In line with new economic narratives, the pandemic has accentuated two key considerations that need to be foundational to a new framing of economic prosperity: understanding the assets of the real economy and their true value, and understanding their distribution writes Julia Wdowin.
The coronavirus crisis is being increasingly centered as a potential turning point between ‘the old normal’ and a new one. Under disruptive and unfamiliar circumstances, the examination of various fragile and unsustainable dimensions of our lifestyles, at the individual and social levels, has become widespread. The last months have seen an emphasis on considering what makes up ‘the normal’ – the crisis has laid many everyday truths bare. In this reality, the future of the economic framework as we know it is being called into question by civil society, practitioners, commentators, and academics.
Economic narratives surrounding the building of economic prosperity around fairness, sustainability and inclusion have been mounting over the last decade (UN, 2017; OECD, 2012; European Commission, 2010) so why has the pandemic sparked such urgency?
The crisis, and especially a thoughtful strategy for recovery, is widely considered to be a concrete opportunity for building up new structures. In a conference earlier this month Patricia Espinosa, Executive Secretary of UN Climate Change, distinguished between “building back better” and “building forward.” Aiming to ‘correct’ or ‘improve’ old structures is not the same as turning to cultivating new ones that better address pressing local and global societal needs. As Mariana Mazzuccato has pointed out, “normal” ‘is precisely what brought us to this point’ – that is to the many exacerbated challenges, divides, and the undervaluing of jobs, goods and services that are vitally important to daily life, and proved especially so in crisis conditions.
‘Building back better’ in the sense of continuing to develop and invest in the same structures would put us on a path to maintaining the status quo, or worse still, a degenerating state over time. Without critically understanding the “better” aspect of this phrase, there is the risk that by returning to the ‘old normal’ problems will become even more deeply-rooted, divisions and inequalities even wider, and systems generating adverse effects increasingly rigid to undo. ‘Building forward’, on the other hand, entails directing focus and investment towards supporting new structures and institutions that have the potential to address urgent societal challenges and forge a ‘new normal’, by expanding economic capabilities of individuals, governments and civil society.
The pandemic has strongly highlighted aspects of the economic framework that are not functional for individuals, local and global society, and that are leaving significant damage to the quality of relational goods such as institutional trust and social cohesion. How can this be related to the current pursuit of a turn to a ‘new normal’? The crisis has given insight into two key considerations that need to be foundational to a new framing of economic prosperity: understanding the assets of the real economy and their true value, and understanding their distribution.
An important step in responding to aspirations for a fairer and more prosperous economy is to think about what really generates value to individuals and society, and, on this basis, to re-assess the place, weight and cultivation of those assets in policy-making. Re-thinking what is valuable to the common good will provide the foundations for orienting policies towards investment and focus on the assets that can bring real benefits to the individual and to society. As many commentators have observed, jobs that were essential to the public at large during lockdown are mostly set at the minimum wage. Parks and green spaces were important to many individuals during this time. An RSPB survey found that 87% of people thought living closer to spaces rich in wildlife and nature was an advantage during the Coronavirus (COVID-19) outbreak.
The Wealth Economy framework is one way of conceptually approaching a re-balance of capital important to economic prosperity understood holistically: it extends the asset base by which we measure our economic progress to include a broader range of assets that generate value to society. In building on a holistic understanding of economic prosperity the framework acknowledges as fundamental to inclusive and sustainable growth the cultivation of asset-bases in physical, human, social, natural, and knowledge capital and innovation.
Secondly, although the Wealth Economy framework provides a basis for a wider consideration of assets and benefits in decision-making, a crucial question remains as to whom the generated value reaches and in what proportions. The way distribution is assessed will have consequences for its framing and impact in policy-making. An outcomes-based approach to distribution can inform corrective-type policies, but a more dynamic approach might be to consider, and for policy-making -measure – the opportunity people have to access certain goods.
Long-standing issues of unequal access have been accentuated during the Covid-19 pandemic. One such example is access to green spaces, distributed unequally between individuals and communities. An outcomes-distribution approach observes, for example, that a certain group such as those living in big cities, are less likely to have a green space in the form of a private garden, but in turn more likely than average to have access to a nearby public park (Intergenerational Foundation, 2020). The inequality in overall access, then, to a green space becomes seemingly narrower. A dynamic-distribution approach, on the other hand, would consider the opportunity to green space access in real terms, which could include diminished opportunity due to safety concerns, the quality of the private or public space, transport means in the case of further distance, and potential closing of parks in the lockdown context. From this perspective, the prior inequality appears to be underestimated.
Again, observing distributional outcomes, a number of studies investigate the impacts of the Covid-19-related crisis on women in relation to their male counterparts. Research points towards the lockdown having a larger impact on females in the labour market (Alon et al, 2020; Amano-Patiño et al, 2020). An opportunity-distribution lens could contribute to insight into real factors in opportunity in employment, such as adequacy of support to single mothers or the nature of jobs that have a proportionately higher female employment share. Understanding how these opportunities are distributed can contribute to forming pro-active policy and cultivating new systems instead of fixing what goes wrong in the old ones.
The tension between the old normal and the new, between ‘building back better’ and ‘building forward’ lies partially aligned with the challenge of making short and long-term objectives and visions compatible. This will depend on rethinking where true value lies for current and future well-being. A recent study by Cameron Hepburn and colleagues, though, shows that policies that meet both objectives with benefits in both the short and long-term, are not idealistic, but strategically feasible.
A ‘new normal’ framework that allows for the pursuit of economic prosperity across inter-related and interdependent domains of the real economy will require rigorous systems thinking. Systems thinking, in turn, will require a return to re-thinking the foundations of the steering economic paradigm. How value and, in turn wealth, are understood underpin the framework, while underpinning a prosperity paradigm are questions of measuring distribution. The success of these latter distribution measures as a tool for economic progress will depend on how deeply we dig to uncover sources of excessive inequality – looking to outcome measures that can prompt ‘curative’ policies or, deeper still, to measures of genuine opportunity to access valuable goods and states.
The Wealth Economy programme is funded by LetterOne
The views and opinions expressed in this post are those of the author(s) and not necessarily those of the Bennett Institute for Public Policy.
