Not Back But Forward: What The Post-COVID-19 Economic Recovery Models Are Getting Wrong – Forbes

Impact team
Written by Impact team

Not Back But Forward: What The Post-COVID-19 Economic Recovery Models Are Getting Wrong  Forbes

As Governments around the world work their way through the COVID-19 crisis, new models have emerged showcasing different scenarios for ‘recovery’ and a ‘return to normal’ from policy influencers such as the World Bank, IMF, investment banks such as Morgan Stanley and Goldman Sachs, management consulting firms such as McKinsey, BCG, Deloitte, Nobel Prize Winning Economists, Market Analysts and Policymakers.

A common theme across all these models is that they contain some variation of the tradeoff between effectiveness of health response on one axis, against the effectiveness of economic response on the other. The outputs are usually a plot of economic output against time based on the speed and trajectory of the health and economic responses.

These models all get one thing wrong – they all use GDP as the yardstick to ‘return to normal.’

This is a dangerous assumption against which success should be measured. In a large survey conducted in the UK last week, only 9% wanted life to return back to pre-crisis ‘normal.’ If surveys are conducted around the world, it is likely that similar levels of discontentment with the pre-COVID world would emerge.

Already there are worrying warning signs that several Governments have been lowering environmental standards and bailing out unsustainable polluting industries, as a way to accelerate their way out of the coronavirus crisis. This is a false trade off and may accelerate second order effects, given that the origins and events that led to this global pandemic lay with how the modern economy has undermined natural ecosystems.

Having been at the forefront of economic responses during the 2008 Banking Crisis and 2011 Eurozone crisis, it has been clear from that experience that most countries did not ‘build back better.’ In both crises, whilst a Great Depression was avoided, a decade later all other indicators such as inequality, environmental degradation, measures of citizen happiness, all continued on a structurally downward trajectory. If anything, this was accelerated with taxpayer stimulus funding targeted at incumbent economic actors (‘too big to fail’), rather than innovative disruptors.

What is needed coming out of the COVID-19 crisis is a model that addresses the structural roots of this crisis. Most importantly, models of recovery need to clearly articulate how they will fundamentally redefine our economies’ relationship with nature. What the world certainly does not need now is a knee-jerk reaction focused solely on GDP as the main ‘North Star’ objective for policymakers.

This has led to false tradeoffs in the past where examples such as the 2010 BP Deepwater Horizon oil spill actually ended up being recognized as leading to higher economic output due to the huge cleanup activity, rather than the loss of wildlife in the region.

GDP: emerging from the ashes of the Great Depression

GDP is a relatively new concept. It was recommended in a 1934 report to the Department of Commerce by Nobel Prize Winning economist Simon Kuznets and presented to US Congress in 1937 (initially called GNP), as a way to measure economic output during the Great Depression. The need resulted from the uncertainty of indicators, measures, information and tools to assess economic output following the 1929 Stock Market Crash, Great Depression as well as ways to assess the impact and implementation of the New Deal.

At the time, economic data was fragmented, incomplete, anecdotal, biased, not timely and disconnected from one another. This is very much the situation with environmental data today. So GDP began as an abstract concept for economic decision-making.

It has remained a controversial measure of progress ever since, even attracting challenges from leading economists and Presidential Candidates.

 “GDP counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage… It counts jails, napalm, nuclear warheads, and the loss of natural wonder in chaotic sprawl… Yet, it does not pay attention to the health of our children, the quality of their education or the joy of their play… It measures everything in short — except that which makes life worthwhile.Robert Kennedy (1968), in his run for the US Presidency.

Four Planetary Health Scenarios for the post-COVID world

Heading into the COVID-19 human health pandemic, the world was already experiencing a major planetary health crisis. It was more than just a Climate Crisis, as the planet faced rapid loss of biodiversity (described as the Sixth Mass Extinction), rapidly increasing water scarcity, catastrophic collapse of coral reef systems, increasing rates of tropical deforestation

So, there was already a need for some form of a blended ‘Planetary Health index’ that would give a combined State of the Planet, in much the same way that GDP was composed of four main constituents (Consumption, Government Spending, Investment, Net Exports), that guided economic decision-making.

