COVID-19: A Temporary Health Scare Or The Exposure Of A Failed Economic Model? – The Organization for World Peace

A return to normality a phrase repeated countless times by politicians, businesses and most of all the public. After such a severe crisis the old world despite all its caveats is a tempting prospect. A return to employment for most if not all, the devolution of our basic freedom to go just about wherever whenever we please and the general sense of stability that was felt before the pandemic.

What would we be returning to?

However, there can be no return to normal. A return to normal would be a failure to acknowledge the socio-economic problems the virus laid bare. Just over a decade ago, following the great recession: governments, banks and corporations moved quickly to cover up the structural problems our economies faced and return to normal. As a result, the inequality that had been growing at an unprecedented rate since the 1980s continued to spiral out of control. Socio-economic insecurity spread and large swathes of our communities became vulnerable to even very temporary disruptions to their incomes. The 2019 UN Global Poverty report found that poverty is everywhere whilst inequality within countries is massive. Over 1.3 billion people mostly in Asia and Africa were faced with multi-dimensional poverty due to insufficient access to; education, medical services, employment and food.

Economic hardship was by no means reserved for those in the developing world. Estimates by the United Nations found that 1/5 of the British population was living in poverty an astounding figure for the 5th wealthiest country on the planet. In the United States, 3 people held more wealth than the bottom 50% of the population 45 million of whom lived in poverty. Whilst Across the European Union poverty rates had barely recovered from the effects of the 2008 crash.

The exponential rise in inequality was justified repeatedly with a recycled quote from a John F. Kennedy speech in 1963: a rising tide lifts all boats. This metaphor has been the motto of Trickle-Down Economics for decades. The pandemic has confirmed its failure. The rising tide has not bought us all prosperity but instead launched a handful of super-yachts into the stratosphere: leaving millions at the bottom scrambling to stay afloat.

Whilst the number of people struggling to make ends meet increased our environment continued to decay. Environmental policy was side-lined in favour of GDP growth. Promises of reducing fossil fuel use and building more sustainable economies proved to be half-hearted at best, and empty at worst. The COVID-19 must lead to change both economically and environmentally.

What do we build now?

COVID-19 has exposed the dangerous reality of inequality. The wealth and power of the richest members of our society has continued to rise, whilst overall poverty has increased rapidly both in the developed and developing world as people living pay-check to pay-check lost their incomes. Our economic system requires urgent reform. Incremental change will not suffice. Reducing inequality and working towards Environmental sustainability must take centre stage in our recovery plans.

Investment In Education

Access to education has long been considered a levelling force in our society. A UNICEF report found that each additional year of education boosts a persons income by 10 per cent. Countries in both the developed and developing world must increase investment into education. According to the World Bank, developing countries that have had the most success in improving education standards focused heavily on increasing access to primary and secondary education. The International Community should provide support in this matter by ensuring that lenders refrain from demanding debt re-payments that wouldresult in cuts to education budgets.

The developed countries should focus on tertiary education and training programs to meet the demand for high skilled labour. Access to higher education and other training programs must be made accessible to those with lower incomes. This can be achieved via reductions in debt burdens placed on those who need to borrow money to attend university and by offering more flexible re-payment schemes.

Greening Our Economies

The devastation reeked by COVID-19 must not distract us from the most urgent threat faced by humanity: climate change. The old system was failing to come to grips with this issue. Emissions targets were missed, government support continued to flow into the fossil fuel industry the IMF estimated that $5.2 trillion in subsidies per year and sustainable energy initiatives remained underfunded. Following the Great Depression, the United States took a huge leap of faith with the FDRs New Deal to pull the country out of the depths of Economic depression. It is time for this generations leap of faith against an even more pressing threat than economic depression: climate change.

The Green New Deal is a policy initiative that was born in the United States but has since spread across the globe. It has been discussed by leading politicians as well as grassroots climate activists. The deal aims to overcome climate change and environmental degradation via huge state-led investment into renewables along with divestment from the fossil fuel sector.

President Macron of France committed 35 billion of the 100 billion French recovery package to green energy initiatives. This is a positive move from Europes second economy. Others should follow suit and go further with their commitments to a green recovery.

As France has shown these investments will be costly. In a world more riddled by debt than ever, increasing investment may well appear counterintuitive or even impossible. For this reason, certain groups will pressure governments to implement austerity measures to make debt payments. This must be avoided. Austerity will only further contract the economy, increase inequality and prevent necessary structural changes to our economy from being pursued. None the less, the question will have to be answered. How do we fund our recovery?

The answer to the calls for austerity? Tax reform.

No taxation without representation exclaimed the early American colonials as they dumped tea into the Boston harbour. This protest by the colonials in 1773 resonates strangely with the modern world. Due to the failures of governments and intelligence off private interests to ensure our tax systems keep pace with the globalization of finance: loopholes and tax havens have made the ultra-rich immune to taxation. They now haverepresentationwithout taxation. Whilst the majority are overtaxed and under-represented. Joseph Stiglitz, Economics Nobel Laureate, states that a progressive taxation system must replace our current regressive system. Mr Stiglitz puts forward a proposal arguing for the need to remove loopholes and tax heavens whilst the levying of a tax on financial transactions. This will raise funds for investment and increase equality whilst avoiding the need to resort to higher taxes for the majority of people.

The removal of tax-loopholes will guarantee that the tax that ultra-rich and corporations are obliged to pay can be demanded by governments. Estimates vary massively on how much tax is dogged every year, but the figure is in the trillions according to the Tax Justice Network with at least $36 trillion are hidden away in various tax heavens. Collecting these funds is not an attempt to raise taxes but an attempt at preventing the manipulation of tax-rates by those in the top tax brackets. This would do a lot towards resolving theissue of representation without taxation, whilst providing governments with funds for their recovery plans.

A financial transaction tax of just 0.1% on trading transactions in the United States would raise $777 billion over ten years. This tax is inherently progressive due to most large trades being carried out by the very wealthy members of society. Urban-Brookings Tax Policy centre predicts that the top 1% of Americans would pay 40% of the tax whilst the bottom 60% would account for just 11% of the tax. The European Union has already considered the implementation of such a tax estimating that it would raise $66 Billion per year. These funds would contribute greatly to our recovery efforts and reduce spending deficits.

The Chinese word for crisis is comprised of two characters: one representing danger and the other opportunity. The danger is yet to pass, COVID-19 has pushed both the wealth and health of millions into doubt. Despite the lingering threat, a bold plan for recovery must be implemented now. If we wait for the dust to settle the opportunity to build a better future may well pass us by.

Peter has been writing for the OWP since early 2020. He studied Politics with History at the University of Keele where he focused on conflicts in the Middle East, economic development in South East Asia, and the European refugee crisis. He is interested primarily in how economic development can bring about peace and stability in the developing world.

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COVID-19: A Temporary Health Scare Or The Exposure Of A Failed Economic Model? - The Organization for World Peace