Priorities for Putting Back Together Our World Post-COVID-19
Many of the finest economic and regulatory minds are now collectively debating as to how to produce or build “more” of everything (from masks to medicines to consumer and capital goods and services) in order to make sure we can go back as a society to “business as usual”, or the times of pre-COVID-19.
Risk perception is seen to be at an all time high with income inequality, nationalism, politicization and financialization all adding to the unholy mix. Faced with prospects of subdued demand, supply chain disruption, credit defaults and unprecedented unemployment, the biggest fear is of “de-growth”.
In fact, it is my belief that everyone, from carpenters to software engineers to marketers will be affected by the looming jobs crisis, as the entire economy will start getting structurally reset, post-opening up after COVID-19. There will be heaps of job losses, almost 50% in some countries. Given the magnitude of the jobs crisis, the reverberations are going to be felt around the world, and there will be need for specialized, vertical platforms to help people find jobs at the scale that is now required. And therefore it is becoming abundantly clear that the fallout from the economic shutdown after COVID-19 is like throwing a pack of cards in the air: you can eventually put the deck back together, but not everything or everyone will end up in the same spot.
So the temptation, alas, is to reach for the familiar. How to try and turbo-charge the sales engines to stimulate demand, deploy all sorts of technology & AI-propelled tools to aggressively pursue efficient production and supply chain management, produce more and more of everything in desperation, and hoping that supply will create its own demand, to thereby enable everyone to return to the familiar pattern of excess that we are so used to by now (which was beautifully captured in this video below some years ago).
That is indeed tempting. But extremely dangerous.
Instead, it is imperative — now that we have a chance to reconstruct our economic model — to build it so as to take cognizance of the Climate Emergency, which is real and immediate. In every way, whether while deciding on how to allocate government spending, how to stimulate jobs, which technology to support, or even how to automate, do it with one eye on the climbing temperature, and solve for the transition to a low-carbon economy. Side benefit: hopefully, you can avoid “stranded costs”, as responsible investors increasingly take the pledge not to support these expenditures (that do not benefit the climate). A McKinsey article (shared later in this post) sheds light on the required set of actions, and the costs and benefits of each of them, and the likely outcomes.
Scientists from around the world agree on one thing: that increasing earth warming beyond 1.5 degree Celsius is to court certain disaster. But far from reaching “net zero” emissions by 2050, it is clear that on our current trajectory, we are on track to reach that warming level within the next decade!
While 2020 has seen the biggest annual decline in emissions since 1900, it is only a small blip in the overall chart of emissions, which (despite the shutdown) will still touch 30.6 billion metric tons this year. So, small comfort, and it is becoming abundantly clear that we are extremely unlikely to reach this target (of net zero by 2050) on current pathways.
In fact, if you read, like I did, the 2019 book “The Uninhabitable Earth — Life After Warming” by David Wallace-Wells, a journalist who by his own admission was a climate skeptic- you will be chilled to the bone by the statistics about the exponential nature of global warming. It is much, much worse than you think. From the recent wildfires in California to Australia, to the “500 year storms” in the US and the inordinate flooding of cities from UK to India, to the current pandemic — all of this was predictable and are only an indicator of far worse to come . There isn’t, and never was, a free lunch. The price of bringing all that fossil fuel out of the earth and burning indiscriminately, has to be paid.
In fact, the scary dimensions of the drama of climate change — the existential crisis of our lifetimes — is in his words:
“[…] now being haphazardly improvised between two hellish poles, in which our best case outcome is death and suffering at the scale of 25 Holocausts, and the worst case brings us to extinction, enough to enclose not just all of present day humanity but all of our possible futures as well. In a single generation, our exhaust poison of emissions is casually working its way through millennia of ice so quickly that you can see the melt with the naked eye. What that means is that we have not at all arrived at a new equilibrium, more like we have taken one step out on the plank off a pirate ship.” — David Wallace-Wells
Therefore, an urgent, irreversible, collective, and dramatic commitment to decarbonization is the only solution. The McKinsey article below gives the mathematical impact of each of the areas where decarbonization has to be propelled for achieving the target (of net zero emissions by 2050). Clearly, the world needs to start immediately with five immediate and major business, economic, societal shifts, simultaneously: a) a “oil-well to wheel” approach in transportation; b) change in agricultural systems (e.g., reduce water-intensive cultivation of rice and consumption of methane-producing beef); c) shift to efficient electrification in building and industry and reduce waste; d) power largely from renewable sources; e) active carbon capture through reforestation at scale.
But most of all, this is not just for academicians. It will involve sacrifices, trade-offs, and collective action, on a scale that we have never conceived before.
And for those who argue that most folks are at Maslow’s bottom of the hierarchy in the ruthless economic structure, and therefore would not be able to afford anything if all externalities are priced in…my response is that the architecture of the proposed solution does provide for “baseline” consumption, the structure of a carbon tax and other measures are tiered to discourage large scale overuse, and mechanisms such as the “Nationally Determined Contributions” of COP-21 and the Financial Institutions’s “Responsible Financing Guidelines” do provide for these within the very framework. We also have a fledgling carbon market and the political apparatus to phase out dirty energy, and tools (like congestion pricing and extended producer responsibility, right to repair, etc.) which enable us to support the circular economy through micro-incentives. Furthermore, all this can be implemented quickly and monitored through the power of digital tools.
In fact, the good news is that positive, “green economic stimuli” can help deliver employment, climate change mitigation PLUS other benefits like reduced air pollution, job creation, energy security, and enhanced access to energy. These opportunities (such as laid out in this comprehensive green stimulus framework) are investments that governments can seize in emerging into a post-COVID-19 world. However, this requires bold action and thinking. The question is whether policymakers will take advantage of these opportunities.
Consensus is that bailout funding should have environmental strings attached. There are even metrics to ascertain for yourself whether you (and your business) are part of the problem, or emerging as part of the solution — helpfully cobbled together by financiers and bankers as given alongside.
But my main point is that we collectively do not have a choice here. We have to work the ramifications of emissions and climate into everything we do today. This is the most existential task of our lifetime whose ramifications will be felt within the next decade. Otherwise, the assaults will produce a new kind of cascading violence, waterfalls and avalanches of devastation, with increasing intensity, and in ways that build on each other and undermine our ability to respond, uprooting much of the landscape we have literally taken for granted.
Will this lesson be learned and put into practice? Will our future society be like in this wonderful story captured in the video which went viral recently, where a young father tells his daughter (some time in the future) about how the pandemic nudged us to heed nature and reorient our ways?
Or will this just be a beautiful fairy tale? Will we push on uncaring with the result of an overshoot in temperatures, triggering climate feedbacks, and thereby multiplying the uncertainties and disasters multifold?
Being an optimist, I certainly hope that the “better angels of our nature” prevail and bring us back from the brink!
Otherwise, it may well be that the world scenario will be like this terrifying image below, which I fervently hope will not come to pass.
