domingo, 12 de abril de 2020

GDP is a wicked compass to guide our socio-economic system: Additional COVID-19 evidence

Fears to economic consequences from COVID-19 have delayed (or prevented altogether) effective response to the pandemic in many countries, with a significant death toll impact, and are now hasting a risky return to ‘normality’ (breaking confinement measures) against the advice of health experts. In several global North countries, we have witnessed the naked nasty reality of statements putting GDP before people’s life, accepting to sacrifice our elders just to maintain GDP growth for a bit longer.

Our economic system has become production growth-dependent, and our whole social system seems to be guided by one single compass: GDP growth. When GDP stops growing, our economic system collapses, and our societies suffer. By itself, this is a very clear sign of weakness (moreover considering the fallacy of eternal GDP growth) and lack of resilience. We certainly do not have appropriate socio-economic structures to navigate collective crisis, and we should better take advantage of the lessons from the COVID-19 crisis to improve before we have to face bigger crisis already in the pipeline (e.g., climate change).

Because of the time lags between the initial wave of the COVID-19 crisis in different countries, it is still rather soon to have the full picture. Indeed, the crisis is just taking off in the US (Figure-2) and it may still be incipient in many parts of the global South. But data up to date (Figure-1) already hints what could be a significant positive correlation between COVID-19 deaths per million people and GDP per capita. This could still become more of a U-curve if the COVID-19 crisis hits strong in the global South. However, if this happens it will be (at least in part) due to weakened health systems in these countries, for which the structural adjustment policies dictated by global North controlled institutions during the last decades have an important responsibility. And since these are (at least in theory) impositions done in the name of promoting GDP growth in the global South, the main conclusion would still hold:

It seems we are using the wrong compass (GDP growth) to guide the evolution of our socio-economic systems. Blindly following it takes us far away from prosperity, at least when facing a collective crisis. Focusing our whole socio-economic system on serving GDP growth leaves us without resilience and capability to navigate shocks without high impacts.  


Figure-1: 


Figure-2: Evolution of confirmed COVID-19 deaths per million people in selected countries (January 31  to April 11th, 2020)


We already knew that the ‘developed’ and ‘developing’ counties narrative becomes a fallacy as soon as we evaluate the state of development in a holistic two-dimensional space (‘achieved social thresholds’ and ‘biophysical boundaries transgressed’): we all live in developing countries. Indeed, Figure-3 shows how there is no country in the D-quadrant, the region where the needs of all are met within the means of the planet, where developed countries would lay (https://goodlife.leeds.ac.uk/).


Figure-3: Countries' performance in terms of achieved social thresholds and biophysical boundaries transgressed



The mainstream neoliberal argument during the last decades has been that there is a significant positive correlation between the ‘social thresholds achieved’ and GDP growth. This is certainly the case for some prosperity indicators, such as child mortality (Figure-4) and maternal mortality (Figure-5).

However, the beneficial effect of GDP on many prosperity indicators, while being important for low income countries, saturates or even becomes negative as high GDPs per capita are reached, which invalidates the use of GDP growth as the only compass to guide the evolution towards prosperity. This can be appreciated, among other, in life expectancy (Figure-6), self-reported life satisfaction (Figure-7), human development index (Figure-8), share of children in employment (Figure-9) and death rate from indoor air pollution (Figure-10).

Other indicators present a high dispersion with GDP, like Human Rights Score (Figure-11), perform the worst at middle GDPs, like outdoor air pollution death rates (Figure-12), or even deteriorate as GDP increases, like gender wage gap (Figure-13) and the share of low-pay earners who are female (Figure-14).

Therefore, we should stop using GDP growth as the only or main compass to guide the evolution of the socio-economic system. The momentum provided by the evidence disclosed during the COVID-19 crisis (about the lack of resilience and extreme socio-economic weakness that results from blindly using the GDP growth compass) should be used to change course and adopt a compass that guides us towards inclusive prosperity, while redesigning socio-economic structures so that they have the needed resilience.



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