I know, it’s very early days to talk about life after COVID-19, while we’re not even at the peak of the pandemic. In my previous column ‘Economic resilience in times of corona’ I pointed out how a large part of our current economic woes aren’t so much caused by the corona crisis, but by the way we’ve set up our economies.
This vulnerability immediately emerges when economies stop growing. And economic adversity has been taking on unprecedented proportions since last week’s blog post: many countries are seeing over a quarter of economic activity vanish. An economic crisis the likes of which we have never seen.
Which is precisely why this is exactly the right time to think about the future and not do what we always do after a crisis: repair what didn’t work in the first place. After all, this crisis has shown we can do what previously appeared impossible: take major decisions, change behaviour, move society in a different direction.
So, let’s use this momentum to leverage this unprecedentedly massive government action – not to extend the life of our bankrupt system, but to spark a transition to a more sustainable economy. For ease of understanding, I’ll touch on a few issues that we’ll have to address whatever happens, from the abstract to the highly practical, while making no claim to being exhaustive in any way. I’m advocating a fresh appreciation of public values, a review of the tax system and a labour market overhaul.
Re-acknowledging collective services and value-driven policy
Government has been a dirty word since the 1970s crisis, and the solution for that crisis was sought in a firm belief in free markets, deregulation, and most of all as little government as possible.
The respect and salaries that teachers command are a good indicator, a profession that used to be well paid – and in fact even among the better paid – and respected at the end of the 1970s. Over the past forty years both appreciation and payment have been sliding ever further down. The same is true for health care: public erosion. Meanwhile, it’s become glaringly obvious that it’s precisely these professions that are keeping this country ticking over. This demands a revaluation of the status and therefore also the reward of these key workers.
A second point: for the first time in a long while, government policy isn’t primarily about economic values, it’s about human, collective values, such as life and health. When push really comes to shove, we feel these values are worth an awful lot of money, and therefore outrank purely financial values.
If it were up to me, we’d be more explicit and take this even further. If we extend this approach to our health and that of our children and the communities we seek to build, other considerations quickly come to the fore: we need more than just budgetary rules for finance, we need them just as much for health, for social and environmental values. What comprehensive values do we think are important as a society and how much money are we willing to allocate to them? There’s no getting away from this question – the crisis is making this crystal clear. Apparently, we choose public health over tourism when our arms are twisted. Never before were public policy trade-offs so clear for all to see.
Tax system overhaul
If we become more explicit about our central values, it’s also time we adjusted our toolkit accordingly. I’ve mentioned what we spend our money on, but the same applies to our tax system. As things stand, government income depends on how many people are in work (more income tax), how much is being sold (value added tax) and, albeit to an ever lesser degree, how much profit companies make (corporate tax). All of these run on the same mantra: the more the better. In other words: get as many people as possible into work, making as much money as they can, creating as much economic activity as possible, and so earn as much profit as is feasible.
This doesn’t work if other values also claim centre stage. A tax basis that factors in land use, resource consumption, wealth and pollution is a lot closer to achieving those other values. Many proposals have been put forward to address these issues: from greenhouse gas emissions tax, to air travel tax to higher wealth taxes. Radical changes such as these – without scrapping tax on labour, as this also has a distributive effect – would get closer to the values a government should be able to achieve, as they would hand it multiple possibilities to balance its accounts in ways other than by simply promoting financial values.
Labour market overhaul
My third point: we need a comprehensive overhaul of the labour market. It’s plain as day that the Dutch system is not as resilient as it should be. The country’s huge numbers of self-employed need instant assistance at the first economic headwind. Granted, we’re talking a veritable storm right now, but we would hope that our labour market could handle this a little better than it apparently can.
I’m still mulling over the solutions. I’m quite partial to the idea of an easy-to-obtain subsistence income for all. Call it what you will, universal basic income, guaranteed income – by way of negative income tax, for instance – I don’t really care. The basics should be simple: everyone is entitled to a certain minimum, regardless of their family situation. The administrative burden (i.e. pumping around money) should be as low as possible. In times of corona, this will cause much less panic among policymakers and the self-employed, with the latter also less tempted to take greater risks as they scrabble around for some sort of income.
Agenda for 2020
Of course, there’s lots more I could put on this agenda. But I understand that our current problems demand firefighters to put out a raging fire and not a philosopher thinking deep thoughts about what the optimum policy would be.
And yet, and yet. What we’re learning in this crisis is that we’re able to make swift and radical policy changes. And that we’re driven by more and other values than simply financial ones. So why wouldn’t we seek to permanently incorporate this in our policies? With the inviting prospect of a more resilient, more sustainable economy that’s better able to weather a fresh crisis.
Also read our Economic Outlook 'Corona unveils the fragility of our economic system'
This is a translation of a column published earlier on DuurzaamNieuws.