by Ar. Joel Luna. Published in Philippine Daily Inquirer, July 18, 2020.
The COVID-19 pandemic has been referred to by the World Economic Forum as The Great Reset. -Photo by Jose Antonio Gallego Vazquez.
The COVID-19 pandemic continues to besiege the Philippines and the rest of the world.
With persistently high number of cases, the country entered its fifth month of quarantine while taking cautious steps to reopen the economy. Through all these, one thing is clear: life has taken a dramatic change, and that change can be systemic, permanent, by design and for the better.
We have seen that the most essential elements of our economy are also the most vulnerable. Roughly half of employed Filipinos are salaried employees, one third of whom are laborers and unskilled workers earning the lowest wages. Ninety nine percent of businesses in the country are micro, small and medium enterprises (MSMEs) employing over 60 percent of the workforce, while 50 percent of total industrial output caters to the domestic market. Household consumption contributes 74 percent to our gross domestic product (GDP).
These statistics show how individual wage earners, MSMEs and private consumption are interwoven links in the chain that drives our economy. They also illustrate the fragility of our economic system. Severely damage one link and the whole chain could fail.
It is often said that COVID-19, like most crises, revealed what was already broken in the system. Among the things that the pandemic and the resulting economic recession has taught us is that human well-being is crucial to achieving prosperity. A major health crisis can make the whole economic engine grind to a halt.
We thus need a more resilient framework for society—one that is not necessarily immune to crisis, but one that at least allows us to function and even thrive through it.
We need a more distributed form of prosperity and orient our recovery investment goals towards attaining that aim.
Globally, the richest 1 percent own more than half of all the world’s wealth. The poorest billion people account for 1 percent of all consumption, the richest billion, 72 percent. Thus, it could be said that most of the production and private consumption that propels the global economy cater to the already wealthy.
This asymmetry was evident locally and in specific sectors of the economy. For instance, the robust growth of real estate over the last 10 years was fueled to a significant extent by speculative interest, with real estate prices and demand being driven by the exchange value and appreciating capital gains of property assets. Developers thus focused on more profitable products sought by the robust speculative market.
In the meantime, the real need for affordable housing remained largely unaddressed. The housing shortage was a result of a lack of investment from institutions with the wherewithal to address it.
During the lockdowns, the flood of donations by big businesses have shown that the most important motivations that ensure our survival are not self-interest, greed or private profit. Survival of the fittest and profit maximization are not the instincts that prevail in a crisis but collective survival through cooperation. If these efforts can allow us to weather a crisis, can we use them instead to prevent them?
The lockdown was devastating to the economy not only because it simultaneously halted both production and consumption, but because the economic engine was not designed with an off switch.
Consumption will always be the foundation of capitalist economies. But the lopsided focus can be corrected through direct investment by corporate institutions into human welfare sectors such as education, healthcare, mass housing, environmental restoration.
Our concept of value and value creation needs to be assessed. The prevailing idea that price equals value encourages companies to put financial targets first by maximizing profits and reducing its costs or to pass on (externalize) those costs to other stakeholders as much as possible (e.g., waste, pollution).
Current economic systems are still largely premised on one-way, linear systems of the early industrial era characterized by an “extract-produce-consume-dispose-repeat” model, which was expected to proceed ad infinitum. The highly extractive and wasteful linearity of the system created the resource-depleting, over-consumptive and polluting lifestyle that threatens society with climate change today.
The absence of an alternative to the linear model of mass consumption created limits our capacity for self-sufficiency and resiliency.
The opportunity lies in strengthening local communities. Enabling individual communities to function amid a crisis will make for a more adaptive, cooperative and resilient system at the local level. This can come in the form of creating platforms for micro mobility, food production and distribution, community-level trade and commerce and more distributed systems of enterprise and governance. The different emergent behaviors that we see throughout the crisis—cottage industries, selling goods on line, domestic farming, cycling as an alternative form of transportation, all point to the capacity of people to adapt and can be reinforced by deliberately planning communities for more self-sufficiency.
Imagining a more resilient future
The frailty of our current system lies in hierarchical, linear systems that fail to operate at small scales.
Our society is really the aggregate of numerous smaller pieces that collectively contribute to production and prosperity: the small business, the wage earner, small communities, the individual consumer. This granular level is largely ignored by macro-economic policies.
But while these elements form the foundation of our economic system they are also the ones that are most at risk. Ironically, in a time of hyper-connectivity, our society has become disconnected.
The unprecedented COVID-19 pandemic has been referred to as The Great Reset. It is an opportunity to revamp structures and discard elements that have made our society unequal and unsustainable. Perhaps in building a more resilient future, a true reset can happen that shifts the focus to strengthening the smaller pieces that comprise the whole—one that puts human welfare as the primary goal of any enterprise.