To understand the different scenarios emerging from the post-COVID world, it is important to understand the immediate near-term policy responses to COVID-19. This can be condensed to whether the Economic and Health responses will either be strong and effective, or weak and reactionary. Policies seen as effective will contain the health crisis and stimulate growth. Weaker or reactionary policies will lead to an uneven and uncoordinated international approach, resulting in a patchwork of solutions and an unstable recovery. 

Addressing the structural challenges means that at the same time, the strength of each Government’s Sustainability Strategy needs to be assessed. In recent weeks, we have seen several major Governments weaken environmental protection as a false-stimulus to bring back economic growth. However, this does not address the structural shifts that were needed in the economy coming into COVID-19. An alternative to weaker environmental protection is a strong articulation of a Sustainable Green Economy (or a derivation of the proposed US Green New Deal). There have been some calls for such an approach among policymakers around the world. Rather than a drain on growth, a Sustainable Green Economy should be viewed as a multi-trillion dollar exciting new growth and job-creating opportunity, that will accelerate the transition to a new sustainable and more inclusive economy. It will create new winners in the green economy that could go on to displace slower-moving incumbents.

Here is a brief overview of four possible scenarios for planetary health that emerge based on corresponding COVID-19 policy response in the upcoming weeks.

A: Accelerated Planetary Decline

Moving back to a ‘Business-As-Usual’ model of economic growth and bailing out industries that needed structural reform (e.g., oil and gas) will accelerate the decline of planetary health. In a double-whammy, a move to ‘Business-As-Usual’ would strengthen incumbent extractive industries, whilst raising the bar higher for innovative and sustainable challenger industries to succeed. This would lead to an ‘L-shaped’ planetary health recovery, resulting in many lost years of environmental progress.

B: Disorderly Planetary Recovery

A weak economic and health response, that is uneven and uncoordinated internationally, will lead to a patchwork of varying healthcare, economic and environmental responses.  Whilst the weaker economic growth could result in less demand for extractive industries, it would also weaken the enforcement capacity of various Governments and civil society organizations, and could lead to higher rates of illegal extractive activities as high unemployment leads to more desperate ways to earn income. This oscillation between two unstable equilibria of weak economic growth and weakened environmental protection, could result in a ‘W-shaped’ planetary health recovery as multiple waves of COVID-19 continues around the world in months to come.

C: Slow Planetary Recovery

A weak economic and health response, with aspirational green economy policies could paradoxically lead to a slower recovery for planetary health. Weaker economic growth may result in a lower injection of resources into a new green economy, and the transition away from incumbent extractive industries may be slower. This could create a ‘U-shaped’ planetary recovery, as there may not be sufficient consumer purchasing power to accelerate the growth of new sustainability challenger companies.

D: Planetary Renaissance

A strong articulation of an innovative, growth-oriented, sustainable green (and blue) economy, combined with effective economic and health interventions that prioritize resources on the new green economy (rather than the incumbent extractive industries), could result in a rapid ‘V-shaped’ Planetary Health recovery. This is the aspirational sweet spot for human health, economic health and planetary health. It is a place where bold and visionary new local sustainability-focused companies flourish, create jobs, and build a better, more inclusive, future.

A New Planetary Health Dashboard

To understand the impact of each of the four scenario on different aspect of the planet, we would need a new form of Planetary Health Dashboard (in the same way that GDP as a concept was created). This should go beyond the previous attempts at ‘green accounting’ that tried to equate natural capital to GDP, becoming overcomplicated, challenging to implement, and attracting its own share of criticism.

Taking three biospheres of Air, Land and Water, it can be seen that under each scenario (labelled A-D), the potential trajectory of each could be profound, depending on the policy decisions taken in the upcoming weeks.

