The Real Crisis

Though it has become easier and easier to forget the discussions of yesterday in today’s fast-spinning wheel of news cycles, not too long ago the question surrounding the coronavirus pandemic was one of a trade-off: health or economy? The title of a New York Times panel discussion published on the 10th of April sums the thinking up nicely, reading “Restarting America Means People Will Die. So When Do We Do It?”

Today, with over half a million dead and second waves washing over many countries, the option to weather out the storm, overlook some deaths, and wait for “herd immunity” to develop seems untenable. This consensus is somewhat backed by the fact that the US and Brazil, the two countries most notorious for eschewing lockdown measures once widely called “draconian,” now sit at the top of the list for coronavirus deaths. Nonetheless, economies have been hit hard: even back in April China’s economy shrunk for the first time since it began recording quarterly figures in 1992, and just recently the US has reported its worst quarter since WWII with its GDP declining by 32.9%.

There is, then, some deep discord between the demands of the “invisible hand” of the economy and those of the sustainability and maintenance of the systems that compose it revealed both by the questions asked before lockdown, and the results we are seeing after it. Though hearing the words “recession” or “economic crisis” may bring 2007-2008 to many minds, there is something fundamentally different this time around, and that difference runs through this line of discord. The crisis that occurred in the past decade is widely considered a financial crisis- a crisis emerging from webs of debt, derivatives, and other financial instruments. It was a crisis of perverse incentives, opaque deals and irresponsible practices- in other words, it had its source in confusions and inconsistencies of accounting, to put it very crudely. The crisis arising from COVID-19 will be, or is, one triggered by something not financial, but real: the loss of hundreds of thousands of lives, a sudden drop in various forms of consumption, and restrictions on large swathes of the global labor force.

One thing that a real crisis like the current pandemic does, then, is that it reveals gradations of necessity and thus reality within broader economic systems. The most familiar example of this is the distinction drawn between essential and non-essential workers, with the latter and not the former allowed paid leave or remote working. What is striking about this distinction is that the “essential” work is some of the worst-paying, scoring below average salary in many US states. In other words, these distinctions reveal that in many cases work that is less needed is paid, and thus incentivized, more than work that is “essential” to the functioning of society.

This discordancy gives rise to two interconnected problems. First, it becomes less and less viable to look at “the economy” through the lens of money alone, as this does not distinguish between the real, or essential, and the financial, or non-essential, economies. The destruction of billions of dollars’ worth of valuable jewels vs. the destruction of farmland of equal value appears the same on a spreadsheet, yet when we consider what is essential these two are incomparable. There has already been much criticism of GDP as an economic measure along these lines, with a recent notable example being former US presidential candidate Andrew Yang’s campaign.

But the second problem goes beyond that of perception, and strikes at the heart of this discord that these crises and issues point to. That is: what incentives does this discord generate? In a world of growing global inequality, the reins of economic power lie more and more in the hands of a few, and thus lie farther from macro-level social forces and closer to the incentives of those well-situated. And if profit-seeking and over-consumption are the bread and butter of the economic system under which we live, it is easy to imagine how phenomena like the divergency between the pay of essential and non-essential workers emerge.

Recognizing this central disconnect is vital for questions of future sustainability, as it is both a driver and a hinge for similar future crises. From relentless deforestation and tremendous fires in the Amazon to the depletion of fisheries worldwide, many of our environmental challenges are challenging by virtue of the economic incentives against their resolution. And while it may be enticing to imagine the perpetrators of these disasters to be villains driven by greed, it can often be the pressures of necessity placed on the many that end up threatening the environment, as the case of poaching demonstrates.

In some ways the COVID-19 pandemic is unique, a “once-in-a-century” crisis as the World Health Organization put it. From this perspective it requires an equally unique, extraordinary response. But looking at both how such responses can be hard to coordinate, and how the web of incentives can act to hollow out resilient systems and dismantle far-sighted precautions, it is impossible not to see systemic problems. But just as the detachment of the essential economy from economic power can mean a neglect of those essential measures, it also means the inverse: that crisis-time investment in those measures will run counter to the flow of the economy, inevitably leading to downturn, and much suffering with it.

Much like a pandemic, the crises of environmental degradation are real – that is, they lie not in the web of financial numbers, but in the availability of the necessities of life. They are driven by a neglect of real systems and their maintenance, and their impact is real and unavoidable by clever tricks of accounting. What this ultimately means is that so long as the disconnect between what is essential and what is profitable remains, we place ourselves more and more at risk of facing “once-in-a-century” crises, at which point the only solutions available undermine our economies and cause great suffering. It is only through transformative changes that we can close this gap, and make sure that we can prevent such a future.


Image courtesy of Flickr. Originally published by S&S on Aug. 11, 2020.

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