The Black Economists Network: Can The Economy Ever Be Kind?
As the world looks to plunge into a historic economic downturn, the cracks in our current system have now become seismic. Calls for an economic change of tack have never been louder, but is what they propose enough – particularly when it comes to the most vulnerable in society?
In this new article, Elmyra Chinje of The Black Economists Network examines the market playing field, challenges ‘fix all’ solutions like Universal Basic Income and outlines the framework needed for a truly kind economy.
The COVID-19 pandemic has changed our lives in ways that few people could have foreseen. Far from being a great leveler, the disease has widened divisions within our society: young and old; rich and poor; ethnic minorities and those who identify as white.
None of these divisions are new, but a once-in-a-generation global pandemic has laid bare what analysts and many of the most disadvantaged have been decreeing for decades. No crisis has come close in scale since the Second World War, after which the modern welfare state was born. Similarly, we now have a unique opportunity to rewrite the economic framework for a kinder post-pandemic society.
It has somewhat justly been argued that our current economic system of neo-liberal capitalism has brought millions out of absolute poverty. Proponents of this framework believe that individuals acting in entirely self-interested ways are the predominant driver of economic growth. To them, the market is the perfect arbiter: allowing individuals to bargain with one another generates mutually beneficial outcomes. As such, prices are the ultimate expression of our society’s collective wants.
‘Homo economicus’ is frequently used as an oversimplified (yet mathematically neat) unit for economic analysis. It characterises human beings as consistently rational and constantly optimising in pursuit of their own ends. It’s this belief that frames most modern economic theories and subsequently how governments approach public policy. Because it represents an efficiency in generating goods and services for consumption, maximising profits is often mistakenly equated to maximising social welfare. This has subsequently led to a chronic undervaluing of societal well-being; the antithesis of a kind economy.
The unwavering belief in the primacy of the market has led to the inequitable distribution of social goods across economic, gendered, ableist, and racial lines. The market as a mode of distribution has its place in the exchange of commodities, however it doesn’t encourage the socially optimal provision of education, healthcare or security.
In a developed economy like the UK, these services are provided by the state. However in the years following the 2008 Great Recession, the sustainability of government debt was given primacy over the livelihoods of the most vulnerable in society. Cuts were made to essential public services in the name of ‘balancing the budget’ – a prime example of how markets have a grip on policy making.
In this environment, we have increasingly seen wealth define access to social goods that we would commonly consider to be essential for a life of dignity and opportunity. Money continues to underwrite access to better healthcare, education, job security, and the political power to influence how economic resources are distributed.
In the context of the pandemic, public services such as the NHS have struggled to acquire basic PPE and the ineffectiveness of Universal Credit has seen many relying on food banks. At the same time, those with the most wealth have been able to buy protection from the worst of the disease. Second homes in the country; well-kitted home offices and a cushion of savings to fall back on following the decimation of the job market. The gulf between the ‘haves’ and the ‘have nots’ has never been wider.
Even in advance of the COVID-19 pandemic, policies previously thought of as radical had started to become mainstream; there is now a desire amongst the public to move beyond the status quo. The pace with which the furlough scheme and loan guarantees for businesses were set up have expanded the realm of what was previously thought to be possible in terms of state intervention.
Still, gaps in coverage have resulted in many people engaging with the social welfare system and experiencing its dysfunctionality for the first time. Proposals such as Universal Basic Income (UBI) and a Job Guarantee, once fringe ideas, are now widely discussed – reflecting a more inclusive policy making landscape. Whilst these policies are compelling, alone they fail to address the fundamental issues of how social goods are distributed.
Proposals like UBI imply that guaranteeing more income is the end goal, when ultimately income shouldn’t determine our access to the things we need to live a fulfilling life. Reversing years of detrimental ‘budget balancing’ won’t be achieved overnight, but there is a simple framework we can follow to begin to create an economy that works for all.
1. Reinvestment in Public Services
The government can do more on reinvesting in the provision of public services available to all. Rather than outsourcing services to save costs and generate narrowly defined efficiencies, there should be greater emphasis on insourcing and improving the pay and status of public sector work. This should reflect their value to wider society and attract people who are enthusiastic and motivated. Badges and claps for key workers are simply not enough. The New Economics Foundation have explored the chronic under-investment in social care and the low status given to workers in depth. Many of these workers are from the BAME community who bore the brunt as COVID-19 ravaged care homes.
2. Addressing Social Deficits Over Budget Deficits
In the current low interest rate environment, the government has the fiscal room to spend on building quality public services and institutions that have been eroded following years of austerity. A fervent adherence to the mantra of reducing the budget deficit should be replaced with the desire to reduce deficits of a social kind. There are deficits in housing where demand eclipses supply, which has been further fuelled by policies that favour those with access to the financial system rather than increasing supply. We have deficits in education where socioeconomic status drives inequalities in educational outcomes before a child turns five. There is a deficit in how we value work in the home such as child rearing (most of which is performed by women) compared to ‘normal’ jobs. Universal childcare provision and flexible maternity and paternity leave across the first few years of a child’s life can help to address both aforementioned issues. There is a deficit in health outcomes and in the attention given to preventative care and mental health services which should be addressed through engaging with communities and offering greater financial support to the NHS. These are just a few examples of deficits that a kind economic system needs to address to break the link between wealth and dignified living.
3. Correcting The Information Deficit in Markets
Even in areas where the market is the ideal mode of distribution, there is an information deficit. The cost of damage to the planet and the plight of future generations are not captured by the price mechanism. Companies should be compelled to provide information on their exposure to climate change risk and a framework needs to be developed to measure effective economic, social, and corporate governance. This will give investors confidence in ESG (Economic, Social and Corporate Governance) and Impact Investing which encourages capital inflows to socially responsible firms. This will help rebalance our exploitative economy. A globally coordinated effort to put a price on carbon and to introduce it into the tax system is also key. These are the foundations of a Green economy, where those who develop innovative goods and services whilst respecting the planet can be rewarded for it.
The pandemic has slowed the world down and has forced us all to re-evaluate many aspects of our own lives and our interconnectedness with others. Whilst it has shown us the dark side of our economic system, it has also highlighted to us the strength of our communal bonds as the rise of Mutual Aid groups has shown. We should not aim to return to the system we once had, but strive to rebuild an economy with kindness at the core. An economy where a good quality of life is accessible to all.
The Black Economists Network (T-BEN) are a UK based organisation which seeks to connect, support and inspire Black economists, whilst challenging the lack of diversity in the field.
Illustration by Charlie Fischer