Need for ‘green economic recovery’

‘For a while in the early stages of the Covid-19 pandemic, there were high hopes for a V-shaped recovery. After a brief but sweeping lockdown to stanch the spread of the virus, the economy would easily reopen, and without enough care and money, everything would go back to the way it was at the start of the year. That was clearly a fantasy... the pandemic had exposed – and probably exacerbated – deep problems plaguing the economy well before the crisis began.’ – ‘How to recover green’ by Joseph E. Stiglitz

The world cannot afford to go back to a pre-Covid mostly neoliberal ways of global economy, which has significantly contributed to climate change crisis, and to lack of preventive steps against a many-a-time returning coronavirus crisis – with this time being on a global scale – and a weak focus on reaching a vaccine even after almost two decades of its first significant appearance in the shape of SARS. The world should take the path of a ‘green economic recovery.’ In fact, well before the current pandemic appeared, Mariana Mazzucato in her article ‘The creative state’ had highlighted an important negative consequence of the neoliberal ways as ‘One thing is clear: the current approach suffers from serious shortcomings, largely because it socializes the risks and privatizes the rewards.’

Foremost, it needs to be understood that a ‘green economic recovery’ is not just about ‘environmentalism’, and is not just about economic recovery also, but rather about the fundamental issue in the way economic growth has been approached, whereby governments have been called out as the problem, and markets have been allowed dangerously extensive independence from regulation to serve the selfish interest of the architects of this neoliberal thought process.

Sustainable economic growth that provides equal opportunities to all, and that assumes choices, which allows growth to be not at the cost of jeopardizing the existence of normal life on earth as we know it. The extractive institutional design of the collusion of the politico-economic elites in many countries for many decades now has exacerbated inequality, and disenfranchised demos, in order to influence policy to these ends through employing inordinate – and mostly ill-gotten – sums of money.

A ‘green recovery’ is also not just about ‘stimulus’, but rather enhancing the quality of public economic institutions to spend more appropriately in terms of priorities that are more efficient in terms of public expenditures, and employing greater creativity while raising taxes so that they are overall progressive in nature. Such a recovery would, therefore, require a ‘creative’ role of government, which both right-sizes itself, and believes in a deep, detailed, and effective role of government in terms of providing governance and incentive structures to organizations – public and private – and markets.

In the same article, Mazzucato highlights an important role the government should play to transform the wrong neoliberal mindset favouring limited government: ‘The conventional view in mainstream economics today is that governments have little capacity to spark innovation. The state should play as limited a role in the economy as possible, the thinking goes, intervening only in cases of “market failure.” This is far from the truth. In fact, the governments can and do play a critical role in spurring innovation – actively creating new markets, instead of just fixing them.’

The government in Pakistan, which continues to grapple with the issue of reaching and implementing correct prices, and in providing the critical mass of technological advancement and infrastructural projects for incentivizing private entrepreneurship and competitiveness – in both rural and urban markets – need to adopt a more active, wider, and creative role; an important ingredient for ‘green economic recovery.’

In an article ‘It’s 2023. Here’s how we fixed the global economy’, Mariana Mazzucato takes a flight into a future where the path of a green economic recovery was in fact taken, and the fruits it bore roughly two years from now, whereby for instance with particular reference to the role of government, it is pointed out: ‘Yet this was not about just Big Government, but Smart Government. The transition to a green economy required innovation on an enormous scale, spanning multiple sectors, entire supply chains and every stage of technological development, from R&D to deployment... Rising to the role of the “entrepreneurial state,” government had finally become an investor of first resort that co-created value with the public sector and civil society.’

Moreover, in the same article, Stiglitz highlighted the importance of the role of government in moving towards a meaningful post-Covid world by arguing that ‘A strong recovery will require government support that is not only well designed but also sustained over time. A disastrous situation has furnished us with a rare opportunity to pursue the investments and reforms needed for a more sustainable and prosperous future. We must not waste it.’

The tyranny of the private sector, under the garb of the neoliberal assault on democracy, and economy, cannot be allowed to continue – years of rising income inequality at the back of unjustified extraction of resources from the ‘many’ to a ‘select few’ in society, the ascendancy of ‘profits now’ than sustained and environmentally-responsible wealth gains over time, and the starker imprint of money on policy rather than the aspirations of majority demos, all point towards the need for a policy path correction to a new normal of a ‘green economic recovery.’ In this regard, Ann Pettifor in her article ‘The need for a great transformation’ highlights the following: ‘Today’s global economy suffers from multiple imbalances. The fundamental economic objective of endless “growth” fuels increases in heat-trapping atmospheric gases above and beyond what the planet can sustain. Urbanization, pollution, soil erosion, deforestation, the destruction of wildlife, and the degradation of marine ecosystems: these and other consequences of economic activity threaten humanity’s life-support system.’

(The writer holds PhD in Economics from the University of Barcelona; he previously worked at International Monetary Fund) He tweets@omerjaved7

Copyright Business Recorder, 2020