Learning from our mistakes: the post-COVID recovery

By on 03/01/2021 | Updated on 04/01/2021
Illustration by Katy Smith

After the financial crisis, a slow and imbalanced recovery fostered a new set of social, health, economic and political problems. At a GGF webinar, expert panellists discussed how policymakers can ensure that – as countries finally emerge from the pandemic – the next recovery addresses these problems rather than exacerbating them. By Catherine Early

The pandemic has led to “impact piling upon impact for the most disadvantaged in society,” said former UK permanent secretary Clare Moriarty. For COVID-19 not only causes most physical harm to those who are old, disabled or unwell; its economic and social impacts have also been felt most by those with the least income, assets and job security. 

Moriarty, who’s chairing an inquiry about inequalities in the pandemic for independent charity the Health Foundation, was speaking at a Global Government Forum webinar on ‘Rebuilding economies and tackling inequality in the post-COVID world’. Inequalities, growing over the years since the financial crisis, left many people vulnerable when this new crisis struck. At the December event, public servants and private sector specialists discussed how economic policymakers can generate growth as countries emerge from the pandemic while ensuring that – in contrast to the years since the financial crisis – all sections of the community benefit.

Going into the pandemic, said Moriarty, many groups lacked resilience. Over the past decade, longstanding progress on extending lifespans stalled for communities in parts of the world – life expectancy even fell for some groups in countries such as the UK, US and Iceland – while rates of disability and long-term conditions rose. And many didn’t benefit from the faltering post-financial crisis recovery, she said: many lower-income families went into the pandemic with little or no savings.

With the arrival of the pandemic, workers in transport, retail and healthcare have been far more likely to die than those in professional occupations, Moriarty explained. Race compounds the problem: in the UK, people from black communities are more than four times more likely to die than those from white communities. People in the lowest income jobs have also been hardest hit by measures to contain the spread of the virus, she added.

Recovery and resilience

So as policymakers seek to revive growth in the wake off the pandemic, she argued, they must prioritise work to address inequality. “If we go through a recovery of the type that we went through after the financial crisis, we’re just going to see a widening of those inequalities. These are problems which compound: greater inequalities leads to lower resilience, which leads to worse impacts from the pandemic, which leads to greater inequality. This is a vicious circle.”

The webinar heard how several governments have already taken steps to reduce inequality as part of their COVID recovery plans. Jennifer Duncan, vice president of Government Innovation (Global) at Mastercard – one of the event’s knowledge partners – said that the pandemic has forced governments to significantly accelerate financial inclusion programmes.

The company has been involved in more than 100 different initiatives in 40 countries, she said: Chile and Israel, for example, have digitised pensions so that old people can stay safely at home. “The challenge is going to be: how do we ensure that this isn’t seen as solely a crisis measure, but as an imperative for our economy and how we move forward?” she said.  

In Sweden, noted Albin Kainelainen – director general of the Ministry of Finance’s Economic Affairs Department – interventions such as short-term working schemes and support for hard-hit sectors had not evened out the pandemic’s differential impacts. Unemployment has increased, while stock markets and house prices have risen: “This has given wealth effects in this crisis that we are not seen in previous crises,” he said.

Support small businesses

In Duncan’s view, support for small and medium-sized enterprises (SMEs) will be an important element of governments’ post-pandemic recovery plans. “They employ 50% of people globally, and provide over half of GDP; they are hugely important to people’s livelihoods. But during the pandemic, in just three months we saw one in five of those businesses shut their doors,” she said.

Stephanie Allen, global public health and social services leader at Deloitte – the second of the event’s knowledge partners – said that the firm’s experience of working with SMEs in Australia as lockdowns hit had revealed the social and mental health impacts of movement controls. Closing down businesses not only had an economic impact on their owners, but also hit their sense of identity. “It affected the owners’ sense of pride in the work that they had built up over many years,” she said.

Some banks had had to mobilise emergency services when calls from SME owners to apply for refinancing revealed they were having suicidal thoughts, Allen said: the Australian government has since reshaped support for SMEs to address people’s wellbeing as well as their finances.

Mental health in the pandemic

For Gus O’Donnell, a former UK Cabinet secretary and head of the civil service, the wellbeing of populations is an imperative for governments planning recovery packages. COVID had had a significant impact on the mental health of the UK population, he said, pointing to government surveys that have measured the mental health of the nation every quarter since 2011. These reveal that life satisfaction plummeted when lockdowns began, while anxiety levels rose significantly. “These are big effects, pretty much unprecedented for the time series,” he commented.