Climate Change 

Under Business As Usual (Scenario A), the world rapidly exceed the 1.5C Carbon Budget that we are trying to avoid by 2030. This would take the world beyond certain tipping points and into the dangers of runaway heating of the planet. However, a bold Green Strategy (Scenario D) involving aggressively moving toward Electric Vehicles, renewable microgrids, negative emission technologies, could move the world toward negative carbon emissions within 20 years, and start to extract more carbon from the atmosphere as we move away from the Hothouse Earth danger zone.

Air Quality

The world’s population exposed to unhealthy air (defined by the WHO as concentrations of fine particulate matter, thinner than a human hair and known as PM2.5) has increased so that today almost 90% of the world’s population is exposed to unhealthy air. Under scenario D, new approaches should reward strategies that reduce air quality pollution. The world is bifurcating where rapidly industrializing urban centers in countries such as China, India, SE Asia, Africa and Latin America now have some of the world’s poorest air quality, whereas Europe and the US are improving their quality. New technologies mean that there is a ‘leapfrog’ opportunity so rapidly industrializing countries do not need follow the more extractive path of Europe and the US, but can immediately jump to a cleaner future.

Global Forest Cover

Last year saw some of the highest rates of deforestation in the Amazon for over a decade. Since the industrial revolution, the world has lost half of its trees and gone from an estimated 6 trillion trees to 3 trillion trees. This has resulted in global forest cover falling from 80% before the industrial revolution to 30% today. Under current trends and building back the same economy (Scenario A), most of the Amazon could collapse to grassland savannah within 15 years if strong actions are not taken. However, a bold vision of planting 3 trillion trees and new nature-based solutions (Scenario D), could radically alter the trajectory of deforestation, and life associated with natural areas.


The planet is facing a biodiversity crisis. The World Wildlife Foundation has estimated that the planet has lost half of all life on the planet since 1970. If we were to build back the economy to its pre-existing trajectory (Scenario A), this will lead to the collapse of critical species and ecosystems (e.g., coral reefs, mangroves, pollinators, primates, great cats, apex predators). A bold New Deal for Nature (especially following the closure and proposed ending of the industrial wildlife trade), and developing new value systems from nature-based solutions, could result in a radical resurgence of biodiversity, as many regions have started to see during the great COVID-19 shutdown as the human footprint has reduced.

Clean Water

Today, over 3.6 billion people find their water is scarce for at least one month a year.  By 2050, almost two thirds of the planet will be water stressed in some way, requiring some form of water rationing.  This will be in wealthy regions (like California) and poorer countries alike.  There has been insufficient investment in new water management techniques or in eradicating waste from the system. A Scenario A Business-As-Usual strategy would continue the world along the same trajectory. However, a radical re-imagining of the big drivers of water scarcity – industrial agriculture, cattle ranching, textiles, household appliances – could take the world down the trajectory of Scenario D – smarter usage and more abundant water resources for the world within only a few years.

Coral Reef coverage

On our present trajectory, over 90% of our healthy coral reef systems will disappear by 2050 (within 3 decades). Coral reefs cover 0.1% of the ocean, yet are responsible for over 25% of all marine biodiversity. They are extremely fragile ecosystems and since 1950, we have already lost one third of global warm water reef systems as the world warmed and acidified the ocean. A bold and radical reimagining of coral reef systems (in the same way that major philanthropists have come together in an attempt to develop a coronavirus vaccine), could develop new technologies to safeguard exiting reefs and grow back new coral reef systems replacing those that have been lost. This would be the bold vision under Scenario D, that would also be job creating for millions of new coral farmers around the world.

The last radical re-thinking of the global economy and the indicators of progress occurred following the 1930s Great Depression. Given the voices calling on the world to build back better, now is the time to agree a common set of Planetary Health indicators against which the trillions of dollars of stimulus funding (between 10-20% of GDP in most countries) can be judged. These are the indicators, dials and lens through which such major policy decisions should be taken as world leaders pilot their economies and societies through this multifaceted crisis.

Yet what has to be at the forefront of policymakers’ minds, is not to rapidly go back to the old economy, but chart a path forward toward civilizational progress.

Full coverage and live updates on the Coronavirus

Source: forbes.com

Leave a Comment