A Force for Change

By George Barham (BSc Economics & Finance)

The prevailing stories in the current climate are that of: economic slowdown, panic buying and ever increasing numbers of infections. But while the world embroils itself in yet another wave of negative media, I will instead explore the potential changes that could come out of the crisis. These changes may yield positive benefits, or the alternative is we let the system continue as normal. I’ll focus on the changes it’s made to our natural environment and how we work – and the wider implications this could have in the future. In order to tackle the challenges we face, we need a much more agile economy that places a value on things that are essential to our long-term survival.

Changing the environment
With empty roads, empty factories and empty skies – the conditions were certainly fitting for the 50th anniversary of Earth Day on 22nd April. We’ve seen environmental miracles throughout the world – just half a year ago, the city of Delhi in India was gasping for breath. Ranked as the world’s most polluted city, since lockdown it has experienced clear skies and relatively fresh air for the first time. Similarly, the EU has seen daily emissions drop 58% compared to pre-COVID-19 levels. Futures markets in oil saw a historic negative price for a barrel of oil delivered in June, meaning you’d have to pay someone up to $40 to take the commodity off your hands. In part thanks to the demand shock, but also due to the limited capacity of oil storage facilities such as Cushing, Okla. With so much oil and nowhere to put it, it’s no surprise that the price has been depressed so fantastically. These conditions we’ve experienced have led people to rethink the ways in which we went about life before lockdown.

The increase in air quality has reduced the number of deaths from pollution by 11,000 in Europe. In developing countries, the number is in the millions. This is obviously a clear benefit and should only reinforce the desire to move towards a renewable energy solution. What if air quality was improved not because of people sitting at home doing nothing, but because we invested in our renewable technology industry? It is a common misconception that a transition to renewable energy is costly to the economy. In developed countries, there are economic benefits when encouraging the advanced manufacturing required for renewables. Not only bringing new high paying jobs but allowing for a “green industrial revolution” as coined by the Labour party in the last general election. Should GDP be our motive anyway? In my opinion, the long-term health of our people & planet is more vital, as eventually a few figures on an economic forecast will be irrelevant.

The main reduction in pollution has been seen from this air travel. Companies are luckily rethinking their policies on using business flights for international conferences. If a discussion can happen over video call with the same effect, then there is no need for a costly flight which contributes to pollution. We can only hope that non-essential travel ceases to exist post-Covid-19. It is understandable that air travel is used so widely since the UK government subsidises it – yes, you heard me right, the UK government subsidises air travel. Not directly, but indirectly. With no harmonised carbon tax across the board, VAT exemptions on air travel mean that the industry is effectively paid for the carbon it emits. A source from Energy Systems Catapult, 2019 shows that Air transport receives £42.40 per tonne of carbon it emits. 

With the drastic improvements we’ve seen to the environment since lockdown, we can’t miss the opportunity to seize the moment and rethink the structure of such taxes. Aviation, agriculture and transport have seen little improvements in emissions, which needs to change. Tax would not be the only method of reducing emissions to zero, but it is certainly the “magic bullet” that will get us most of the way there. This comes back to the idea of ‘pricing’ things correctly, aka. Placing a higher value on the things that are important to us long term – and with this view in mind, it is a sensible policy to harmonize carbon taxes, and then keep them rising year on year.

Changes to working
The UK has been going through a productivity crisis since the GFC in 2008. A report from PwC said that £83bn a year could be added to the UK economy by making up only half the efficiency gap. With the pre-crisis economy having poor levels of productivity growth, the government missed a trick to invest soon after 2008 when interest rates were low and private sector investment was falling. It took a worldwide pandemic to force the government to spend record amounts when this could have been done earlier. Labour made this a significant part of their manifesto, and in hindsight, they were correct to say that the UK economy needed a significant stimulus. If money were to be spent on physical infrastructure to disconnected areas, then productivity could be increased significantly. This would yield benefits; however, transport links don’t have any use in the current crisis given restrictions on movement. What we need now is a new economic mindset. One that can be scaled forwards and backwards without loss of livelihood for citizens.

In a typical crisis, the prescription is government spending until consumption picks up to normal levels. However, with Covid-19, public health and economic activity work against each other for the first time. Lockdown cannot be eased without fears that people at work will continue to spread the infection. Therefore, it must continue to save people’s lives. The economist James Meadway wrote that the correct response is an “anti-wartime economy” with large scaling back of production. The question arises as to how people continue working with restrictions in place. The immediate answer is that of flexible working. Large companies quickly moved to buy laptops and IT equipment to allow their employees to work remotely; universities have moved to online learning and family stay in touch over FaceTime. As a student myself, I’ve had many virtual lectures, webinars and even a virtual school board meeting. This works for me, but I understand this is not a solution that fits everyone equally. The point to take away however, is that industries that are able to adapt have been forced to, and this should continue to be in place post crisis. Firms need to throw away the old idea of people travelling to their place of work to complete a 9-5 in favour of a more flexible approach that works around people’s daily lives and the environment.

Another proposal is a reduction in the length of the working week to 4 days. We can all agree that working less is the inevitable future, as automation makes jobs less labour intensive. So why do we stick with the same historic structure that hasn’t evolved for centuries? It is found that 57% of all sick days were due to work-related stress, anxiety or depression, 44% of these caused by workload pressure alone. It can safely be said that concerns over mental health have been brought to the forefront in lockdown – with feelings of loneliness doubling due to lockdown. This is just one aspect of mental health, but there is certainly an argument that it needs to be taken more seriously. Even those who had seemingly good lives beforehand have experienced stress and worry as a result of lockdown (myself included), and thus need to have their needs met. It cannot be forgotten that this is an issue, and more importantly, it won’t go away with coming out of lockdown. Fortunately, there are a few measures that could improve the situation. Studies from companies/countries that have a 4-day week show that productivity relies on not just the number of hours put in, but on the well-being, fatigue levels and overall health of the worker too. This will allow workers to recuperate, leading to higher levels of job satisfaction and productivity. Measures to move to this are being taken, through the introduction of universal basic income which ensures a basic standard of living – but issues with this system still need be ironed out. In terms of mental health, I think students in ECO have a lot to be proud of – the embedded well-being teams that have been introduced show that the School understands that mental health is a part of the equation to success. This approach needs to be taken to a national level so that we can move to a more agile economy, one that places value on all aspects of health.

Conclusion
There’s a lot to conclude on here – but the idea at the heart of what I’m proposing is placing a higher value on the things that matter to us, mainly health and our environment. We see a situation where we have a shortage of health workers, despite the social value of them to be very high. I am not saying the whole price mechanism needs to be rethought – rather, we just need to see the policy tools used more efficiently to redress the balance of private and social welfare. We have been presented with a unique opportunity to make lasting change. I believe there has never been a time where so many people can reflect on the life they had beforehand, in order to develop new, fresh views to move forward. My mother who runs a small business has managed to catch up with her backlog for the first time in 20 years. She is using the spare time to innovate new ideas to expand the business post-lockdown. It’s this innovative and collaborative thinking that gets us out of these sticky situations, and this needs to be taken more nationally. Rather than reactive policy, I wholeheartedly encourage government to take a bold proactive approach to dealing with the other issues of the day – carpe diem.

Banner Image by Karsten Würth on Unsplash