Will Covid-19 change our economy? Not unless we reimagine it

Covid-19 has introduced a huge degree of uncertainty into people’s lives (most especially, thus far, in Northern countries unused to coping with disorder). Yet one thing seems to be certain. A seismic economic shock is underway, which will change all our lives forever.

Or is it? Will Covid-19 and its aftermath really change our economic futures in fundamental ways?

Other recent crises suggest perhaps not. The dot-com bubble, the September 11^th terrorist attacks and the ‘Great Recession’ of 2007-2008 have not shaken the prevailing economic orthodoxy. While global institutions, G7 governments and many other countries took sometimes extreme measures in response to these crises, in most cases the aim was to return the economy to ‘normal’ as quickly as possible.

In other cases, changes that emerged following a crisis represented an acceleration of pre-existing trends, rather reflecting a watershed moment. For example, many demographic, social and economic changes in Britain commonly ascribed to the impact of World War I and the Spanish Flu pandemic reflect instead a much longer set of processes rooted in the 19^th century.

For those who feel that we need a different and better economy, and that the turmoil created by the global pandemic creates the imperative for change, a proactive response is therefore needed.

This response will also need to identify and take account of pre-existing trends. These include, for example, the explosion of the digital economy and big tech, pressures for deglobalisation rooted in economic nationalism, a high proportion of the workforce in the informal sector and gig economy, a consolidation of economic power within large corporations, and unhealthy relationships between many of these companies and their governments.

Reimagining the economy

With support from the Open Society Foundations, I have been working with colleagues to identify economic alternatives; models and examples of how enterprises and economies can be managed to combine economic development with social justice.

These alternatives sit in contrast to the current economic ‘normal’ which preaches maximising value extraction for shareholders while squeezing workers, producers, and consumers; generating inequality accompanied by resentment towards institutions; and the depletion of the environment. These alternative models from both global South and North democratise economic power and enable people to influence their own economic future.

While the work was started long before Covid-19 was in sight, the findings identify some ingredients of a more democratic post-crisis economy. These include:

1. A shift from hierarchical to more widely distributed economic decision-making power, accompanied in some cases by wider or collective ownership of economic assets.For example, the Buen Vivir Fund is a participatory impact investment fund operating internationally. Investors and investees worked together to collaboratively design the investment terms, financial practices, and governance structure for the fund, and continue to share decisions affecting fund management.
2. The mobilisation of people in these decision-making spaces in order to effect change including, at times, efforts to create or open such spaces for engagement.For example, PEKKA is a movement of grass-roots member-owned cooperatives led by female heads of households in rural Indonesia. The cornerstone is women’s self-organisation and shared learning. These efforts create ownership in the cooperatives and stimulate the determination and willingness of women to use the movement to make positive changes in their lives.
3. Going beyond creating spaces for individual engagement in economic-decision-making, towards building coalitions and networks, which often span multiple levels or geographies.One of the most successful cases in this respect is the Mondragon Cooperatives Corporation. Mondragon was founded as a single cooperative promoting worker participation in the Basque region of Spain in 1956. Over time, it has created an integrated international network of 266 companies and cooperatives across Spain and internationally.
4. Deliberative processes of conflict resolution and problem-solving, making different participants’ interests explicit, and sharing perspectives and options in order to generate solutions. Banco Palmas, the first Brazilian Community Development Bank, is managed for and by the community of Conjunto Palmeiras in northeastern Brazil. It emerged from community efforts to jointly map local employment, working conditions, and family spending in order to understand the causes of poverty in their community and find a solution together.
5. Democratising knowledge by demystifying technical information, as well as recognising the legitimacy of other, non-technical knowledge.The Economic Governance Platform in Ghana advocates for civil society inclusiveness in major public financial management issues, initially focused on Ghana’s negotiations with the IMF in 2014. Drawing on the expertise of key resource persons, they were able to relate government and IMF decisions to issues of concern for civil society, while also pressing to ensure that the legitimacy of citizens’ views was recognised in the negotiations.

Economic democracy post-crisis

The elements and examples cited above show how we can widen meaningful participation in economic decision-making. More broadly, they point to ways we can create an economic system based on the (re)production and exchange of wealth and wellbeing, rather than shareholder value maximisation, re-embedding the economy in social relations, as Polanyi would see it.

However, to support economic democracy post-crisis, we also need to understand and respond to today’s pre-existing trends. This is pending work, but here are two examples.

First is deglobalisation. Since processes of economic democracy involve affected individuals having a voice in decision-making, they can, in theory, benefit from trends that bring these processes close to home. On the other hand, taken to an extreme they could also be used to support beggar-thy-neighbour America- (or Italy- or Britain-) first policies that would leave us all worse off. So, the question would be how to build and protect local economic structures and processes but, like Mondragon, engage in national and global networks, seeking strength and international solidarity.

Second is the trend towards the consolidation of economic power within large corporations. This trend runs more directly counter to the idea of economic democracy. The question here will be to ensure that as individuals, institutions and governments take measures to support the economy, we are alert to the risk of reinforcing these monopolies and oligopolies, and press instead for investment that enables enterprise diversity and dispersed ownership.

The overall aim of our research on economic development and social justice was to learn from existing and emergent practice, in order to deepen knowledge on what constitutes meaningful participation in the economic sphere.

We did not foresee that as we came to summarise our findings at the end of the project, economic development would be halted in its tracks by a virus that has brought terrible human and economic cost. As we rebuild, we can make things change for the better. But only if we use this moment to reimagine our economic future.