Humanizing our Economies: the Trade-off between the Economy and Human Health
To reopen the economy or not? Socioeconomic debates in time of Coronavirus
You know the story.
Most of the global economy is at a standstill in an attempt to mitigate the effects of the highly contagious virus SARS-CoV-2 that has run rampant on our planet. Because the US did not do enough to contain the virus when it first arrived in January, the only way to stop its spread has been through social distancing: a concept pretty much everyone except epidemiologists learned about in the past month. In practice, we shut down the (significant) portion of our economy that requires daily human interaction.
It’s a small price to pay to save human lives, right?
Now that social distancing seems to be working, people are clamoring to open the economy again. The first issue lies with that description: the economy doesn’t have an on/off switch. It took a massively destructive global pandemic to turn it “off,” and it’s going to be pretty difficult to simply turn it back “on.” Just ask the 30 million Americans who have already lost their jobs.
So we’ve come to a crossroads: a tradeoff in human lives for a functioning economy.
It is a strange debate indeed. Isn’t human life what our economy — by design — should strive to preserve and support? Isn’t life priceless? Why are we even allowing a functioning economy to be comparable to the value of human life? What about the adage that money doesn’t buy happiness?
Certainly money is critical to basic survival (food, shelter, and medical care), but what if it wasn’t? Why are we so obsessed with an economy that doesn’t value human lives? The most absurd part of it all being that humans built this system... Why don’t we make it better?
This discussion is intended to build off another post I wrote on the crisis of capitalism: the issue of capitalism’s inherent design to maximize profit over human wellbeing. In the debate about whether or not to open the economy we are witnessing the absolute failure of capitalism.
This is not a tradeoff people should be willing to accept, and yet they are.
Economists and political theorists have been warning us for years that the modern economy we know today was not designed to value human lives!
In his book Carbon Democracy, Timothy Mitchell explains that the economy — as developed by Keynes and post-WWII politicians — was a method by which governments sought to restrain democratic populations. The economy was designed so that the government would be the only entity able to fully administer it, and therefore retain authority over its citizens*.
In other words, the economy we live (and die) by today was created by governments as a way to control their people. And the environment? That was intentionally left out of the equation.
In response to the pillaging of the environment at the hands of economic growth, Herman Daly quit mainstream economics to develop the field of ecological economics: the study of the economy as within the global ecosystem, distinguishing development from growth. Instead of an economy growing at the expense of the ecosystems that sustain it (leading to pollution, depletion of natural resources, climate change, etc) — Daly’s work envisions a sustainable economy that is built on qualitative development instead of perpetual capital accumulation.
But those in power in the mid-twentieth century saw an opportunity to write off the wellbeing of individuals and the environment in favor of a complex array of market indices that could be controlled. You open any newspaper, turn on any television channel, and these numbers are there to reinforce an artificial world: it only exists because we have all agreed that it does.
Many people claim that markets are a reflection of the economy, but the reality couldn’t be further from the truth. Today financial markets exist almost entirely in an echo chamber. The post-2008 financial crisis quantitative easing (QE) program in the US, led to the longest bull market in history.
But instead of improving the quality of life in the US, inequality increased. The majority of the impact of QE was felt in the portfolios of Americans who were already invested in the stock market.
Meanwhile, the rampant inflation predicted by monetary policy experts because of all the extra currency that was being sent into circulation? Never happened. This is because while the Federal Reserve did indeed print loads of money and send it into the markets, the money mostly stayed there, it did not exit the markets and enter into the real economy; it did not circulate.
An economist I used to work with described QE as a heating mechanism. Imagine the heating system in your house: you turn up the temperature, the vents fill with hot air, and the room gets warmer. But you don’t see the air, you don’t touch it, it never interacts with you. That’s what quantitative easing did; most of the cash that the Treasury injected into the markets warmed up the economy — increasing asset values on paper— but never exited the markets into the real economy. The real economy is comprised of payments like rent checks, mortgages, dining out, taxis, and movie tickets. Most people who made money in the stock market in the past twelve years didn’t cash it out to pay for those things. So all the money the US government created stayed in a very small chamber. And inequality increased.
The title of this article comes from an interview with Andrew Yang. The former US presidential candidate shaped his entire platform around the idea of universal basic income (UBI). Promoting UBI as a solution to American job loss accelerated by automation, Yang explained that instead of forcing these specialized workers to be unemployed or underemployed, we should take a dividend from the economic growth of the United States, and give them a safety net to allow them to figure out how to best contribute to the economy going forward. COVID-19 sped up that job loss at lightning speed. We need some kind of UBI now, and unlike QE, the money that gets sent directly to Americans is more likely to go back into the real economy, which is what is needed right now. Yes, (hopefully) many people will save or invest the checks, but even if they save, this money is still more likely to be used down the line for those unexpected monthly bills: car and house repairs, extra childcare, eating out.
So what do we do now? Do we just hope that the economy, with the right amount of prodding and pushing, will go back to “normal?” Or do we use the opportunity to envision something that values human life?
You’ll recall that many of the tools we take for granted today, such as the measurement of the economy (GDP) and financial regulatory bodies (SEC) were created after the Great Depression. We now face another (bigger) crisis, with the chance to make our world better. Why not take it?
Think carefully about the people who are telling you they want things to go back to normal. Are these people who would benefit from the status quo resuming? Are they worried about your life, your children, your health?
The purpose of this article is to get us thinking about alternatives.
Now is the time to rethink GDP and how to incorporate universal basic income. It’s a chance to truly explore how to transition to Daly’s vision of the economy as a subsystem of a limited ecosphere, or to a knowledge economy. COVID-19 could mark the end of our unhealthy obsession with markets and hyper-individualism, as NYU professor Eric Klinenberg writes. It could be the beginning of a better understanding of how we are all inextricably linked, as well as the need for greater investment in humanity.
We just have to design it that way.
*see pp. 124–125 for Mitchell’s full analysis — but read the whole book, it’s really good. You can read about Daly’s ecological economics here, and check out Yang’s book: The War on Normal People. Please share any additional theories or readings in the comments!