Governments must spend more mental health services, O’Donnell argued: “You would not leave people with physical injuries untreated, and yet we do it all the time with mental health,” he said, adding that people also need access to good jobs and a decent minimum wage.

O’Donnell argued that societies needed to think carefully about what they value. “We realised during lockdown that there are certain things that we value enormously. Hugs, kisses, meeting people – none of that is reflected in GDP. The idea of GDP as a measure of success, forget it! Success is really about living a great and satisfying life, and lots of wellbeing.”

Moriarty echoed this sentiment. “We’ve got to get beyond GDP: it’s a really important measure, but it is not the totality of everything in life,” she said. “Health and wellbeing are hugely important, and the environment.” And she warned against the idea that protecting people’s health through lockdown measures causes unnecessary damage to the economy: “All the way through the pandemic, we’ve heard people talking about saving lives versus saving the economy,” she said. “But we know that countries that have seen the least number of deaths have also seen the least impact on the economy.”

Certainly, the evidence is that acting fast to minimise the virus’s spread minimises economic damage: obvious examples include Germany, South Korea and New Zealand. By contrast, countries that moved slowly or saw political pressure to lift controls – such as the US, UK and Sweden – have seen higher infection rates cause greater economic disruption down the line, worsening downturns.

New solutions

We need new ways of measuring success, said Moriarty, pointing to the UK Office for National Statistics’ recently published “Health Index” – which takes into account outcomes, behaviours and personal circumstances, plus environmental determinants such as air pollution. “I think that it’s an enormously important development. If we can put that at the centre of our thinking about recovering the economy, then we stand a chance of improving health and reducing inequality,” she said.

One idea discussed by the panel was that of a Universal Basic Income (UBI) – regular payments from the state to all individuals, regardless of income – but O’Donnell was not convinced. UBI is “an extremely bad idea”, he said. “Jobs are much more than just income… jobs also give you self-esteem, skills and colleagues. And we know the scarring effects of unemployment: without jobs, a person’s ability to get a job gets worse, and the impacts on their mental health eventually get a lot worse.”

Moriarty agreed that there were “all sorts of difficulties about UBI”, but pointed out that not all jobs provide those wider benefits. “That’s what we’ve seen since the financial crisis: there have been plenty of jobs, but they haven’t been good quality,” she said, noting that here too GDP metrics do not provide a useful measure of success.

Perhaps UBI payments could arrive in the form of a lump sum rather than a smaller regular amount, suggested Duncan – then recipients could use the cash to set up a business or retrain. France, she noted, has introduced a service providing people with funds for training and support with moving into new roles.  

In Kainelainen’s view, governments are likely to avoid some of the mistakes made in the years after 2008 – such as a rapid swing to making big cuts in public spending. “Of course, we’ve learned from the financial crisis, so we might not make the same mistakes – especially when it comes to fiscal tightening too early,” he said. But as policymakers focus on attracting investment and creating jobs, he warned, longer-term goals around sharing the proceeds of growth may fall by the wayside: “There are also things that complicate implementing a different kind of restart: governments will want to get people into employment as fast as possible, and I think that the political system will prioritise speed before quality when it comes to increasing employment.”

Former UK senior civil servant Siobhan Benita, who chaired the event, summed up the challenge ahead. It takes time to retrain people and create new skilled roles, she said, and governments will be under huge pressure to get their economies back on their feet as quickly as possible. “That’s a huge challenge for policymakers and ministers going forward when you’re trying to bring in transformational change,” she concluded.

The webinar ‘Rebuilding economies and tackling inequality in the post-COVID world’ was held on 8 December 2020, with the support of Mastercard and Deloitte. You can access the slides, read more about the panellists and watch the full video via our events page.

About Catherine Early

Catherine is a journalist and editor specialising in government policy and regulation. She writes predominantly about environmental issues and has held permanent roles at the Environmentalist (now known as Transform), the ENDS Report, Planning magazine and Windpower Monthly, and has also written for the Guardian, the Ecologist and China Dialogue. She was a finalist in the Guardian’s International Development Journalism competition 2009, and was part of the team that won PPA Business Magazine of the Year 2011 for Windpower Monthly. She also won an outstanding content award at Haymarket Media Group’s employee awards for data-led stories in Planning magazine. She holds a 2:1 honours degree in English language and literature from Birmingham University.

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