The Covid-19 pandemic has caused immense shocks around the world, creating health crises and economic impacts beyond what most people have experienced in their lifetime. As governments around the world scramble to provide fiscal stimulus packages and create economic recovery plans, there is a real threat that – once again – societal and environmental priorities will be scarified for economic growth.
Next to the daily numbers of new infections, hospital admissions, deaths, and vaccination rates, the pandemic’s economic effects are predominantly reported employing the measure of Gross Domestic Product (GDP). GDP measures the monetary value of all finished goods and services produced by a country during a specific period. It provides an economic snapshot of a country by estimating the state of an economy and its growth rate. Increasingly, GDP has also come to be seen as a proxy of human welfare, despite the fact that GDP growth as such is in no way coupled to improvements of people’s livelihoods or progressive social outcomes[1]. GDP measures monetized economy activity, but it does not differentiate between those activities that are socially and ecologically valuable and those that are destructive[2]. Moreover, while GDP underestimates destructive activities, it completely neglects many valuable ones[3]. GDP does not factor in non-monetised economic activities, even when they are fundamental to human life and well-being, such as care work. Similarly, GDP overlooks relevant inputs to personal well-being such as leisure time, equality, safety, clean air, and access to education and health services. Intensifying long-standing critique of the wide use of GDP is especially crucial in light of the Covid-19 pandemic which has revealed previously existing and deep-rooted societal and economic dysfunctionalities.
The dynamics of the modern capitalist system may or may not have directly contributed to the birth and spreading of the Covid-19 virus. Either way, one implication of the perpetual strive for expansion and new resources dictated by GDP growth is the devastation of wild places and habitats. While this is a major driver behind biodiversity and extinction emergencies, it also puts the global community at constant risk of encountering new zoonotic diseases like Covid-19. And certainly, the capitalist economic system has determined governments’ capacities to respond to the virus outbreak. Over the past decades, public resources have been mismanaged through policies of austerity that use GDP-based metrics to justify reducing government spending[4]. Public goods and services, including health, were increasingly privatized to create and ensure continuous opportunities for economic growth, often at the cost of social objectives[5]. The outbreak of the pandemic quickly revealed numerous and catastrophic instances of market failure in health. Low pre-pandemic stock of and failing global supply chains for personal protective equipment, surgical gowns, and medical oxygen complicated and delayed the essential provision of such equipment during the first outbreaks. Low pay and systematic understaffing in the care sector have failed elderly residents in long-term aged facilities and intensive care patients throughout the OECD. For example, in the American health care system many hospitals have operated with one clear, profit-driven business model for years: provide surgeries, scans, and other well-reimbursed services to privately insured patients, whose plans pay higher prices than public ones. Covid-19 has shown the vulnerabilities of this business model, with procedures cancelled, millions of newly unemployed Americans expected to lose the health coverage they received at work, as well as low initial availability of emergency equipment and long-term intensive care units in consequence of their lack of economic profitability. Regarding Covid-19 vaccinations, recently leaked calls with the BioNTech[6] CFO underline the for-profit design of health markets when prioritizing pricing schemes and long-term investment opportunities of Covid-19 over global vaccine distribution justice.
The pandemic also exposed and aggravated another implication of GDP growth as the ultimate marker of success: inequality. Since the start of the pandemic, the majority of billionaires have gotten richer. 86% of billionaires are now $5.1 trillion richer while some 76 million Americans have lost their jobs[7]. GDP growth per capita deals in averages. In times where a major cause of social dislocation is inequality, GDP has nothing to say about (re-)distribution and averages are misleading and fuel political resentment. A rise in average GDP per capita could in fact have negative implications, if it leaves 99% of people resentful at how the 1% is thriving. In the US and many other developed countries, recent political events have shed light on the injustices and sense of insecurity experienced by many. On the one hand, right-wing populism and conspiracist theories are gaining more consensus. On the other hand, minority and marginalized groups including women, BIPOC, LGBTQ+, and students are protesting for their rights and fighting for their future. Interestingly, these uprisings share a sentiment of resentment against the global elite and the continuous reinforcement of systematic inequalities.
Currently, billions of national currencies are being mobilized for Covid-19 recovery plans which are aimed at restoring pre-pandemic economic growth paths, measured by GDP. Such recovery plans will impact people’s lives for the coming decades and have the potential to set the global economy on a pathway towards net-zero emissions – or lock us into a fossil system. If GDP growth remains a top priority, the latter scenario is more likely. A recent paper[8] by economists at the University of Oxford, including Nobel Laureate Joseph Stiglitz, described the current situation as a golden opportunity for change. One such change must be the way in which governments, policymakers, and economic actors use the GDP measure which ignores social value and the worst outcomes of capitalist economic systems, such as inequality and the climate emergency. Governments justify their focus on GDP growth as a means and an ends by arguing that it is the only way to reduce poverty, create jobs, and improve people’s lives[9]. But ultimately, GDP growth is nothing more than an indicator of the welfare of capitalism[10]. After a certain point, long surpassed by rich nations, GDP growth ultimately becomes destructive. What matters for human well-being and progress is how income is (re-)distributed and the extent to which it is invested in public services[11]. Activities that increase today’s GDP such as deforestation, strip mining, and over-fishing, are in fact detrimental and self-destructive to the long-term economy. The fact that we regard GDP growth as the primary indicator of progress reveals the extent to which we see the world from the perspective of capital rather than the perspective of life[12]. However, the perspective of capital is no longer environmentally sustainable nor societally supported and we must finally move away from the GDP measure and towards measures, such as the Happiness or Better Life Index, that incorporate welfare indicators such as housing, jobs, education, health, and happiness.
References
[1] Hickel, J. (2020), ‘Less is more’, London: Penguin Random House.
[2] Ibid.
[3] Ibid.
[4] Ibid.
[5] Ibid.
[6] The Hill. “Krystal and Saagar: Pfizer Execs Explore How To Profit Off Future Vaccines“. 16.03.21. Video. Available at: https://www.youtube.com/watch?v=Kdhwq74L_YQ.
[7] Sanders, Bernie (BernieSanders). “The majority of billionaires have gotten richer since the start of the pandemic. Let me repeat that: 86% of billionaires are now $5.1 TRILLION richer, while some 76 million Americans have lost their jobs. Yes, the time is now to address this obscene level of greed and inequality.”. 08.04.21, 16:44. Tweet. Available at: https://twitter.com/berniesanders/status/1380169560742105092?s=21
[8] Hepburn, C., O’Callaghan, B., Stern, N., Stiglitz, J., and Zenghelis, D. (2020), ‘Will COVID-19 fiscal recovery packages accelerate or retard progress on climate change?’, Smith School Working Paper 20- 02.
[9] Hickel, J. (2020), ‘Less is more’, London: Penguin Random House.
[10] Ibid.
[11] Ibid.
[12] Ibid.