The health risk is high and combatting COVID-19 has had a huge economic toll on the global economy. Everything is at a standstill as countries have had to interrupt urban life to avoid death. However, this societal paralysis has created a similar scenario for more intangible activities, resulting in decreased investments and suspended mergers and acquisitions. This situation jeopardizes the entire structure of the global financial economy, which was unimaginable just a few months ago. Now, liberal governments have completely changed their rhetoric.
In Belgium, the Federal Budget Minister declared that health takes precedence over the economy. In France, COVID-19 had the power to suspend pension reform that weeks of strike action and protests had failed to accomplish. Experts in the fight against climate change, environmental protection and social inequality all share the same message: COVID-19 is the first crisis of this magnitude, yet it revealed the total lack of economic resilience in the face of a global health crisis.
Old remedies do not work
This planetary stress is one of the ESG ( Environment, Social and Governance) risks outlined in numerous works related to sustainable finance centered around the same idea: the cost of inaction is a lot higher than that of action and anticipation. The coronavirus stress test has been cruel on developed economies. In an effort to save them, drastic measures have been put in place to limit fatalities and restart the global machine at a later date. But as we learned from the massive injection of liquidity in the financial markets in 2008, old remedies do not work.
This is logical considering the virus has effectively shut down the main driver of growth in a number of developed countries: consumption (53% of French GDP in 2017 and more than two-thirds of US GDP). For the past 30 years, the majority of adopted policies have sought to plug the leaks of the economic boat in hopes that the post-World War II economic boom would eventually return. COVID-19 has put an end to this mirage and forced us to reflect on the environmental and social aspects left behind by a model built on the consumption of natural resources. This was simply unsustainable for a planet belonging to 10 billion inhabitants.
To echo President Macron’s discourse, what if we viewed this virus as an opportunity for change so that the days that follow will not be like those before? Concretely, this means rethinking the entire model and using all mechanisms to do so. COVID-19 has shown that priority must be given to building hospitals strong enough to absorb shocks of this nature, that is to say ones strong enough to withstand a “sanitary war”.
Preparing for peace
Putting an end to delocalized global production, where goods travelled far so that they may cost less for Western consumers, has led to measurable benefits for the climate, including drastic reductions in emissions. Confinement has also limited automobile pollution just as drastically!
Obviously, the goal is not to continue to confine ourselves when it is no longer necessary, but to view COVID-19 as an opportunity to think outside the box and build a new economy based on principles other than those that dominate the world today; one that is circular, local, digital and human capital-driven.
If we are at war, then soon will come peace, and we will have to find the 21st century version of the Marshall Plan: “green deals", a just transition, etc. Plans already exist, as well as risk-opportunity assessments, scientific data, and many ongoing experiments in countries around the world. Therefore, we at least have the means to try. On the other hand, if we choose to rebuild the same fragile planetary model, we will be weakened over and over again by a more serious crisis than the one before, whether that be climate-related, environmental or social.
Anne-Catherine Husson-Traore, @AC_HT, CEO of Novethic