The big questions on many minds are: will the current health and economic crises have a lasting effect on future consumption? Will they affect the forces driving overconsumption? Could there be a systemic change towards a less consumption-focused society?
We focus here mainly on the U.S. One thing we have abundantly seen in this crisis is the overriding importance of the State: in countries where the State took early and decisive action (China, South Korea, Singapore) the damage has been more limited than in countries with dysfunctional central governments (like some Southern European countries and the US). Only national governments have the ability and power to generate the enormous amounts of money and logistics to fight the crisis and to counter the economic collapse. Relying exclusively on private markets to provide the means needed to deal with large scale national emergencies obviously does not work. We are watching in horror and revulsion how the free market in the US gauges prices for PPEs and inhalers (10-15 fold), as states compete with each other for these scarce goods.
From the perspective of small business and household economics, the enormous losses of income and of economic security by many millions of Americans will be hard to recover from, even if the pandemic will get under control quickly. Those who were laid off will have to start the job search in a highly competitive market, with many small employers gone. The timid gains in wages and benefits which have accrued in the past couple of years, a decade after the worst of the Great Recession took hold, will be lost. So will – at least initially – the leverage for worker-employer negotiations. Many people will lose livelihoods, health insurance, even their homes; especially those on low-paying short-term contracts and gig workers. The government is the only player with sufficient resources to help these millions of people, and that help will be needed for a long time.
Another observation is that an economy so highly dependent on private consumption of goods and services is very vulnerable. The allocation of money between the private and public sector can and should be drastically rebalanced, with considerably less money going toward individual consumption, especially for the higher earners (tourism, private cars, ever expanding homes), and much more for governments (health care, pandemics preparedness, education, affordable housing, support for low incomes, investment in green infrastructure and clean technology). This will reduce household consumption of the affluent, while providing the needed economic security for low-income earners. The top earners and big business should thus be taxed at a much higher rate in order to create the necessary revenues.
Thus we see a lot of opportunities. The crisis has unleashed enormous creativity among citizens to find new solutions for pressing immediate needs; many of them through social media. Local governments have an opportunity to combine on-line with face-to-face meeting spaces, for community support, support for disabled and the elderly, neighborhood support, and the creation of local sustainable business. There is clearly more cooperation among people, more mutual support, acts of kindness, and many courageous acts to save lives by healthcare workers. More sense of community. People are discovering, in a very personal way, what life on a smaller footprint might look like: less leisure travel, less shopping, more engagement with the immediate family, more leisurely walks in the neighborhood, children relying more on their own resources for amusement and engagement and less on paid activities organized by adults.
Will these new social practices continue? We already read about a plea for “revenge shopping”. Are we going to consume more in order to “revenge” the losses in opportunity for consuming, or are we going to collectively save as a future protection against economic and environmental disasters? We do not know.
