged by health, housing and labour market inequalities. Striking evidence of the disproportionate impact on BAME communities has called for the government in the UK to launch a review to investigate, which is welcome but it’s a shame that these inequalities have gotten to this point in the first place.
In developing countries, there is fear that hunger fuelled by poverty will cause further deaths as a result of social distancing and lockdown for example in Pakistan where the Prime Minister has called for support from global leaders to create a fiscal response.
This pandemic has brought the dark side of free markets to the forefront.
Now that the economy wheel has nearly stopped turning, we can see who actually keeps it moving- it’s the underpaid and undervalued ‘key workers’ that hold up society, not the workers in the finance sector that make up a greater proportion of GDP than the value they give to society.
This is the problem that emerges when we lose sight of what is important — in this case we’ve become obsessed with economic growth when we should be more focused on creating an economy that increases wellbeing. After all, economic growth should only be seen as a means to achieve wellbeing. There has been an improvement in measuring wellbeing, but GDP is still the dominant measure of success, which can be misleading.
This misguided obsession has got us thinking of the economy as separate from people.
Now that austerity has been shamed and we know that Thatcherism was driven more by ideology than good economics, it’s time to shift the narrative from economic growth to an economy centred around the wellbeing of people as argued by Nobel prize winning economists Banerjee and Duflo in their book Good Economics for Hard Times.
We should aim for a wellbeing economy, no matter how messy and uncomfortable, as supported by the Wellbeing Economy Alliance. The Alliance defines it as an economy where ‘humanity should determine economics, not the other way around’ and calls for the economy to deliver ‘an equitable distribution of wealth, health and wellbeing, while protecting the planet’s resources for future generation and other species.’
Economic growth may have been a good short-term goal post war in terms of rebuilding damaged economies, but times are different now and goals should evolve and follow Iceland, Scotland and New Zealand in creating a wellbeing economy.
The economy is the people.
It is the doctors and nurses on the frontline, it is the delivery drivers that distribute resources to where they are needed (more tangible than the invisible hand), it is the teachers that educate the next generation and it is the carers that provide childcare and elderly care.
But thanking these people is not enough, we need to do right by people by paying people for their work in proportion to the value that they add in society and in doing so, acknowledging how much good they do for our wellbeing.
The economy is also the people who are not key workers and are sitting at home unable to work given the lockdown, likely causing an inevitable contraction in GDP to stop the spread of the virus – so, we can see clearly than ever before that the economy is the people and that population health cannot and should not be separated from that.
The economy is also global.
Global inequalities mean that developing countries are more likely to suffer the consequences of this pandemic, even though the epicentre of the outbreak is the developed world. According to Oxfam, ‘More than half a billion more people could be pushed into poverty unless urgent action is taken to bail out poor countries affected by the economic fallout from the Covid19 pandemic’.
This pandemic has revealed that we are interdependent as countries and institutions have come together to help each other mitigate the effects of this pandemic, which started in just one corner of the world.
The Home Office extending visas for medical staff is an example that we as a human race are dependent on one another and that when one faction of society suffers, we all suffer.
Given the interconnection and interdependency, it is in the interest of the wellbeing of nations to work together to solve problems and this should not be forgotten when it is time to deal with the aftermath of this pandemic.
Now really isn’t the time for nationalistic responses to this global economic downturn, especially in terms of the support that poorer nations receive — global solidarity is needed to solve global problems.
So, let this be a time of thinking and rethinking, learning and unlearning, designing and redesigning a society using economics that puts people at its heart.
An increased government role isn’t a bad thing, in fact it may be government failure to leave market forces to self-regulate through capitalism.
Current economic models facilitate inequality in ways that aren’t questioned enough in the mainstream. Government policy can build back better and nudge things in a better direction, one that includes people and questions the distribution of wealth and power through market forces, no matter how normalised they’ve become.
Build back better by calling greed what it is.
Financial services have been evolving over the decades and centuries with a profit maximising objective. A study shows, for example, that having a mortgage wasn’t always aspirational — it was seen as hanging a millstone around your neck with the debt being seen as a burden, regardless of the lifestyle that it facilitated.
The finance sector has facilitated private debt to sustain consumption even more today for example with car leasing and pay-day loans with interest rates that only feed the accumulation model of wealth generation.
Sure, this is a consumerism problem too. But making financial services more responsible through government intervention and rethinking the role of interest in the economy is a start to protecting people from the glorification of debt.
Build back better by adopting human centric business models.
Big businesses are talking more about social responsibility but according to Mariana Mazzucato, little seems to be changing in reality where only few companies put social responsibility at the core of the way they function.
Tick box exercises are not enough. Fundamental changes are needed in business models that aren’t afraid of an anti-accumulation of capital philosophy of business and an increased involvement of workers at every level.
Greater government control may actually be the answer, after all, corporate greed can’t be curtailed by mere good will.
Build back better by creating better narratives.
Underlining the failings of capitalism are the surrounding narratives that keep leaving people behind. For example, it is a government failure that people keep falling through the cracks of welfare so we should stop blaming people for being stuck in the poverty trap designed by giving too much power to market forces and arguably the welfare system itself.
A move towards a wellbeing economy should involve exploring a Universal Basic Income as is being done in Scotland. A study by the RSA shows that people receiving welfare are likely to benefit from a Basic Income by enabling them to have more power over their lives and to build a better and more self-reliant future for themselves.
Build back better globally, with compassion, responsibility and humility.
In the spirit of creating a wellbeing economy that puts people at its heart, there is hope that the fear, desperation and anxiety caused by this pandemic will make people understand what it’s like to live with economic insecurity, lack of opportunities and a constant feeling of uncertainty.
It is paramount to build back better through policy and narratives that are more compassionate towards refugees and economic migrants by acknowledging that people do not leave what they know for uncertainty without sufficient cause, desperation and hope of a better future in terms of wellbeing and finances.
If compassion is not enough to build back better globally then I hope that the studies that show that history matters in that countries are still suffering economic and political consequences of post-colonialism make a case for exercising humility in the global policy sphere along with the failing of the IMF.
So, let’s build back better by mitigating the socio-economic consequences of history in the face of colonial amnesia.
Capitalism can do better.
What does it really mean to reach the peak of civilisation when haven’t paid enough attention to how such progress for the few has left so many behind? And what are we building the economy for if it’s not for the people that actually make up the economy in the first place?
This pandemic is a chance for us to revaluate capitalism and rebuild a more inclusive world where we channel energy towards collaboration, socialism and understanding.
Let’s build back better.