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The Economic Survey released in January cited high-frequency data such as exports, factory output and non-food credit growth to raise the growth estimate to 6.75% for the year ending 31 March. Photo: Priyanka Parashar/Mint
The Economic Survey released in January cited high-frequency data such as exports, factory output and non-food credit growth to raise the growth estimate to 6.75% for the year ending 31 March. Photo: Priyanka Parashar/Mint

Opinion | A new economy must take shape once this crisis passes

We need a wide understanding of causes and effects in an economy to address its fragilities

The coronavirus has revealed the inadequacy of public health systems in many countries. Governments have swung into action to prevent a loss of lives. Attention is focused on the numbers of those infected and the fatalities. Governments have turned to medical research institutions for guidance. Scenarios are being projected of how the pandemic may be contained depending on a combination of variables: the pace at which personal protective equipment, ventilators and testing kits are produced; how quickly a vaccine is developed; and how fast “herd immunity" develops.

Complex systems have many interacting variables, with several cause-and-effect loops within them. It is difficult to predict outcomes with precision. The condition of the system in the future also depends on what actions are taken in the present. Well-intended actions can have unintended consequences, however, if the policy doctor does not have a good model of the whole system. A powerful drug to cure an illness in the cardiac system can cause severe damage to the digestive system, for example. Patients can die of side-effects before they die from the disease. Therefore, drugs must undergo extensive tests before they are certified.

Lockdowns have been imposed in most countries to improve citizens’ well-being by preventing infections. But these have side-effects, too—lack of food and essentials, insecurity with loss of incomes, and psychological distress—that affect the well-being of citizens. Governments chose the strong medicine of lockdowns because they did not have a systems’ model of the cause-and-effect connections among the many economic and social sub-systems that together raise collective well-being. As a result, citizens are angry that their governments do not understand what matters to them.

Systems operate at several levels. Like the waves on an ocean’s surface that are caused by invisible currents beneath, perturbations visible on the surface of social systems are also caused by deeper forces. On top are the waves—the visible symptoms of the systems’ behaviour. Beneath them are the interacting forces that cause the system’s dynamic behaviour. A systems’ map reveals the inter-connections between these sub-systems and the forces flowing across them. Specialization in the sciences since the European Enlightenment of the 17th century has divided knowledge into narrow domains. A new enlightenment based on a systems approach to connect the parts is needed. Experts in different domains must put their heads together, like the proverbial blind men around the elephant, to understand the beast. Systems’ maps also enable all stakeholders, who are actors within the system, to understand the consequences of their individual actions on the health of the whole system.

At an even deeper level are the values shaping the decisions of policymakers. For example, do the lives of a few matter as much as the livelihoods of many? Is the growth of the economy more important than the distribution of wealth within? Does individual liberty matter more than the imposition of order by strong governments? The values and beliefs that drive policies and the evolution of institutions tend to change slowly.

The ideology of material progress, with wealth as the marker of success, has dominated public policies for a long time. Both capitalist and communist states competed to grow their economies, albeit with different approaches to the distribution of wealth. In capitalist societies, wealth belongs to individuals and can be monopolized by a few. Indeed, unbridled capitalism has led to a widening of inequalities in the past 50 years. In communist systems, wealth theoretically belongs to everyone. But people, generally, have no say in how their wealth is used. That decision rests with State leaders.

Sadly, neither capitalist nor communist systems seem to care much for the rights of human beings. In communist regimes, millions are often compelled to sacrifice their well-being for the greater public good. Under capitalist regimes, many suffer as inequalities increase.

Covid-19 has provided a high-pressure stress test, revealing the fragility of many economies, including India. The country’s gross domestic product has grown healthily for 20 years. Within hours of the lockdown announcement, millions of migrant workers poured onto streets and highways to head home. According to mainstream economics, the growth of the size of an economy is an indicator of its health. The pandemic has shown that the size of a system is not a good indicator of its health: its internal shape matters more. Health cannot be gauged by weight; the harmony of internal systems determines well-being.

According to systems’ science, whenever complex systems face catastrophes—i.e. critical points of instability—they re-emerge in distinctly new forms. The covid-19 pandemic has been a catastrophe both for human lives and economies. It has provided humanity an opportunity to create a more resilient economy and a more just society.

Countries are aiming for recovery while providing relief from covid-19. This is the time to imagine the shape in which we want our economies and societies to emerge. Without a vision, economies will merely regain their old forms, with all their fragilities and inequities. Post-covid, one can envision capitalism morphing into socialism; governance moving from the global to the national and local levels; and a realization of the power of communities.

Arun Maira is a former member of the Planning Commission and author of ‘Transforming Systems: Why the World Needs A New Ethical Toolkit’

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